Section III: Supplementary Information - Financial Highlights

Canada Revenue Agency Future-oriented Financial Statements – Agency Activities

Notes to the Future-oriented Financial Statements – Agency Activities

The Canada Revenue Agency (the “Agency”) is an agent of Her Majesty in right of Canada under the Canada Revenue Agency Act. The Agency is a departmental corporation named in Schedule II of the Financial Administration Act and reports to Parliament through the Minister of National Revenue.

The mandate of the Agency is to support the administration and enforcement of tax legislation as well as other related legislation. The Agency provides support, advice, and services by:

(a) supporting the administration and enforcement of program legislation;

(b) implementing agreements between the Government of Canada or the Agency and the government of a province, territory, or other public body performing a function of government in Canada to carry out an activity or administer a tax or program;

(c) implementing agreements or arrangements between the Agency and departments or agencies of the Government of Canada to carry out an activity or administer a program; and

(d) implementing agreements between the Government of Canada and First Nations governments to administer a tax.

The Agency collects revenues, including income and sales taxes and Employment Insurance premiums, administers tax legislation, delivers a number of social benefit programs to Canadians for the federal government, as well as for provincial, territorial, and First Nations governments and collects amounts for other groups or organizations, including Canada Pension Plan contributions. It is responsible for the administration and enforcement of the following acts or parts of acts: Air Travellers Security Charge Act, the Canada Revenue Agency Act, the Children's Special Allowances Act, Part V.1 of the Customs Act, section 2 of the Energy Costs Assistance Measures Act, the Excise Act, the Excise Tax Act (including the Goods and Services Tax (GST) and the Harmonized Sales Tax (HST) except for GST/HST on imported goods), the Excise Act, 2001, the Income Tax Act, the Softwood Lumber Products Export Charge Act, 2006, the Universal Child Care Benefit Act, and others including various provincial acts.

In delivering its mandate, the Agency operates under the following program activities:

(a) Internal services: Provides internal services across the Agency, such as human resources management, financial management and information technology, to support the needs of programs and corporate obligations;

(b) Reporting compliance: Verifies complete and accurate disclosure by taxpayers of all required information to establish tax liabilities;

(c) Assessment of returns and payment processing: Processes and validates taxpayer returns; registers, establishes, and maintains taxpayer accounts and; receives payments;

(d) Accounts receivable and returns compliance: Identifies and addresses non-compliance with taxpayer filing and remittance requirements;

(e) Taxpayer and business assistance: Assists taxpayers in meeting their obligations under the self-assessment;

(f) Appeals: Provides a dispute resolution process for taxpayers who disagree with decisions taken by the Agency;

(g) Benefit programs: Provides Canadians certain income-based benefits, credits and other services on behalf of federal, provincial (except Québec), and territorial governments;

(h) Taxpayers' Ombudsman: Addresses requests for reviews made by taxpayers and benefit recipients with respect to service matters.

These future-oriented financial statements have been prepared:

(a) as at January 31, 2012;

(b) on the basis of government policies, government priorities, and external environment at the time the future-oriented financial information was finalized;

(c) according to the requirements of Treasury Board Accounting Policies which are based on Canadian generally accepted accounting principles for the public sector;

(d) on the basis that the resources provided will enable the Agency to deliver the expected results specified in the Report on Plans and Priorities;

(e) on the basis of historical costs.

While every attempt has been made to accurately forecast final results of 2011-2012 and 2012-2013, actual results are likely to vary from the forecast information presented, and this variation could be material.

The Agency will not be updating the forecasts for any changes to appropriations or forecast financial information made in ensuing supplementary estimates. Variances will be explained in the Departmental Performance Report.

For financial reporting purposes, the activities of the Agency have been divided into two sets of financial statements: Agency Activities and Administered Activities. The future-oriented financial statements - Agency Activities include only those operational revenues and expenses which are managed by the Agency and utilized in running the organization. The purpose of the distinction between Agency and Administered activities is to facilitate, among other things, the assessment of the administrative efficiency of the Agency in achieving its mandate. No future-oriented financial statements were prepared for Administered Activities because it is analogous to information presented by the Department of Finance.

These future-oriented financial statements - Agency Activities have been prepared using accounting principles consistent with those applied in the preparation of the financial statements of the Government of Canada. The accounting principles used are consistent with Canadian generally accepted accounting principles for the public sector. A summary of significant accounting policies follows:

(a) Parliamentary appropriations

(b) Net cash provided by the Government of Canada

(c) Forecasted expenses

(d) Services received without charge from other government agencies and departments

(e) Forecasted revenues

(f) Due from the Consolidated Revenue Fund

(g) Accounts receivable and advances

(h) Capital assets

(i) Vacation pay and compensatory leave

(j) Employee future benefits

(k) Contingent liabilities

(l) Measurement uncertainty

5. Parliamentary appropriations

The Agency receives most of its funding through annual Parliamentary appropriations. Items recognized in the Statement of Financial Position and the Statement of Operations in one year may be funded through Parliamentary appropriations in prior, current, or future years. Accordingly, the Agency has different net results of operations for the year on a government funding basis than on an accrual accounting basis. These differences are reconciled below.

a) Reconciliation of Parliamentary appropriations to be provided and used:

Footnote 1

In accordance with the division of activities for financial reporting purposes outlined in Note 4, the payments under the Softwood Lumber Products Export Charge Act, 2006 and the Children's Special Allowance payments will be reported as federal administered expenses on the statement of administered expenses and recoveries of the Agency's Administered Activities financial statements.

