Regional Audit of Assessment and Client Services Tax Centre Program Performance Management


Executive Summary

Background: The two tax centres in the Atlantic Region process individual tax returns, corporate tax returns, GST/HST returns, client requested reassessments and Canada Child Tax Benefit applications. The Summerside Tax Centre (TC) also processes visitor and domestic GST/HST rebate claims and Excise Tax and other levies returns for all of Canada. The St. John's Tax Centre operates a national call site for the Canada Child Tax Benefit program and administers the GST Tax Credit program. For the fiscal year 2002-2003 these programs were delivered at the St. John's and Summerside Tax Centres with budgets of approximately $35M and $32M respectively.

Objective: The objective of the audit was to provide assurance that program performance in the Atlantic Region is effectively managed and monitored, performance data captured is appropriate and accurate, and performance results are being used to better manage programs. The scope of the audit covered the tax centres in St. John's and Summerside. The audit was conducted during the fiscal year 2003-2004.

Conclusion: Overall, the management of programs at the two tax centres in the Atlantic region has been effective in meeting the Agency's operational objectives and service standards for the fiscal years 2002-2003 and 2003-2004. An integrated monitoring and reporting framework is in place, enabling performance results to be used for program management purposes. Program performance data captured is generally appropriate and accurate. However, program performance management can be strengthened by improved reporting in terms of consistency of performance report content across TC programs. Additionally, there may be potential for cost savings in the T2 program given the significant difference among the TCs' processing cost per return.

Action Plan: The Corporation Assessing Section (Assessment & Client Services Branch) has been participating in the CRA's Horizontal Review "Benchmarking" initiative. Each Tax Centre's T2 Processing operation has been reviewed and findings have been discussed with the local management team. A report is being finalized that will address the causes of disparities and will provide a series of recommendations to tax centres. The report is to be delivered by April 2005.

The A&CS branch has indicated that the addition of financial performance data to performance reports now or in the coming year would be inappropriate because of the implementation of a new costing framework being developed by the F&A branch. The new costing framework is intended to bring consistency to costing and rationalization of activity types and cost centres.

With respect to the Client Requested Reassessments program, the improvements requested to the report that the T1 Adjustments Section receives from the Policy and Planning Branch started for the fiscal period 2004-2005. The report is now issued within the timeframe of one month after the end of the reporting period.

Introduction

The two tax centres in the Atlantic Region process individual tax returns, corporate tax returns, GST/HST returns, client requested reassessments and Canada Child Tax Benefit applications. The Summerside Tax Centre (TC) also processes visitor and domestic GST/HST rebate claims and Excise Tax and other levies returns for all of Canada. The St. John's Tax Centre operates a national call site for the Canada Child Tax Benefit program and administers the GST Tax Credit program. For the fiscal year 2002-2003 these programs were delivered at the St. John's and Summerside Tax Centres with budgets of approximately $35M and $32M respectively.

Focus of the Audit

The objective of the audit was to provide assurance that program performance in the Atlantic Region is effectively managed and monitored, performance data captured is appropriate and accurate, and performance results are being used to better manage programs. The scope of the audit covered the tax centres in St. John's and Summerside. The audit was conducted during the fiscal year 2003-2004.

Findings, Recommendations and Action Plans

Accomplishment of Operational Goals and Objectives

One of the outcomes of the CRA Strategic Framework as contained in the Corporate Business Plan 2003-2004 to 2005-2006 is for the CRA to become a leading-edge service provider. According to the business plan, innovation is the key to achieving this strategic outcome.

Both the Summerside and St. John's Tax Centres have implemented awards and recognition programs that acknowledge employee innovation (e.g. Innovation and Excellence Award Program). Best practices are also shared between the TCs through methods such as exchange visits. As well, a review of the 2002 CRA Employee Survey results shows that among all TCs, the Summerside Tax Centre achieved the highest results on questions related to innovation.

The CRA strategic framework also states that productivity and efficiency of operations are indicators of achieving status as a leading-edge service provider. In this context, measurable performance standards and goals have been established for TC programs. TC Program managers interviewed, generally agreed that performance standards are realistic. The achievement of performance standards is incorporated in the performance agreements of senior management and is linked to performance pay.

TC Program performance standards were met or mostly met for the fiscal year 2002-2003 and 2003-2004. One notable exception was in the Client Requested.

Reassessments (CRR) program at the St. John's Tax Centre in fiscal year 2002-2003. The performance standard in this program is that reassessments are to be processed within the published service standard of 8 weeks. For the fiscal year 2002-2003 it took the St. John's Tax Centre 10 weeks on average to process Client Requested Reassessments. However, since the audit was completed, the St. John's Tax Centre has improved its performance in this program. During the fiscal year 2003-2004, CRRs were processed at the St. John's TC within 7 weeks. Furthermore, the manager of the CRR program at the St. John's TC received a CRA Award of Excellence in 2004 for leading improvements in the efficiency and effectiveness of the program.

