Audited Financial Statements - Agency Activities

Management Discussion and Analysis - Agency Activities

Introduction

This section of the Financial Statements provides unaudited supplementary information on Agency Activities, as reported in the audited Statement of Operations - Agency Activities. The information is on an accrual basis.

Agency Management

The moderate increase in Agency expenditures from 2005-2006 to 2006-2007 is the result of new initiatives announced in recent Federal Budgets as well as collective agreement increases for salaries offset by a decrease in the cost of employee allowances and benefits, as detailed in the analysis below.

The increase in non-tax revenue is primarily attributable to an increase in the fees charged for administering the Canada Pension Plan and the Employment Insurance Act.

Analysis of Net Cost of Operations

The Agency’s 2006-2007 net cost of operations decreased by $93 million over 2005-2006. Agency expenses totalled $3,863 million in 2006-2007 and $3,861 million in 2005-2006 (see Note 9 of the Financial Statements - Agency Activities for the breakdown of personnel and other expenses). When adjusted for non-tax revenue of $414 million (2005-2006 - $319 million), the net cost of operations becomes:

The Agency’s expenses, as detailed in the Statement of Operations, are made up of approximately 74% in personnel expenses (salaries, other allowances and benefits) and 26% in other expenses, as illustrated in the exhibit below.

Personnel expenses are the primary drivers for the Agency. A number of factors had a significant impact on the net decrease of $39 million in personnel expenses in 2006-2007 from 2005-2006. These include a decrease in the costs of employee benefits (such as superannuation and severance benefits), partly offset by increased salary costs to address initiatives from recent Federal Budgets and other initiatives such as interdepartmental services provision, Corporate Tax Administration for Ontario, the administration of the Softwood Lumber Products Export Charge Act, 2006, as well as collective agreement increases.

Other expenses increased by $41 million. This is due mainly to federal sales tax administration costs by the Province of Quebec which increased by some $26 million over 2005-2006 and to payments to private collection agencies in the amount of $12.4 million for the collection of certain accounts receivable. The remaining portion of other expenses is linked to personnel expenses (e.g., travel for auditors, computers, accommodation, furniture replacement, etc.).

Non-tax revenue increased by some $96 million in 2006-2007 over 2005-2006. The increase is primarily attributable to an increase in fees charged for administering the Canada Pension Plan and the Employment Insurance Act. The Agency received approval from Treasury Board to increase these fees to better reflect the true costs of administering these programs.

Figure 23 Total Expenses

Date modified:

2007-11-01