GST/HST Redesign Project


Executive Summary

Background: The Goods and Services Tax (GST) was introduced in January 1991 to replace the Federal Sales Tax. In 1992, Revenu Québec (RQ) began to administer the GST on behalf of the Canada Revenue Agency (CRA) in Québec under the terms and conditions of a GST Agreement. In 1997, the GST was harmonized with the provincial sales taxes in Newfoundland and Labrador, New Brunswick and Nova Scotia, creating a Harmonized Sales Tax (HST) for those three provinces.

The GST/HST Redesign Project was launched in 2000 and the April 2000 Current State Assessment outlined the vision for GST/HST Redesign: to modernize service delivery and integrate GST/HST into the Business Suite and to the Agency-wide common business platforms. The Business Suite is a collection of CRA systems that share common platforms such as the Business Number System, Standardized Accounting (SA), Business Client Communication System (BCCS), and Case Management System to provide co-ordinated functions (i.e. registration, accounting, and outputs).

The Current State Assessment also identified opportunities for improvement regarding the GST/HST program delivery. Specific project objectives included the expansion of risk management and compliance measures, the migration of program delivery to utilize common platforms where feasible; the rebuilding of the GST/HST processing system to consolidate many distributed system components; the building of a flexible system intended to respond to legislative and Provincial/Territorial changes and with improved financial control and reporting capacity. Elements of the redesign also sought to address issues related to financial controls and reporting raised by the Office of the Auditor General.

This GST/HST system is being implemented through a series of releases. The October 2006 release includes changes to core functionality and is a major undertaking that lays the foundation for future enhancements which will take place in subsequent releases that are planned to 2009.

The project is forecast to cost approximately $145 million, projected to fiscal year 2008-2009 (see Appendix A) and is internally funded from the CRA Investment Plan.

Responsibility for the project is shared jointly between the Assessment and Client Services Branch (A&CS) and the Information Technology Branch (ITB). A&CS provides the business/functional management and co-ordination. ITB is responsible for system development and implementation.

Objective: The objectives of the audit were to provide assurance that management and project controls are in place to facilitate the achievement of the project's goals and objectives; that monitoring controls are in place to track project progress; and that the Business Suite is ready to incorporate the GST/HST revenue line.

The planning (October 2004 to April 2005) and examination (May to June 2005) phases were conducted at Headquarters in A&CS and ITB.

Conclusion: Overall, appropriate management and project controls were in place during the examination phase of the audit, allowing CRA management to track and monitor the project's progress. Results of continuous monitoring activities on project status and progress are documented and reported to internal and external stakeholders. When warranted, actions are taken to address identified issues. The review of the Business Suite indicates that the design of the Business Suite is sufficiently robust to incorporate the GST/HST revenue line.

Three key issues (i.e. RQ, data conversion and testing) remain outstanding that could jeopardize the integrity or timely implementation of the system. During the audit, the project teams made progress in the right direction to address these issues. Current management practices and controls are in place to enable early warnings for timely resolution of these issues.

This is a major and complex project and our audit found that appropriate management controls were in place. There are opportunities for improvement in terms of developing a vision document to provide a strategic overview of the project, having more robust support for project management, plans prior to start-up as well as increased emphasis on recruiting and training people with the appropriate skill sets.

Furthermore, the overall co-ordination and management of large investment and complex projects within the Canada Revenue Agency (CRA) need to be better supported by designating a senior management committee to provide oversight for major projects.

Action Plan: A 5-year Business Suite Release Strategy is being developed to provide an overall plan for the delivery of current and upcoming projects. This strategy will take into account the complexity and size of projects, impacts on business suite applications and common platforms, as well as implications for existing and future capacity to deliver projects, programs and take on new opportunities. This strategy is expected to be completed in the Summer 2006 and will involve consultations with all business stakeholders.

Management agrees to consider the establishment of a core capacity for project management. The development of branch level project management expertise will be considered in the context of as part of the A&CS Branch Strategy in the Spring/Summer 2006

A plan has been developed to address information that cannot be corrected prior to implementation, i.e. try to correct the filing period problem automatically and to lock the account and correct the corrupted data problem later.

Introduction

The Goods and Services Tax (GST) was introduced in January 1991 to replace the Federal Sales Tax. In 1992, Revenu Québec (RQ) began to administer the GST on behalf of the Canada Revenue Agency (CRA) in Québec under the terms and conditions of a GST Agreement. In 1997, the GST was harmonized with the provincial sales taxes in Newfoundland, New Brunswick and Nova Scotia, creating a Harmonized Sales Tax (HST) for those three provinces.

