Canada Revenue Agency Quarterly Financial Report

Statement outlining results, risks and significant changes in operations, personnel and program

For the quarter ended June 30, 2011

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 Report on Plans and Priorities and the Main Estimates.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the Canada Revenue Agency's spending authorities granted by Parliament and those used by the Agency consistent with the Main Estimates for the 2011-2012 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 in the form of statutory spending authority for specific purposes.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

The Agency 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

Analysis of Authorities

This report reflects the results of the current fiscal period in relation to the Main Estimates for which full supply was released on June 27, 2011.

As shown in the Statement of Authorities, CRA's total authorities available for use have decreased from $4,636 million in 2010-2011 to $ 4,471 million in 2011-2012, representing a 4% decrease or $165 million. The components of this decrease are discussed below.

The Agency's Vote 1 gross Operating authorities have increased by $88 million from $3,435 million in 2010-2011 to $3,523 million in 2011-2012. This is primarily due to increased funding received for the administration of the Harmonized Sales Tax in Ontario and British Columbia and the Affordable Living Tax Credit in Nova Scotia.

In 2011-2012, the CRA expects to recover $313 million from the Canada Pension Plan (CPP) and Employment Insurance (EI) Accounts, up from $283 million in 2010‑2011, to cover the cost of the Agency's administrative responsibilities under the respective CPP and EI legislation. This $30 million increase in revenues is netted against a corresponding increase in expenditures reflected in the Vote 1 gross Operating authorities.

The Vote 5 Capital authorities have increased year-over-year by 49% or $67 million. This increase in 2011-2012 relates primarily to $52 million of unused Capital authorities available from the previous fiscal year, as permitted under the Agency's two-year spending authority.

The forecasted expenditures under the Budgetary statutory authorities represent a net decrease of $290 million from 2010-2011 to 2011-2012. The estimate for Softwood Lumber disbursements, established by the Department of Finance, was revised downward by 71% or $339 million year‑over-year to reflect changing market conditions. This expected reduction is partially offset by an increase in required employee benefit plan contributions, as well as lesser adjustments in the authorities for Children's Special Allowance payments and the spending of revenues.

Analysis of Expenditures

A two year comparison of the Agency's annual net authorities available for use against year‑to‑date net expenditures as at June 30 is presented in Figure 1. 

Figure 1: Annual Authorities against Year-to-Date Expenditures

Figure 1: Annual Authorities against to Year-to-Date Expenditures

A) Statement of Authorities – First Quarter

As displayed in the Statement of Authorities the Agency's total first quarter expenditures have increased by $1 million, from $1,050 million in 2010-2011 to $1,051 million in 2011-2012, which represents an increase of less than 1%. The components of this increase are discussed below.

The Agency's net Vote 1 Operating expenditures have decreased by $18 million from $759 million in 2010-2011 to $741 million in 2011-2012, which relates primarily to a decline of 2% in salary expenditures. This is likely due to the spending restraint exercised by the Agency while the Government operated under Governor General Special Warrants for the first quarter of 2011‑2012, as a result of the Federal Election call and the prorogation of Parliament.

Vote 5 Capital expenditures in the first quarter have increased by $4 million, from $3 million in 2010-2011 to $7 million in 2011-2012.  This is not surprising as the quarterly distribution of capital expenditures tend to change from year to year, depending on the status of major investment projects and the timing of capital procurements.

Statutory expenditures increased by $15 million, from $288 million in 2010-2011 to $303 million in 2011-2012. This is comprised primarily of increases in employee benefit plans contributions and Softwood Lumber disbursements to the provinces, which are externally‑driven and can fluctuate throughout the year.

B) Budgetary Expenditure by Standard Object – First Quarter

As illustrated in the table Departmental Budgetary Expenditures, first quarter personnel expenditures have decreased from $791,956 million in 2010-2011 to $789,179 million in 2011-2012, a change of less than 1%.

Transportation and communication expenditures decreased by $9 million, representing a 20% reduction. This is largely due to the Agency's continuing efforts to reduce its travel costs, $5 million, as well as reduced contractual obligations in respect of telecommunications, $3 million.

Professional and special service expenditures dropped by 15%, or $10 million. This was largely comprised of a decrease of $7 million in the use of consulting services and a decrease of $6 million in payments made for the administration of GST in the province of Québec, partially offset by an increase of $4 million in the cost of legal services provided by the Department of Justice and the Public Prosecution Service of Canada (PPSC).

Repair and maintenance expenditures have increased by $21 million in comparison to the first quarter of 2010-2011 as a result of a new accelerated approval process for information technology purchases in 2011-2012. Such expenditures, related to the acquisition of computer software and maintenance agreements, had been incurred later in previous fiscal years. Overall spending on repair and maintenance by year-end is expected to be consistent between years.

Transfer payment expenditures have grown by $5 million, representing a 5% increase. This is associated with an increase in Softwood Lumber disbursements of $7 million offset by a $2 million decrease in the Children's Special Allowance payments.

Risks and Uncertainties

The measures to contain administrative costs throughout the government, announced in the Federal Budget 2010 , froze operating budgets at 2010-2011 levels for all government departments and agencies and are in effect until 2012-2013. Departments and agencies are required to absorb collective agreement rate of pay increases for all employees that take affect after April 1, 2010, through the reprioritization of existing operating resources.

In response to the Budget 2010 measures, the Agency undertook a comprehensive internal spending review to identify potential sources of funding for key operating pressures, including non‑compensated wage increases, which amounted to approximately $13 million in 2010-2011.

