Public Accounts Committee on March 20th, 2017

[David Christopherson, NDP, Hamilton Centre, ON]

At the outset, Mr. Hamilton, I have to say that I was a little disappointed. Also, you missed an opportunity for getting a brownie point by not making a reference to data in your opening comments. I will say to colleagues that I think that's as much an indication of our failure as a problem for the department. We have been trying for six or eight months now, and maybe the better part of a year, at the urging of the Auditor General, to make data information, accuracy, and completeness a priority.

I was disappointed because it was one of the major recommendations. It's an area that I'm going to focus on in my remarks, and I was a little disappointed that we haven't done a good enough job, such that your advisers didn't make sure that you dropped something in there to make reference to our pet project of the year, if you will. We take it very seriously. Maybe that's a cautionary note to your colleagues, if they have others listening, to give that kind of advice to their presenters.

Having said that, turning to the actual audit on this matter, I'm looking at the area of paragraph 2.58. Here's the thing: it's sort of the “blatantness” of it, if that's a word. I'm going to quote the Auditor General, who said:

We found that the data contained errors, which hindered accurate performance measurement and reporting. We found that the Agency’s information system did not have sufficient controls in place to ensure data integrity. For example, it was possible to enter a date for completing an objection that preceded the date for receipt of the objection, and in such cases, the error was not flagged by the system.

To continue, to get it on the record:

For some objections, the date recorded for receipt of the notice of objection followed the date of assignment to an appeals officer. For example, we found that 20,825 objections had invalid dates (that is, errors in date sequence, such as the assignment date preceding the mailing date).

To set it up even sweeter, the next sentence at the beginning of paragraph 2.60 says:

We found that some data fields in the database were blank. For example....

Give me some assurance, please, that you have a major turnaround on the issue of data under way.

[Bob Hamilton]

Yes. I appreciate the question. Being an economist and having spent most of my career at the Department of Finance, there's nobody who loves data more than I do, so thank you for raising that.

Indeed, it was a major criticism in the Auditor General's report. It's something that we have a fairly aggressive action plan on to try to turn it around and to try to correct some of the more obvious things that you have raised.

I would describe the agency as having a wealth of data at its disposal. Sometimes we aren't able to share that data because it's taxpayers' confidential data, but in many ways we do a lot of great work with data.

This is a place where we need to improve our data. I can say that we have made some very significant improvements in a short time, with what I would consider to be relatively straightforward steps. You identified some of the problems.

On the one hand I'm encouraged by that, by that 41% increase in the data quality. On the other hand, I'm distressed by it, because it shows how far we had to come and, as you know, we still have more to go.

I think you can rest assured that with us—also, Mireille is doing a lot of work with her colleagues across the agency, because this is another part where we have to get everybody in the agency contributing to the data set effectively and efficiently—we will have better data, and we will better communicate that data, where we can, with Canadians. I think your point is valid, and it's something that we take great interest in.

[David Christopherson, NDP, Hamilton Centre, ON]

That's good to hear. Thank you.

Before I move on to how we're going to fix it, though, I do want to pursue this a little further. Clearly, what we need is a culture change across government, and here is a perfect example of a culture change that needs to happen.

When it's okay to leave blanks, there's a culture problem. Can you give me some idea of how we could be at that point for an agency that deals in numbers—that's your bread and butter—such that they would actually leave fields blank? Help me understand how we could be so far away from the proper kind of data collection and analysis that you and I both know needs to be done. I know that you've only been there a few months, but I can't leave this totally without pursuing it a little more. How did we get to the point where there's a culture that exists where it can go from all the people whose hands it is in and there are blank fields and that is deemed to be okay? Help me understand that, sir.

[Bob Hamilton]

I will probably ask my colleague Mireille Laroche to chip in on that, if she can, because frankly I don't have a great explanation for blank fields. In my seven months I haven't really uncovered that. The one thing I do know is that there were difficulties with the data entry in some cases. I think you mentioned things that happened before the file was received or after it was done, blanks were there. We do have a data integrity program that we put in place to try to catch those.

[David Christopherson, NDP, Hamilton Centre, ON]

How long has that been around, sir?

[Bob Hamilton]

I think it's been there for a while, but we've actually beefed it up to the point now where it's catching these things.

[David Christopherson, NDP, Hamilton Centre, ON]

You had one, but it didn't work very well.

[Bob Hamilton]

The other one didn't work very well. Why didn't it? I don't know for sure. I would ask Mireille if she could add to that, but I can give you the assurance that, with the new one we have, we will be paying attention to the data entries across the organization, verifying them, and improving the data.

Is there anything you want to add?

[The Chair, Conservative, Kevin Sorenson]

Very quickly.

[Mireille Laroche, Assistant Commissioner, Appeals Branch, Canada Revenue Agency]

Some of the issues of why some fields would be blank would be when the system allows you to make certain fields not mandatory and you can still process them. I think if an appeals officer or any officer wants to expedite the process, they don't consider that as being mandatory; therefore, it's allowed. It's true that it impedes our ability to do some analysis and performance reporting in that regard.

We had some data reporting activities before. We had reports. I would say that they were not truly effective in how we dealt with them, so we revamped them in December. We are already seeing marked results because we're making our officers accountable for these mistakes, and they're changing them, as the Commissioner has said. From one month to the other, we saw a 41% decrease in our data integrity issues.

We're also working on the systems because one of the points that the OAG mentioned is that it's a system issue in terms of it allowing the dates to be non-sequenced, not in order. We started to fix that in the fall, and we have another release coming up that will help mitigate and lower these incidents.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much.

We'll now move back to Mr. Lefebvre.