The GST/HST Redesign Project was launched on the basis of recommendations outlined in a Current State Assessment of the GST/HST system in April 2000. The vision for GST/HST Redesign was to modernize service delivery and integrate GST/HST into Agency-wide common business platforms in the Business Suite. The Business Suite is a collection of CRA corporate platforms that share common functionality including the Business Number System, Standardized Accounting (SA), Business Client Communication System (BCCS), and Case Management System.

The project vision also involved capitalizing on opportunities to improve client service and program delivery. Specific project objectives included the expansion of risk management and compliance measures; the migration of program delivery to utilize common corporate platforms where feasible; the rebuilding of the GST/HST processing system to consolidate many distributed system components; the building of a flexible system capable of responding quickly to legislative changes and advancing electronic service delivery; and improved financial control and reporting. Elements of the redesign also sought to address issues related to financial controls and reporting raised by the Office of the Auditor General.

The GST/HST Redesign Project is being implemented through a series of releases, given the magnitude of the project and the inherent risks. The October 2006 release is a major milestone in the project, with the implementation of new GST/HST systems and the migration to common business suite platforms. As part of this release, implementation, conversion and shutdown of existing systems must also be synchronized with RQ.

The project is forecast to cost approximately $145 million, projected to fiscal year 2008-2009 (see Appendix A) and is internally funded from the CRA Investment Plan. This amount does not include compensation to Revenu Québec (RQ) for extraordinary one-time investment costs to upgrade and modify their systems to align with the changes planned by GST/HST Redesign in the CRA.

Responsibility for the project is shared jointly between the Assessment and Client Services Branch (A&CS) and the Information Technology Branch (ITB). A&CS provides the business/functional management and co-ordination among many stakeholders within CRA (e.g. Collections, Audit, Appeals, Finance and Administration, Assessment, and Payments Processing) and Revenu Quebec, as well as external stakeholders including the Department of Finance, Statistics Canada and Public Works and Government Services Canada. ITB is responsible for system development and implementation.

Focus of the Audit

Given the magnitude of this business re-engineering project, this audit was conducted to apprise CRA senior management on key aspects of this project such as investment, complexities and challenges incurred.

This audit was included in the approved Corporate Audit and Evaluation Branch Business Plan for 2004-2005.

The objectives of the audit were to provide assurance to senior management that management and project controls are in place to facilitate the achievement of the project's goals and objectives; that monitoring controls are in place to track and report on project progress; and that the Business Suite is ready to incorporate the GST/HST revenue line.

The audit planning phase (October 2004 to April 2005) and examination phase (May to June 2005) were conducted at Headquarters in A&CS and ITB.

At the time of the examination phase, the new system was under development. The detailed business requirements (DBRs) were already completed and systems were at the programming stage. Thus, this audit could not include a review on the quality of the new systems. Information from stakeholders indicated that a key indicator to measure the readiness of systems is whether 80% or more of the total core functionality will be ready and available for user acceptance testing (UAT) in February 2006. At the time of the writing of this report, the systems teams reported at the Director Generals (DG) Steering Committee meeting that almost everything is on schedule (see Appendix B). We have been advised that ITB has also implemented and formalized an improved testing process, "Integrated Unit Test (IUT)", which should increase the quality of the product delivered to UAT. This testing improvement was implemented based on internal management reviews conducted after the Corporation Tax (CORTAX) and Other Levies Assessment System (OLAS) projects were implemented that indicated a goal of quality be established.

Findings, Recommendations and Action Plans

Management and Project Controls

The audit team found that management and project controls were in place to track and monitor the achievement of the GST/HST Redesign goals and objectives. A risk management strategy and process were in place. The project support log, managed by the business project office, was the primary tool used to track, assess and resolve risk events. The log was a spreadsheet that included detailed information about risk events, action plans and accountabilities. It was updated and posted on the project website which was accessible to all stakeholders. The business project office was resourced with permanent staff to replace acting staff used at the beginning of the project. This

resource change enhanced the stability of project direction and management. Furthermore, a Director Generals (DG) Steering Committee was in place to manage and resolve high risk issues.