The following table illustrates the overall standard and performance of the Atlantic TCs for a selection of major TC programs.

Program

Performance Standard

2002-2003 Results

2003-2004 Results

St. John's

Summerside

St. John's

Summerside

T1 Individual Income Tax Returns

98% of on-time returns processed by June 15

97%

98%

100%

100%

Client Requested Reassessments (T1)

8 weeks

10 weeks

7 weeks

7 weeks

6 weeks

T2 Corporation Income Tax Returns

- 75% of T2 returns processed within 50 days

87%

82%

94%

89%

- 90% of T2 returns processed within 90 days

96%

94%

98%

97%

GST Returns

21 days

99%

99%

99%

99%

A review of internal performance reports (from Sept.'02 to Mar.'04) on the T2 Corporate Tax Return program (Taxation Centre T2 Processing Monthly Status Report) indicates that there was a difference of $4.75 (29%) between the Summerside and St. John's TCs average processing cost per T2 Corporate Tax Return ($16.38 and $21.13 respectively). The two tax centres process about 100,000 and 95,000 corporate tax returns respectively each year. Nationally, there was a difference of $6.94 (42%) between the tax centre with the lowest average cost per T2 return ($16.38) and the tax centre with the highest average cost per T2 return ($23.32). Notwithstanding the cost differences noted above, the average cost per T2 return in the Agency overall has decreased by approximately 18% between September 2002 and March 2004. One factor that may explain a portion of cost differences among tax centres is differences in the complexity of corporate tax returns processed at individual tax centres. For example, some tax centres may handle more returns of large corporations that require additional time to process. The Business Returns and Payments Processing Directorate, responsible for the T2 program, does recognize that although complexity does play a part in explaining cost differences among TCs, it does not know with any certainty what portion of the TC cost per return differences is attributable to complexity of returns. For the fiscal year 2002-2003 over 1.4 million corporate tax returns were processed nationally.

The impact of significant differences in unit costs among tax centres may be that overall program results are not being achieved at minimum cost.

Recommendation

Assessments & Client Services (A&CS) branch management, in consultation with the Regions, should identify the reasons for cost differentials among tax centres and determine whether there are opportunities to reduce the overall cost to process corporate tax returns.

Action Plan

The Corporation Assessing Section (A&CS Branch) has been participating in the CRA's Horizontal Review "Benchmarking" initiative. Each tax centre's T2 Processing operation has been reviewed and findings have been discussed with the local management team. A report is being finalized that will address the causes of disparities and will provide a series of recommendations to tax centres. The report is to be delivered by April 2005, and will form the basis for future additional discussions between TC management teams in terms of identifying other potential efficiency gains.

Monitoring and Reporting

An integrated monitoring framework is in place for TC programs. Monitoring roles and responsibilities have been defined and assigned at the local (TC), regional and directorate (HQ) levels. The frequency of monitoring varies between programs, and in some cases varies with the time of year (i.e. increased monitoring during peak periods).

One of the components of the Modern Comptrollership initiative, directed by the Treasury Board Secretariat, refers to the use of integrated financial and non-financial performance information to manage programs. Performance information will be most valuable when it brings together both financial and non-financial and historical and prospective information. (Report of the Independent Panel on Modern Comptrollership in the Government of Canada, 1997)

Financial performance information relevant to managing programs would include budget, expenditure and cost-per-unit data. Non-financial performance information would include productivity measures, changes in inventory levels, direct/indirect time ratios, historical comparisons, and benchmarking against Agency performance objectives and service standards .

The performance reports of some CRA tax centre programs do integrate financial and non-financial data. However overall, the internal performance reports used to monitor and manage CRA programs at tax centres lack consistency in both content and format.

For example, the program performance reports for the GST Returns Processing, T1 and T2 programs all include non-financial information on return volumes and method of filing/processing. However, there is a lack of consistency with respect to financial and non-financial information content in these reports. Specifically:

  • The T1 (Individual Returns & Payments Processing (IRPP) Monitoring Report Card) and T2 performance reports both include financial performance information on budgeted and actual expenditures. The T1 report also includes both current and previous year figures. The T2 report provides cost-per-return figures, which are not included in T1 or GST Returns Processing reports. In fact, GST Returns Processing performance reports do not include any financial performance data.
  • GST Returns Processing, T1 (IRPP Monitoring Report Card) and T2 performance reports detail the extent to which internal program objectives and timeframes are attained, but only T2 performance reports identify the extent to which external service standards are achieved.

Overall, the T2 performance report (T2 Processing Monthly Status Report) is particularly informative because it combines information from a variety of sources to provide detailed, integrated financial and non-financial performance data and links to Agency service standards.

