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 - News Release 2002-049 - 

Accountant's Report : CCRA's Current Accounting Practices

on the results of applying specified auditing procedures in connection with the Canada Customs and Revenue Agency’s (CCRA) assertion that CCRA’s accounting practices applicable to mutual fund trust capital gains refunds have been revised to avoid a similar omission in the future

To the Minister of Finance of Canada

Consistent with my engagement letter to the Deputy Minister of Finance of Canada, I have performed the specified procedures set out in the Annex to this report in connection with the Canada Customs and Revenue Agency’s assertion that CCRA’s accounting practices applicable to mutual fund trust capital gains refunds have been revised to avoid a similar omission in the future.

As a result of applying the specified procedures as set out in the Annex to this report, I found no exceptions. However, these specified procedures do not constitute an audit of and accordingly I do not express an opinion on the Canada Customs and Revenue Agency’s assertion that CCRA’s accounting practices applicable to mutual fund trust capital gains refunds have been revised to avoid a similar omission in the future.

This report has been prepared for use solely in connection with an evaluation of the omission of provincial capital gains refunds earned by mutual fund trusts from the previously issued Statements of Income and Capital Taxes Payable to the Provinces and Territories.

Sheila Fraser FCA
Auditor General of Canada

Ottawa, Canada
May 31, 2002

Annex to the Accountant’s Report

Specified procedures performed in connection with the Canada Customs and Revenue Agency’s assertion that CCRA’s accounting practices applicable to mutual fund trust capital gains refunds have been revised to avoid a similar omission in the future

1) Obtain from the Canada Customs and Revenue Agency (CCRA) a written representation that the Revenue Ledger is now being used as the sole source for the preparation of Statement 9 (dealing with the provincial portion of capital gains refunds) which has been added to the Federal / Provincial Tax Sharing Statements effective with the December 31, 2001 report.

2) Review the Canada Customs and Revenue Agency’s (CCRA) internal correspondence and other documentation demonstrating that:

a) provincial capital gains refunds general ledger accounts have recently been set up in the Revenue Ledger;

b) functionality has been added to the Automated Trust System (ATS) to incorporate the proper posting to these new accounts; and

c) changes have been made to the Automated Assessment Control system (AAC) to incorporate the proper posting to these new accounts.

3) Verify that:

a) CCRA has set up all necessary provincial capital gains refunds accounts to capture mutual fund trust capital gains refunds by province in the Revenue Ledger;

b) the additions made to the ATS have included appropriate mapping of provincial capital gains refunds to the Revenue Ledger;

c) the changes made to the AAC system have included appropriate mapping of provincial capital gains refunds to the Revenue Ledger; and

d) the new provincial capital gains refunds accounts have been incorporated in the Tax Sharing Statements templates to be used for future reporting.

4) For each new provincial capital gains refunds account within the Revenue Ledger, and for each system source within that account, to the extent that an assessment transaction has taken place by May 10, 2002, trace a provincial capital gains refund from the actual mutual fund trust tax return to the new provincial capital gains refund account, and ensure that it has been accurately posted to the appropriate provincial capital gains refund account.

5) Summarize the results of the above procedures and prepare the appropriate Accountant’s Report.