The business and IT project teams used ITB's Centre of Expertise for Project Management in the early stages of the GST/HST Redesign. Although recruited based primarily on program expertise and availability, the majority of managers and staff indicated that it was not always sufficient to address the magnitude of the challenges and complexity encountered in integrating the GST/HST processing into the Business Suite, which included managing internal and external stakeholders and partners. Managers and staff continually adapted to manage issues and challenges. However, it was evident that there was a lack of skill sets in certain business areas to work on integrated projects.

A Director Generals (DG) Steering Committee was set up between ITB and A&CS Branch to resolve significant and sensitive project issues which require senior management counsel. However, formal senior level oversight (i.e. above the DG Steering Committee) on a regular basis of GST/HST Redesign was not evident.

During the first two years of GST/HST Redesign, formal senior level oversight on a regular basis was provided through the Agency's Resource and Project Review Committee (RPRC). RPRC was dissolved in 2002. In the absence of a formal senior level committee with specific responsibility for the oversight of major projects, regular reporting on GST/HST Redesign was limited to quarterly bilateral meetings between the ITB and A&CS Branch executive teams, with status reports provided to the Commissioner. Regular updates have been provided to the Commissioner since July 2005.

Greater attention to the complexities of coordinating system changes with RQ and the modalities of the MOU between CRA and RQ was required at the outset of the project. The early involvement of senior management would have been beneficial to clarify the application and interpretation of the MOU with RQ regarding the GST/HST Redesign. In July 2005, work was underway to develop an annex to the MOU to define key deliverables, timeframes and one-time project costs to ensure that RQ systems are synchronized with redesigned CRA systems for the October 2006 release. Treasury Board approval has been received to provide funding to RQ to offset extraordinary costs for system upgrades and modifications.

Joint management committees at the project and DG levels have been established between the CRA and RQ to co-ordinate project implementation. Regular updates on GST/HST Redesign, including significant issues, are provided to the Joint CRA-RQ Committee on the MOU for the administration of GST in Québec. This committee is comprised of the Assistant Commissioners from CRA and senior RQ officials. Issues related to RQ's involvement in the project were addressed by this committee, as appropriate and where warranted.

There was no vision and strategy document for Business Suite projects and program delivery to provide a more strategic overview and common vision in terms of expected savings, service improvements and other objectives. This information would support project teams to develop more robust preliminary plans to illustrate the magnitude of the projects prior to start-up and mitigate risks associated with under-estimating scope, complexity and development costs. It would also assist senior management when setting implementation dates and monitor progress.

The Branch Payments and Returns Architecture Migration Strategy (BRAMS) dealt primarily with the timelines of the migration of the revenue lines, on the basis of anticipated risks. The current 5-year implementation schedule for the Business Suite replaces BRAMS and includes dates. The analysis on the effort of work to migrate the revenue lines onto the Business Suite made it difficult to estimate the size and complexity of projects.

A documented vision and strategy would assist the resolution of potential issues such as the understanding of the memorandum of understanding (MOU) with RQ and the challenge to manage numerous stakeholders using Business Suite applications once GST/HST moves to the common platforms. It would assist the project teams to illustrate the magnitude of projects and the critical need for co-operation from all stakeholders.

Comments from management and focus groups indicated that it was extremely helpful when there was an architect on loan from IT to assist and provide oversight in the development of the high-level business requirements. The lack of business "architects" affected the quality of the DBRs. Business analysts relied on the IT architects to identify discrepancies within the DBRs although IT architects did not have the program experience to assess the DBRs in a meaningful business process manner. The project teams on the business side did not have a clear understanding of how the new systems were integrated from end to end, including how they fit into the Business Suite. These skills are required on the business side to manage and maintain the integrity of the system after implementation.

A formal training plan was not in place to build capacity to manage the project and acquire skills such as writing DBRs. Managers and staff relied on their prior project experience and on-the-job training. Both business and IT project teams used ITB's Centre of Expertise for Project Management and its templates in the early stages of the project. Business relied on the IT architects, who lack program expertise, to detect gaps in the completed DBRs. Consequently, there is a higher risk for an increased number of change requests and post-implementation fixes when there is not a full understanding of the interfaces and the end-to-end processing.

A detailed strategy and plans to enable systems to support integrated testing and training were not developed. Discussions with the Acceptance Testing Division (ATD) indicated it could not guarantee meeting the October 2006 release date without a testing solution that would enable ATD to test and implement maintenance releases. These releases involve the same integrated core applications and occur at the same time as testing the GST Redesign core applications for the October 2006 implementation date. RQ also made a similar request for a separate testing cell. In both instances, the requests will result in additional costs, which were not anticipated originally by the project team.