Ensuring that integrated performance data is available to managers at all levels would reduce the risk that performance issues are not being identified and addressed in a timely manner. Although managers interviewed at both the St. John's and Summerside Tax Centres indicated that the current performance reports used in managing many CRA programs at tax centres are useful, performance reporting could be improved if performance reports integrated and consolidated information from existing sources across the Agency.

Recommendation

A&CS should adopt a consistent approach to internal performance reporting which integrates both financial and non-financial data from existing sources with appropriate links to Agency performance objectives and service standards. Standards and criteria should be developed for the content and format of program performance reports and, where appropriate, should consider the adoption of reporting practices in the T2 program.

Action Plan

The A&CS branch has indicated that the addition of financial performance data to performance reports now or in the coming year would be inappropriate because of the implementation of a new costing framework being developed by the F&A branch. The new costing framework is intended to bring consistency to costing and rationalization of activity types and cost centres.

For the 2003-2004 fiscal year a "New" Program Monitoring Report was issued for Quarter 3 (Q3) to coincide with the Agency's Quarterly Budgeting & Reporting process. This report modelled after IRPPD's Budgetary Allocation document provides a consistent format in displaying year-to-date expenditures for both Taxation Centres and Tax Service Offices on the delivery of IRPPD's programs.

Reliability and Integrity of Data

Performance information is most useful when it is accurate and when it is received on a timely basis. Performance reports for most tax centre programs are issued on at least a monthly basis. For programs such as T1 Individual Returns and GST Returns Processing, reports are issued on a weekly basis. Managers interviewed at the Atlantic Region tax centres indicated that performance information is generally received on a timely basis.

In order to test the accuracy of data contained in performance reports, selected financial data contained in the T2 Processing Monthly Status Report was traced to source data. The test results indicated that the report data was accurate.

The Client Requested Reassessments (CRR) program is monitored within the St. John's and Summerside tax centres as well as by headquarters (IRPP Directorate - Special Processing Division). The performance reports prepared within the tax centres and headquarters differ since TCs monitor their performance against internal performance standards, whereas headquarters monitors performance against the published Agency service standard. 1 Given that these reports refer to different performance/service standards it may be difficult for tax centre program managers to readily understand some data that is used to measure their performance.

An analysis of local tax centre performance reports and the IRPP quarterly reports for the fiscal year 2002-2003 and the first 3 quarters of 2003-2004 does indicate that where the tax centres have processed CRRs within internal performance standards, the Agency service standard of 8 weeks has been met or exceeded overall.

Managers at both the Summerside and St. John's Tax Centres have identified concerns regarding the timeliness of the IRPP quarterly report. For example, tax centres received the report for the 1st quarter of 2003-2004 on September 11, 2003. At that point the two tax centres in the Atlantic Region had already completed approximately 70% of their CRR workload for the year and spent a similar proportion of their budgets for the CRR program. Such reporting delays could present difficulty for program managers in effectively addressing performance issues. Since the audit was completed, the quarterly report for the CRR program is now received by tax centres within a month after the end of a reporting period.

Recommendation

The IRPP Directorate (Special Processing Division) in conjunction with tax centres should make appropriate adjustments to the CRR reporting framework to assure that users of performance reports clearly understand the data that is used to measure their performance. Performance reports should include references to the sources of information gathered, as well as the methodology used to consolidate and report data for specific periods.

Action Plan

During the 2003/2004 fiscal year, a CRR statistical quarterly report was initiated to provide the tax centres with an update of their program results on a continuous basis. The first report was issued late due to the development of the report. All other quarterly reports for the 2003/2004 fiscal were issued within the timeframe of one month after the end of the reporting period.

The T1 Adjustments Section receives data on the processing timeframes from the Taxation Statistics Section, Statistics Division, Policy and Planning Branch. The Special Processing Division consulted with the Statistics Division in order to revise and improve the report they provide. The improvements requested to the report that theT1 Adjustments Section receives from the Policy and Planning Branch started for the fiscal period 2004-2005. The changes have been reflected and communicated to the TCs in the first quarterly report.

Conclusion

Overall, the management of programs at the two tax centres in the Atlantic region has been effective in meeting the Agency's operational objectives and service standards for 2002-2003.

An integrated monitoring and reporting framework is in place, enabling performance results to be used for program management purposes. Program performance data captured is generally appropriate and accurate.

There may be potential for cost savings in the T2 program, given the significant difference among the TCs processing cost per return.

As well, improved reporting, in terms of consistency of performance report content and format across tax centre programs, would strengthen program performance management. That is, it would allow program managers to better identify and address risks in a timely manner.


1 The internal performance standard for CRRs is 15 working days for straightforward requests and 45 working days for more complex requests. The published service standard for CRRs is 8 weeks.

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