Financial Claim Review Manual – Review procedures for financial reviewers
Chapter 3.0 Guidelines for coordinated review
Table of contents
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3.1 Summary of chapter
This chapter introduces and discusses guidelines linked to a coordinated review between the research and technology advisor (RTA) and financial reviewer (FR). Specifically the following section:
3.2 Requirements of chapter
3.3 Background (definition and characteristics of a coordinated review)
3.4 Working with claimants in the coordinated review (blue box)
3.2 Requirements of chapter
Following from Chapter 1.6, there are two requirements that apply equally to both the RTA and the FR:
1. All reviews must be coordinated between the RTA and the FR.
2. Relevant interactions are documented.
The underlying principles of coordination between the RTA(s) and the FR also apply to other situations where consultation and sharing of information leads to more effective and more efficient services, such as process review, pre-claim project review, first-time claimant service, account executive service, or outreach services (such as information seminars).
In general, depending upon the specific issues identified in the review plan, a coordinated review may be done by applying the relevant guidelines outlined below. Most of the guidelines reinforce the need for discussion with the other reviewer (the RTA or FR) for the purposes of planning reviews, coordinating activities, and monitoring progress on the file. When appropriate, the research and technology manager (RTM) and / or financial review manager (FRM) may need to participate in the discussion and the resolution of issues related to the claim.
It is preferable if the FR and the RTA can receive the file at the same time to facilitate timely planning and coordination of efforts.
3.3.1 Definition of coordinated review
A coordinated review is one which is undertaken using an approach whereby the RTA and FR and, when needed, their respective managers, discuss and determine the principal issues of the claim and arrange to coordinate their respective activities throughout the review. For example, when a review is coordinated, the RTA and FR will consult and communicate with each other on the following relevant items:
- the scope of their reviews, including the need for a site visit;
- joint issues in the claim that require the input of both reviewers to resolve and the planned approach to resolve those issues;
- responsibilities for initiating contact with the claimant and mechanisms for obtaining and then sharing pertinent information with the other reviewer;
- significant events (such as planned leave and changes to availability) or occurrences (new priorities and decisions to abandon the review) that may impact the review process, or may provide milestone or status information on the review process;
- contemplated significant revisions to the review plans of the RTA or the FR – in the CRM the words “review plan” may also refer to a joint review plan;
- on-going findings of review work performed, especially as they impact joint issues;
- adjustments each reviewer will be proposing and rebuttals / additional information received from the claimant;
- sources of delays that affect the review process;
- content of communications with the claimant;
- the scientific research and experimental development (SR&ED) Review Report and the proposal letter so that feedback from the other reviewer can be solicited and provided prior to mailing to the claimant; and
- any other information that affects the review process of the other reviewer, or that affects the completion of the file on a timely basis.
Coordinated reviews are required in all cases when both the RTA and the FR have their parts of the file at the same time. A coordinated review allows both reviewers flexibility in how and when their work will be performed.
A joint review, on the other hand, is one where the FR and the RTA work in tandem, and all work on the file, including meetings with the claimant, planning and correspondence is conducted with the concurrent participation of both reviewers. Joint reviews are encouraged, especially with large files, but are not required. The Claim Review Manual (CRM) does not discuss procedures for a joint review as they are considered part of the more general coordinated review.
In summary, a coordinated review is a collaborative and supportive process using on-going communication as its primary tool, which resolves joint or overlapping issues and assists each reviewer to manage and meet their own review objectives efficiently and effectively.
3.3.2 Characteristics of coordinated review
There are two objectives of performing a coordinated review:
- to improve the efficiency and effectiveness of the claim review by encouraging improved communication between the RTA and FR; and
- to reduce the administrative burden on the claimant and minimize the interruption to their business operations (for example, coordinating requests for information and a site visit).
Each reviewer should undertake to assist the other reviewer on joint issues identified in the review plan, and to inform the other reviewer of all relevant developments that could affect the other reviewer’s review process. These responsibilities to one another and ultimately to the overall review process would normally be evident in the file through documentation showing that sufficient relevant interactions occurred to meet the two stated objectives of a coordinated review.
Typical interactions of a coordinated review:
- Early in the review process, the FR and the RTA communicate the scope of their planned review to each other. They discuss and decide which joint issues require coordination of review procedures.
- Each reviewer shares relevant information they have concerning the claim or claimant with the other reviewer.
- The reviewers discuss their information needs with respect to reviewing the claim. Opportunities for improving efficiency of the review may result where both reviewers would otherwise examine the same or similar information independently or seek different information from the same source. For example, both might want a cost breakdown by project.
- The most appropriate and effective manner for obtaining information from the claimant is jointly decided. This avoids asking the claimant for the same information twice and may eliminate the need for a second visit.
- The reviewers discuss and coordinate the need for an on-site visit to the claimant.
- The reviewers update each other on the progress and status of their respective reviews. This could include updates concerning:
- the scheduling of meetings with the claimant;
- information requests issued and information received;
- interim findings by the RTA on project eligibility;
- new issues uncovered during the review;
- changes or modifications to the review plan or to the scope of the review;
- the inadequacy of the claimant’s documentation or books and records;
- anticipated internal delays (for example, leave plans); and
- the time anticipated to complete their review.
- Each reviewer communicates to the other reviewer in a timely manner any other information that is discovered which could have an impact on the other reviewer's review process. This would apply particularly for information of the sort discussed under "joint technical-financial issues" in Chapter 4.6.1 of the technical CRM for RTAs.
