Executive Summary

Background and Legislation

In 1996, the Government announced in the Speech from the Throne and the Budget that it intended to convert Revenue Canada from a department of government into what it then called a “revenue commission”. In taking this step, the Government wanted the new organization to achieve three objectives:

• provide better service to Canadians;
• become a more efficient and effective organization; and
• establish a closer partnership with the provinces and territories.

Bill C-43, An Act to Establish the Canada Customs and Revenue Agency, was introduced into Parliament in June 1998 and assented to in April 1999. The Canada Customs and Revenue Agency, later referred to as the Canada Revenue Agency (CRA), came into existence on November 1 of that year.

The legislation contains five major elements: mandate and governance of the Agency; accountabilities; partnership responsibilities; human resource authorities; and administrative authorities.

The Agency was created as part of the Government’s experiment with ‘alternative service delivery’ and the legislation gives the CRA considerable flexibility and latitude in the human resources, financial, and administrative areas. Apart from the management of public monies, which continues to be governed by the Financial Administration Act (F.A.A.), the Agency is effectively given full authority for human resource and general administration – authorities which to this point had been the responsibility of Treasury Board, the Public Service Commission (PSC), and Public Works and Government Services Canada (PWGSC).

The legislation also established a governance regime for the Agency that is unique in Canada. The Minister of National Revenue retains full responsibility and accountability for the administration by the Agency of tax and benefit legislation, notably the Income Tax Act and the GST legislation. The Act created a Board of Management from the private sector (except for the commissioner’s position) to oversee the human resources, financial, and administrative authorities which were formerly the responsibility of central agencies. It created a Commissioner who is effectively accountable to the Minister for the day-to-day administration of the program legislation and to the Board for the day-to-day administration of the HR and administrative authorities.

The partnership provisions of the legislation give the Agency the authority to implement agreements (under certain conditions) with other federal departments and agencies, with provincial and territorial governments, and with aboriginal governments. The important relationship with provinces and territories is strengthened by the requirement that eleven of the fifteen members of the Board of Management be nominated by them.

The accountability provisions round out the legislation by putting in place a strong and transparent regime that ensures Agency actions are reported upon and given proper scrutiny by appropriate authorities. Indeed, the Agency is arguably subject to stronger accountability requirements than virtually any other federal organization. Accountability to Parliament is guaranteed by the longstanding concept of ministerial responsibility, coupled with the fact that the Auditor General is named as the Agency’s auditor. As well, the CRA is required not only to submit the report on plans and priorities and the departmental performance report required by the F.A.A., but it also must submit two additional documents: the Corporate Business Plan and the Annual Report. The PSC is required to report on aspects of the Agency’s staffing system. Accountability to the provinces and territories is strengthened by the fact the Agency is required to report annually to them and to keep them and the government departments on whose behalf it administers programs apprised as to significant developments that would affect them.

The Agency’s Implementation of the Legislation

Following passage of the legislation, the CRA moved immediately under the direction and oversight of the Board of Management to make use of the flexibilities it had been given in the human resource, internal financial, and administrative areas.

In the human resource area, it replaced a more process-oriented and rules-based staffing system with one where employees are recruited, selected, and promoted based on a common set of competencies matched to the organization’s business needs. Staffing recourse was similarly overhauled and replaced with a system which promotes openness and dispute resolution. The Agency assumed the responsibility of a separate employer for labour relations, compensation, and collective bargaining. In order to recognize and strengthen the importance of the management function in the Agency, a new Management Group encompassing most managers below the Executive level was created along with a new Senior Management level within the Executive level.

In the financial and administrative areas, the Board of Management oversaw similarly profound changes. Costs were reduced and internal services vastly improved through a broad range of technology based re-engineering. Overall savings of $37.4 million were realized between 2002 and 2004, with the potential for further savings over the following two years. Savings were also realized in real property as a result of a number of innovations introduced in partnership with PWGSC. The Board of Management’s strong emphasis on the comptrollership function resulted in more comprehensive and clear disclosures on financial matters and performance, both internally within the Agency and to outside stakeholders.