The collective agreement between the Agency and the Professional Institute of the Public Service (PIPSC) is in the final contract year, expiring in December 2011.

Significant changes in relation to operations, personnel and programs

The implementation of the Harmonized Sales Tax for Ontario and British Columbia transitioned provincial employees into the Agency's workforce beginning in the fall of 2010 and will continue through to July 2012. Under a Memorandum of Understanding with the provinces of Ontario and British Columbia, these employees will be integrated into the Agency's respective collective agreements and staffing classifications.  The Agency has received incremental funding in 2011‑2012 and future years for this initiative.

Approval by Senior Officials

Approved by:

[original signed by]
Linda Lizotte-MacPherson, Commissioner

[original signed by]
Filipe Dinis, Chief Financial Officer

Ottawa , Canada
August 29, 2011


Canada Revenue Agency (CRA)
Quarterly Financial Report
For the quarter ended June 30, 2011

Statement of authorities (unaudited)

Fiscal year 2011-2012
(in thousands of dollars)
  Total available for use for the year ending March 31, 2012 1,2 Used during the quarter ended June 30, 2011 Year to date used at quarter‑end
Vote 1 - Operating expenditures      
Gross Operating expenditures 3,523,146 819,815 819,815
Revenues netted against expenditures minus(312,978) minus(79,205) minus(79,205)
Net Vote 1 - Operating expenditures 3,210,168 740,610 740,610
Vote 5 - Capital expenditures 203,094 7,497 7,497
Budgetary statutory authorities      
Softwood Lumber payments 140,000 63,155 63,155
Employee benefit plans 460,028 115,007 115,007
Spending of revenues received 230,688 69,912 69,912
Children's Special Allowance payments 227,000 54,435 54,435
Other statutory authority payments 78 789 789
Total Budgetary authorities 1,057,794 303,298 303,298
Total authorities 4,471,056 1,051,405 1,051,405

1 Includes only authorities available for use and granted by Parliament at quarter-end
2 Includes incremental funding of $112.6M for the ongoing implementation of the Harmonized Sales Tax (HST) in Ontario and British Columbia, and associated tax credit programs.

Fiscal year 2010-2011
(in thousands of dollars)
  Total available for use for the year ending March 31, 2011 1 Used during the quarter ended June 30, 2010 Year to date used at quarter-end
Vote 1 - Operating expenditures      
Gross Operating expenditures 3,434,820 835,657 835,657
Revenues netted against expenditures minus(283,054) minus(76,837) minus(76,837)
Net Vote 1 - Operating expenditures 3,151,766 758,820 758,820
Vote 5 - Capital expenditures 136,085 3,249 3,249
Budgetary statutory authorities      
Softwood Lumber payments 479,000 55,865 55,865
Employee benefit plans 416,700 104,175 104,175
Spending of revenues received 226,894 71,183 71,183
Children's Special Allowance payments 225,000 56,615 56,615
Other statutory authority payments 79 289 289
Total Budgetary authorities 1,347,673 288,127 288,127
Total authorities 4,635,524 1,050,196 1,050,196

1 Includes only authorities available for use and granted by Parliament at quarter-end

Departmental budgetary expenditures by standard object (unaudited)

Fiscal year 2011-2012
(in thousands of dollars)
  Planned expenditures for the year ending March 31, 2012 1,2 Expended during the quarter ended June 30, 2011 Year to date used at quarter-end
Expenditures:      
Personnel 3,120,859 789,179 789,179
Transportation and communications 225,589 34,599 34,599
Information 12,471 232 232
Professional and special services 352,599 55,482 55,482
Rentals 377,140 85,465 85,465
Purchase, repairs and maintenance 132,393 37,993 37,993
Utilities, materials and supplies 44,743 4,583 4,583
Acquisition of machinery and equipment 144,325 4,725 4,725
Transfer payments 370,171 117,593 117,593
Other subsidies and payments 3,744 759 759
Total gross budgetary expenditures 4,784,034 1,130,610 1,130,610
Less Revenues netted against expenditures minus (312,978) minus (79,205) minus (79,205)
Total net budgetary expenditures 4,471,056 1,051,405 1,051,405

1 Includes only authorities available for use and granted by Parliament at quarter-end
2 Includes incremental funding of $112.6M for the ongoing implementation of the Harmonized Sales Tax (HST) in Ontario and British Columbia, and associated tax credit programs.

Fiscal year 2010-2011
(in thousands of dollars)
  Planned expenditures for use for the year ending March 31, 2011 1 Used during the quarter ended June 30, 2010 Year to date used at quarter-end
Expenditures:      
Personnel 2,979,421 791,956 791,956
Transportation and communications 202,862 43,225 43,225
Information 10,266 385 385
Professional and special services 349,878 65,288 65,288
Rentals 365,828 84,209 84,209
Purchase, repairs and maintenance 120,735 17,307 17,307
Utilities, materials and supplies 36,935 6,488 6,488
Acquisition of machinery and equipment 141,565 5,478 5,478
Transfer payments 707,127 112,487 112,487
Other subsidies and payments 3,961 210 210
Total gross budgetary expenditures 4,918,578 1,127,033 1,127,033
Less Revenues netted against expenditures minus(283,054) minus(76,837) minus(76,837)
Total net budgetary expenditures 4,635,524 1,050,196 1,050,196

1 Includes only authorities available for use and granted by Parliament at quarter-end