Footnote 2

Pursuant to section 60(1) of the Canada Revenue Agency Act, the Agency benefits from a two-year period to utilize Parliamentary Appropriations.

b) Reconciliation of net cost of operations to total Parliamentary appropriations to be used:

a) Pension benefits

The Agency and all eligible employees contribute to the Public Service Pension Plan, which is sponsored by the Government of Canada. Pension benefits accrue up to a maximum period of 35 years at a rate of two percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plans benefits and they are indexed to the increase in the Consumer Price Index.

The Agency's and employees' contributions to the Public Service Pension Plan for the forecasted years are expected to be as follows:

The Agency's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada.

b) Health and Dental benefits

The Agency and all eligible employees contribute to the Public Service Health Care Plan and Public Service Dental Care Plan, which are sponsored by the Government of Canada.

The Agency's responsibility with regard to these plans is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada.

c) Severance benefits

The Agency provides severance benefits to its employees based on eligibility, years of service and final salary. These severance benefits are not pre-funded. Benefits will be paid from future appropriations. Information about the severance benefits, measured at the time of preparation of these statements, is as follows:

The following table presents the expenses from continuing operations by program activity and expense category as described in Note 1 of these financial statements.

The following table presents the revenues from continuing operations generated by program activity and revenue category as described in Note 1 of these financial statements.

The Agency is related in terms of common ownership to all Government of Canada departments, agencies, and Crown corporations. Transactions with Crown Corporations entered into by the Agency are in the normal course of business and on normal trade terms applicable to all individuals and enterprises. Transactions with other Government of Canada departments and Agencies are conducted on a cost recovery basis.

During the year, the Agency received various services without charge from other government agencies and departments. The estimated costs for significant services received without charge include:

As of November 15, 2011, the Agency transferred certain information technology activities to Shared Services Canada (SSC) in accordance with Orders in Council (OIC) P.C. 2011-1291 to P.C. 2011-1297, including the stewardship responsibility for the related assets and liabilities. The Parliamentary appropriations that the Agency has received to fund those activities for the period from November 15, 2011 to March 31, 2012 ($53,661,578) were deemed appropriated to SSC.

The Agency will transfer the liabilities, assets, revenues and expenses related to its information technology activities to SSC on March 31, 2012. The net impact of that transfer on the Agency's equity is expected to be $37,359,762. During the transition period, the Agency will continue to administer those activities on behalf of SSC. The revenues and expenses that will be administered by the Agency during that transition period are not recorded in these future-oriented financial statements.

The estimated revenues and expenses of the Agency relating to these information technology activities prior to the effective date of the transfer are $36,098,966 and $143,752,041 respectively for fiscal year 2011-2012.

The Agency is a defendant in certain cases of pending and threatened litigation which arose in the normal course of operations. The current best estimate of the amount to be paid in respect of the cases identified as likely to be lost has been recorded in accounts payable and accrued liabilities. All other cases, excluding those assessed as unlikely to be lost, are considered contingent liabilities and the related amounts are disclosed whenever the amount of the contingency can be reasonably estimated. At the time of preparation of these statements, contingent liabilities for claims and pending and threatened litigation have been estimated at $42,722,645.

The nature of the Agency's activities can result in multiyear contracts and obligations whereby the Agency will be committed to make future payments when the goods are received and/or the services are rendered. Significant contractual obligation that can be reasonably estimated are as follows:

The presentation of the net debt indicator and a statement of change in net debt is required under Canadian generally accepted accounting principles for the public sector.

Net debt is the difference between a government's liabilities and its financial assets and is meant to provide a measure of the future revenues required to pay for past transactions and events. A statement of change in net debt would show changes during the period in components such as capital assets and prepaid expenses. Departments and agencies are financed by the Government of Canada through appropriations and operate within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by departments and agencies is deposited to the CRF and all cash disbursements made by departments and agencies are paid by the CRF. Under this government business model, assets reflected on the financial statements, with the exception of the Due from the CRF, are not available to use for the purpose of discharging the existing liabilities of the Agency. Future appropriations and any respendable revenues generated by the Agency's operations would be used to discharge existing liabilities.

Date modified:

2012-05-07