- The RTA’s SR&ED Review Report is provided to the FR for examination and feedback. Any comments provided by the FR are addressed prior to sending it to the claimant. This ensures that nothing of importance to the financial review has been overlooked in the SR&ED Review Report. Within this context, the RTA ensures that the SR&ED Review Report does not include decisions on strictly financial issues. Nevertheless, the RTA still provides commentary on any potential financial issues when the RTA has concerns or reservations resulting from information received from the claimant or otherwise. This commentary only puts forward factual comments and relevant observations that will assist the FR in making decisions on their issues. For example, the RTA comments on the role of an employee performing SR&ED, or the time or period spent by that person on a project, but does not comment on whether that person is a "specified employee." The RTA could, however, note in their report that the employee stated that they were a shareholder of the corporation.
- If an outside consultant (OC) is used for the review, the RTA responsible for the consultant regularly updates the FR on the OC's progress on the review. A copy of the OC's report is provided to the FR for comments before it is sent to the claimant as an attachment to the RTA's SR&ED Review Report.
- The FR may need to access information in the TF98 file for the current or prior filings and therefore needs access to any such information not keyed on the Corporate Taxation System (CORTAX). How this is done is left to the coordinated tax services office (CTSO) management to determine and implement. It is recognized that geographical distances between CTSO and tax services office (TSO) may encumber movement of the TF98 file to the FR.
- Delay codes set or removed in the Audit Information Management System (AIMS) are communicated between the FR and the RTA on a timely basis.
- The RTA and FR are encouraged to visit the claimant together to discuss contentious issues so that the claimant may better understand the potential impact of the review on the investment tax credits (ITCs) claimed.
- If requested, the FR provides the proposal letter to the RTA, prior to providing it to the claimant.
- The Proposal Package includes both the eligibility and the financial changes to avoid delays associated with multiple claimant responses. This would require the inclusion of the RTA's SR&ED Review Report as part of the Proposal Package. However, it is understood that under certain circumstances it is preferable to send a preliminary Review Report to the claimant prior to the Proposal Package, such as when there is a significant delay between the completion of the technical and financial reviews. The decision to send a preliminary Review Report is at the discretion of the RTA and local management.
When an issue in the file is strictly technical or financial, the FR or RTA will resolve the issue without involving the other reviewer. However, there are a number of joint issues and situations for which the coordination of reviews is particularly useful. Some of these issues are with respect to:
- Work and related expenditures – to determine if expenditures are for SR&ED requires a decision by the RTA as to whether the time claimed is reasonable in light of the SR&ED work that was performed. It may also require the RTA to determine the context of the expenditure.
- Salaries – to determine if expenditures are for SR&ED requires a decision by the RTA as to whether or not the employee was directly engaged in the identified SR&ED work or otherwise directly attributable.
- Materials – to determine if expenditures are for SR&ED requires the RTA to decide if the materials claimed were "consumed" or "transformed" in the prosecution of SR&ED and whether all or substantially all of this amount of material was consumed.
- SR&ED contracts – to determine if contract expenditures are for SR&ED requires the RTA to decide whether the contractor or subcontractor (performer) has performed SR&ED.
- Equipment – to determine if expenditures are for SR&ED requires the RTA to decide whether the equipment was intended to be used for SR&ED and in what proportion, or whether the equipment is prescribed depreciable property for the purposes of shared-use equipment.
- Prototypes and pilot plants – to determine if expenditures are for SR&ED requires the RTA to decide the actual or intended purpose and use of the property by the claimant.
Experimental production versus commercial production with experimental development contexts (EP vs. CP+ED) – to determine if expenditures are for SR&ED requires the RTA to decide the context of the production claimed.
3.3.3 Working with claimants in the coordinated review
All of the coordinated review practices discussed in Chapter 3 act to benefit both the CRA and the claimant. From the claimant’s perspective, coordinated reviews are more coherent, timely and less burdensome. An integral part of ensuring that coordinated reviews work for both the CRA and the claimant is to solicit the claimant’s input to ensure that the review can be completed efficiently. This is even more important in situations requiring significant travel by the RTA, FR, or employees and representatives of the claimant.
A number of specific practices are noted below that will help to demonstrate the CRA's commitment to working with the claimant in order to ensure that all parties benefit from a coordinated review.
If either the RTA or the FR is familiar with the claimant, either through previous reviews or preliminary research, they will share that information as it may affect the review plan or the quality of service to be provided. Sharing this information between the RTA and FR reduces the number of questions that the claimant is asked.
Prior to the meeting, once the RTA and FR have agreed upon the review plan, they together can plan the initial contact with the claimant, either by phone or via the initial contact letter, to determine or confirm:
- the timelines and anticipated on-site time requirements to complete the review;
- the means (letter or telephone) by which the CRA will request information, and to whom in the claimant’s company the request will be sent;
- time frames for responding to any CRA request or query, so that the timeline for completing the review can be met;
- how and when updates on the progress and outstanding issues will be communicated between the CRA and the claimant; and
- mechanisms for resolving any concerns of the claimant.
During the review, when deficiencies in documentation or understanding of eligibility of work are noted, the RTA and FR should offer the claimant suggestions for improvements to their documentation thus providing them with a consistent message on the expectations of the CRA. A consistent message will enhance the claimant’s understanding of the SR&ED Program and improve their working relationship with the CRA.
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