[Paul Lefebvre, Liberal, Sudbury, ON]

To continue on the line of questioning I was asking before, I asked why the increase, and your answer was taxpayers are more knowledgeable of their rights. You also said that basically CRA is doing a better job of identifying files they should be reassessing.

I will add one. Basically at the auditor level, as well, from my experience in dealing with the CRA representing taxpayers who had to deal with CRA on many occasions, a lot of times it was the approach from the auditor's position. They would not allow a deduction or would be very hard and say, “Well, take your chances at appeals.”

I also know tax practitioners who say that they're dealing with an unreasonable auditor, and they can't deal with this person. They just let it slide and go to appeals because they may get a better discussion at that level, and they want to stop wasting their time. My comment on that is that I think there's an opportunity here. We've looked at resources, certainly. You have the appeals level, the appeals officers, and then you have the auditor level, which is your front line. They are doing the front line of that job of reviewing all the assessments, the reassessments, and determining how they are going to be approaching this. Some are very capable, and some are more difficult to deal with.

I'm happy to see these new processes that you're putting in place moving forward. However, regarding this 30 days in which the agency will contact the individual, my experience is that we waited months to get a response. Then they would give us 10 to 20 days to respond. Is that culture going to remain the same as well? What is that relationship with respect to this new process? Please explain to me a bit of that new process.

[Bob Hamilton]

Maybe I'll take the two of them quickly. The first thing you raise is that the audit activity is generating additional workload for appeals. I think one of the things that we are trying to do is to help put the things in appeals that should be there, and the things that shouldn't be in appeals not be there. For example, sometimes what comes into appeals is a case where new information is provided by the taxpayer. What we'd like to do is, if what you're doing is providing new information, that's not really an appeal, that's handled better in the audit assessment activity. We're trying to do some things so that things don't just automatically go into appeals, either by activities of CRA auditors or by the taxpayers, so let's get things separated on that front.

The one thing that I've learned in a few months at the agency is that something that happens here in audit affects appeals and the tax collection people. It's an integrated whole, so we need to think about that, and we need to give feedback from our appeals officers through to the auditors about some of the cases that are coming. I think that's one of the points that the Auditor General raised. Do we talk to each other enough to figure out how we can help the auditor? Again, going back to my earlier point, help with a respectful and productive conversation.

[Paul Lefebvre, Liberal, Sudbury, ON]

Thank you for going there, because if you look at the auditor's report, this is not the first time that the Auditor General has done a review of the dispute settlement mechanism with CRA. Back in 2004 there was a report as well. I'm reading from paragraph 2.83. The Auditor General says, “we indicated the importance of having auditors understand the changes made to their assessments”, so basically how to be better and to share best practices within the department. This was discussed back in the 2004 report, and here we are in 2017 and it's back at the forefront. It says here, “While headquarters acted on some of the suggestions, most were not addressed, nor was there a targeted timeline for their completion.” That's the gist of what was said there. How can we be sure that this time things will change?

[Bob Hamilton]

I think you can be assured because we have a system in CRA now—and I don't know what existed in 2004—where we track all of these recommendations that are given to us, and we hold assistant commissioners like Mireille and others accountable for how they're doing. If we agree to a recommendation, then we will implement it, and we will do our best job. Whether we'll do it perfectly or not remains to be seen, but we will do our best job.

But on your second question—

[Paul Lefebvre, Liberal, Sudbury, ON]

Sorry, yes, you had to go back.

[Bob Hamilton]

Yes. We're trying to get back to taxpayers quickly. We're focusing on the low-complexity ones first, because that should be the place where we can make the most progress. What happened in the past was that it would sit on a shelf until an appeals officer was ready for it. Time is not our friend in that case, because the longer it waits, sometimes the harder it is to resolve it quickly.

Our thought—and we're having some early success with this—is to get back to the taxpayer quickly and just have a conversation to make sure we have all the information and there isn't anything else. When the appeals officer picks it up, maybe we'll be able to even deal with it at that stage. Certainly, when the appeals officer picks it up, that whole process can go a lot faster.

[Paul Lefebvre, Liberal, Sudbury, ON]

I would agree that this will help.

[Bob Hamilton]

We will still ask the taxpayer to be efficient.

[Paul Lefebvre, Liberal, Sudbury, ON]

You talked about service standards. Now you want to resolve files within 180 days. I'm assuming those are the low-complexity files and not your group files, because group files take a very long time.

[Bob Hamilton]

Yes. Again, what we've had to do here to attack this problem is split it up into pieces: low complexity, medium-high complexity, and group. In the low-complexity category, we're making the case to fix them within 180 days.

[Paul Lefebvre, Liberal, Sudbury, ON]

Perfect. That's a very enviable target. Hopefully, you'll be able to inch towards that target.

I would like to go back to the auditors' best practices and improvement. Again I'll go back to my own experiences. Sometimes you'll have a completely different result between auditors on pretty much the same type of file. That's why sometimes we had to bring it up to appeals. I commend you to try to improve the service standards—not just at the appeals level but also at the audit level—and make sure that their training continues and that there is sharing of why certain files were resolved in a certain way. That lack of communication has been very frustrating for taxpayers and tax practitioners in industry, because it is not consistent. If you can't advise clients and taxpayers on how certain files are approached, or say this is the result you may get, it's extremely frustrating for Canadian taxpayers.

[The Chair, Conservative, Kevin Sorenson]

Thank you. I don't know if there was a question there. I think it was more—

[Paul Lefebvre, Liberal, Sudbury, ON]

That was a comment.

[The Chair, Conservative, Kevin Sorenson]

Thank you.

We'll now go to Mr. Jeneroux, please, for five minutes.