The changes in human resource administration, in the management structure, and in the internal administrative area have had a beneficial impact on management/employee relations in the Agency. This is evident in the results of two employee surveys: one completed in 1999, the year the CRA was created, and the other in 2002. They demonstrate that over this three-year period, employees’ satisfaction with their jobs and work environment improved considerably.

The transformation that has occurred in the Agency over the past five years would not have happened without the drive and oversight of the Board of Management. The Board brought an external private sector perspective to its work and a healthy challenge function to senior management. It made the Agency more entrepreneurial and efficient in management and administration. Its strong interest in performance reporting resulted in the Corporate Business Plan and Annual Report becoming the key planning and reporting documents in the Agency, and being recognized as exemplary within the public service. It also ensured that performance measurement has been pushed down to all managerial levels through a series of results-based accountability contracts.

The CRA also moved quickly to strengthen its relationship with provinces and territories. Service Management Framework Agreements were signed with most provinces and territories to better manage the relationship. The Commissioner has met regularly with his counterparts in the provinces and comprehensive annual reports have been prepared for each province and territory as required by the legislation. The relationship has generated economies and efficiencies for the provinces from the increasing number of programs the Agency is being asked to deliver for them and the growing number of requests to provide data to enable them to deliver programs in a more effective manner.

The rigorous accountability regime which the legislation put in place has been fully observed. The Auditor General is given full access and co-operation in conducting her audits of the Agency and the Agency has been efficient in implementing her recommendations. The Corporate Business Plans and Annual Reports have evolved over the past five years to the point where, as mentioned, they have become models for such reporting. The heightened accountability and reporting to provinces and territories have also been observed through the provision of the annual reports and frequent meetings with the provinces.

In summary, over the past five years, the Agency has been diligent in ensuring that the Canada Customs and Revenue Agency Act has been implemented in a responsible manner that fully observes both the intent and the letter of the legislation. By the same measure, it is important to note that five years is a short period within which to accomplish the sweeping changes in internal human resources and administrative systems that are permitted by the Act and that are planned and approved by the Board of Management. While much has been accomplished, the internal systems of the Agency are still very much a ‘work in progress’ that will continue to evolve and grow in the future.

The Operational Achievements of the First Five Years

The manner in which the Agency implemented the legislation has resulted in meeting two of the original objectives that were set for it: a more efficient and effective administration and a closer relationship with provinces and territories. Importantly, however, the fundamental transformation of the Agency’s human resource and administrative regimes also served as the essential ingredient in enabling the Agency to meet the third of its objectives: improving service to Canadians.

Highlights of the service improvements are described in detail in the following report. Canadians now have immediate access through the Internet to information they need to correctly file their tax return. They have secure on-line access to information related to their income tax returns, Canada Child Tax Benefit, GST/HST credit, and related provincial and territorial benefit programs. Businesses are able to register on-line, file returns using the Internet, and pay their taxes electronically through financial institutions. There have been significant service improvements to the Scientific Research and Experimental Development tax credit program and to the Charities program. Numerous achievements in the Agency’s compliance program have ensured that the federal tax system continues to be governed by fairness and impartiality.

The Agency’s achievements of the past five years have been directly dependant upon the legislation passed by Parliament in 1999. The Board of Management’s drive and determination to ensure the human resource and administrative flexibilities in the legislation were exploited to their fullest produced a cultural change in the organization that prizes innovation, service, economy, and accountability. Under the Board’s oversight, the Agency revolutionized the way it does business by adopting strategies that increased the speed of its decision-making and operations, the flexibility of its resources, and its responsiveness to taxpayers. This increased agility resulted in a sound and comprehensive IT program that has served as the backbone for modernization initiatives in the human resource, administrative, client service, and compliance areas, and a program that is increasingly capable of serving wider federal and provincial interests. The legislation, in short, has been responsible for producing a tax and benefit administration that is recognized nationally and internationally as an exemplary organization and a service provider that will continue to deliver benefits for Canada and Canadians into the future.