Opening Statement to the Standing Committee on Public Accounts

Canada Revenue Agency—Collection of Tax Debts
(Chapter 8 - May 2006 Status Report of the Auditor General)

6 June 2006

Sheila Fraser, FCA
Auditor General of Canada

Mr. Chairman, thank you for this opportunity to present the results of our audit of the collection of tax debts. I am accompanied by John Rossetti, Assistant Auditor General, and Jamie Hood, the Principal responsible for this audit.

Once a year, I prepare a report for Parliament called the Status Report. This report focusses on what the government has done to address recommendations made in a selection of previous performance audits, and assists parliamentarians to hold the government accountable for its stewardship of public funds. Our audit of the collection of tax debts follows up on previous work done by this Office more than a decade ago.

In our 1994 audit we found, among other things, that the Department's automatic risk-scoring systems, developed to help prioritize accounts for collection action, were ineffective. We also found that the Department lacked adequate information on the results of collections to assess performance properly.

Overall, this year we found that the Agency has not made satisfactory progress in addressing our 1994 recommendations. Its approach to assessing files for risk continues to lack the necessary sophistication, and the Agency still lacks information it needs to manage the collection of tax debts efficiently and effectively. While these are difficult and complex issues to resolve, we had expected to see greater progress.

What are the key parameters of the tax debt? The Agency had more than 3 million collection accounts totalling about $18 billion at 31 March 2005. This total represents just over 5 percent of the $332 billion in total taxes paid to the Agency in 2004–05.

Mr. Chairman, the Agency needs good risk management systems because its resources are limited and its collectors need to focus their efforts on the riskiest accounts. Since 1994, the Agency has made some improvements to its risk-scoring systems, but it still has a long way to go. Because of the weaknesses we found in risk management, we concluded that the Agency has no assurance that the riskiest files are given priority.

With respect to management information, we found several shortcomings. We found that management does not have a good understanding of why the amount of tax debt is growing at a faster rate than total taxes paid; nor does it have a good understanding of the types of accounts that make up the total tax debt. Management lacks this understanding because it is not collecting the appropriate data.

We also found that management lacked important information on performance. For example, the amount of cash collected on automated transactions and accounts processed at the national call centre is not available, although these accounts totalled about $2.5 billion at 31 March 2005. In addition, management lacks information on how well the various types of collection actions are working. Management needs this information to ensure that its strategies are working and its resources are assigned to the right areas.

As is often the case in our audits, Mr. Chairman, there are some positive findings to report. For example, the Agency has updated its automated system, opened a national call centre, and established national pools to better manage workload.

Finally, let me turn to the Agency's strategic vision for collection of tax debts. The vision sets out ambitious goals to be achieved by 2010 that incorporate many good practices used in other jurisdictions and in the private sector. The vision also identifies the major challenges faced by the Agency in collecting tax debts, including those raised again in our report.

However, at the time of our audit, we found no detailed plan outlining how the Agency will address the specific challenges described in the vision, or the measures that will be used to gauge progress toward its goals. Without such a plan, the Agency may have a hard time reaching its goals.

We are pleased that the Agency has agreed with our recommendations and that its vision addresses the need for good risk assessment and improved management information. The key question is: When will we see the desired results? Your Committee may wish to ask the Agency to provide you with a detailed action plan and a timetable for completing its vision, and to provide the Committee with regular progress reports.

Mr. Chairman, that concludes my opening statement and we would be pleased to answer your Committee's questions.