Recommendations

1. The Agency should designate a senior management committee to provide oversight for major projects. The secretariat to this major project oversight committee should be mandated to develop Agency standards in the areas of project management methodology, software, and other strategic level support.

2. Given the scope and impact of Assessment and Client Services Branch system development, the Branch should enhance its internal project management capacity by:

a. Establishing a core of project management expertise to provide guidance and training;

b. Requiring comprehensive planning prior to project start up and regular revisions to plans as projects evolve, and documentation of same;

c. Developing standard working tools and templates;

d. Building a formal HR strategy to recruit, develop and retain appropriate expertise to manage current and future projects; and

e. Placing an emphasis on the specific skills and methodology required to draft detailed business requirements.

3. The Assessment and Client Service Branch should enhance the management of the Business Suite in a manner consistent with the ongoing strategic role these systems play in supporting programs across the CRA and key links between these systems and current and future partnerships.

4. The Assessment and Client Services Branch should develop a strategy and plans to ensure that GST/HST redesign testing is comprehensive, complete and confirms the integrity of the new system.

Action Plans

1. The establishment of two new sub-committees to the Agency Management Committee will provide further opportunity for senior level oversight. The new sub-committees are the Resource and Investment Management Committee and the Strategic Direction and Business Development Committee.

2. Management agrees to consider the establishment of a core of project management expertise as part of the A&CS Branch Strategy that is being developed in the Spring/Summer of 2006, in line with the Agency 2010 vision and organizational realignment. The role of a business centre of project management expertise will be considered in this context.

A strategy for managing current and planned initiatives affecting the Business Suite until 2010 is currently being developed, given the significant expected workload volumes and the number of program branches involved. Consultations with business areas are underway. A recommended release strategy will be put forward for senior management consideration in 2006-2007.

Management agrees with the identified need to develop business architecture capacity, to provide overall expertise on Business Suite applications, their interfaces and the integration of systems into the Business Suite. Development of this capacity will be examined as part of the Branch functional review and the development of a Branch Strategy for 2010.

A concerted effort will be made to retain Business expertise developed within the project during the DBR development to manage and maintain system after implementation.

The A&CS Branch Strategy for 2010 will provide the overall strategic directions and context for developing an HR strategy for the recruitment, retention and training of staff to meet the challenges of delivering on current and planned projects. The Branch strategy will is planned for the Spring/Summer 2006.

3. The A&CS Branch will develop a strategy to co-ordinate and provide oversight over all projects within the Agency that impact the Business Suite in order to maintain its integrity and focus on the CRA's core business. A strategy for managing current and planned initiatives affecting the Business Suite until 2010 is currently being developed, given the significant expected workload volumes and the number of program branches involved. Consultations with business areas are underway. A recommended release strategy will be put forward for senior management consideration in 2006-2007.

4. A documented strategy for testing was updated in July 2005. The scope of testing includes all the requirements identified in the GST Redesign Project October 2006 requirements, as well as any additional requirements from the reference documents that may result from Change Requests. A separate Joint Integrated Testing Strategy will be developed with RQ.

Monitoring and Reporting

Monitoring and reporting controls were in place to track the progress of the project against deadlines. A variety of tools, including MS Project software and Excel spreadsheets, were used to track the project in terms of costs, status and outstanding tasks. Issues and change management controls include the use of the afore-mentioned work breakdown structure and project support log. Project tracking documents, minutes of meetings and decisions were posted to the dedicated GST/HST Project Website to facilitate communications to all stakeholders.

Team meetings were held on a regular basis at all levels within the project teams. Results of the meetings were analyzed, documented and posted to the project website. High risk issues were escalated for discussion and resolution at the DG Steering Committee.

Ad hoc self-assessments and interim post-mortems were held as part of meetings and status reports to ensure compliance with expectations. Reviews were restricted to the DBRs. The audit team recognizes that the workload and tight timelines made it difficult to complete these activities in a more rigorous manner.

Readiness of the Business Suite

The Business Suite is ready to accept the migration of GST/HST in terms of capacity to process the GST volumes and to handle the output volumes. In July 2005, the Department of Finance approved the legislative change requests necessary for the October 2006 implementation.

The review of the Business Suite indicated that the processing times, particularly within SA and BCCS, have been improved to handle the GST volumes. Information received from SA concluded that mainframe capacity will not be an issue with the implementation of GST. Overall, performance, database data volumes, response time, and conversion issues were not a major concern.

Similarly, BCCS indicated that reductions in cycle times have increased the capability to handle output volumes. The inclusion of GST will increase the current annual volume from 7.5 million to 46 million. The new cycles can accommodate 100 million. Computer capacity is no longer a major concern.

Plans to manage the conversion of corrupted data and mis-matched filing periods were not complete. Comments from interviews indicated estimates ranged from 740,000 to 2 million master records which have corrupted data and mis-matched filing periods. Correction activity could be substantial. The effort of work will likely require space, money and/or expertise. Revised business requirements and the integration of GST processing into the Business Suite require clean and consistent data.

Recommendation

The Business and IT project offices should develop and implement a strategy to manage the conversion of corrupted data.

Action Plans

A plan to address this risk was first developed in February 2004 in consultation with all stakeholders including RQ. The project team continues to refine those requirements based on going actions to correct invalid data. A plan has also been developed to address information that cannot be corrected prior to implementation, i.e. try to correct the filing period problem automatically and to lock the account and correct the corrupted data problem later.

Lessons Learned

After the RPRC was disbanded, there was an absence of a formal senior management committee with a focus on providing oversight for major system projects. In the case of GST/HST redesign, such oversight would have helped ensure that senior management were apprised of issues and challenges which required their counsel for timely resolution to meet critical timelines, e.g. a Department of Finance decision on harmonized legislation requests and the co-operation of RQ.

Overall co-ordination and management of projects would benefit from structure of such an oversight committee as well as key agency level support in the form of an agency project management policy.

Within the A & CS Branch, better support is required through a core of project management expertise that would provide enhanced support and guidance. It would help identify, co-ordinate and address cross impact risks from competing projects and initiatives within the Agency in an effective and timely manner. It would also ensure that all future projects have a comprehensive plan to link to the overall vision and strategy of the Business Suite and ensure projects will not jeopardize the core programs.

For A&CS, such support would help business to improve their cost estimates and implementation timelines for future programs moving to the Business Suite. The complexity of future projects will increase as more programs are integrated. This should be taken into consideration when establishing estimates, particularly for testing and implementation dates. More focus should be given to planning for data conversion and testing.

For current and future projects, project teams within A & CS should have a good understanding of all memorandums of understanding (MOUs) that exist with potential partners, stakeholders and clients and how the MOUs apply to their respective projects.

Best Practice

A dedicated GST/HST Redesign project website was available on the Intranet. Documents such as work breakdown structures and project support logs were posted on the website. Stakeholders were able to access the website to keep abreast of current project issues, status and progress.

Conclusion

Overall, appropriate management and project controls were in place during the examination phase of the audit, allowing CRA management to track and monitor the project's progress. Results of continuous monitoring activities on project status and progress are documented and reported to internal and external stakeholders. When warranted, actions are taken to address identified issues. The review of the Business Suite indicates that the design of the Business Suite is sufficiently robust to incorporate the GST/HST revenue line.

Three key issues (i.e. RQ, data conversion and testing) remain outstanding that could jeopardize the integrity or timely implementation of the system. During the audit, the project teams made progress in the right direction to address these issues. Current management practices and controls are in place to enable early warnings for timely resolution of these issues.

This is a major and complex project and our audit found that appropriate management controls were in place to ensure success. There are opportunities for further improvement in terms of developing a vision document to provide a strategic context for the project, having more robust project plans prior to start-up as well as recruiting and training business resources with the appropriate skill sets (e.g. writing detailed business requirements, understanding the interfaces of GST/HST processing with the Business Suite).

Furthermore, the overall co-ordination and management of large investment and complex projects within the Canada Revenue Agency (CRA) need to be better supported by strategic, Agency level support as well as measures to enhance capacity to manage projects at the A & CS Branch level.

For major projects, third party reviews such as internal audits should be actively pursued at critical stages to ensure compliance with expectations and to assess the efficiency and effectiveness regarding the use of resources and meeting milestones. Such reviews would enable senior management to be apprised of major issues and challenges that require their intervention. In addition, lessons learned for future projects within the CRA would be captured and documented

Appendix A

Cost Projections

(Source - July 2005 briefing to the commissioner by GST/HST Project)

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