November 28, 2020

The Solution? A Paradigm Shift to the New Normal

We believe the CRA should be providing financial support both directly and indirectly to host organizations. 

We are proposing that the federal government put the program on a sustainable footing and initiate significant improvements.  Ironically, this would represent a shift in practice towards what the federal government normally does elsewhere in support of program delivery by third parties.

The obvious source of financial support is the CRA.  After all, the federal government considers the CVITP to be an essential program for reducing poverty.  And the CRA is the federal agency that administers the CVITP.  Although the CRA’s budget for the CVITP has been substantially raised in recent years, this money has been largely spent to augment its own internal management capacity.

Unlike some federal department and agencies, the CRA does not have any grants or contributions within its regular budget which it can use to provide outside organizations with financial support.  This is not an insurmountable problem: the federal government regularly changes the way in which departments and agencies administer their programs.

Even so, the CRA could always seek this financial assistance from other federal government departments (such as Employment and Social Development Canada which is responsible for the Guaranteed Income Supplement) and provincial/territorial governments whose income assistance programs it administers through the income tax and benefit return process.  (Such interdepartmental agreements and transfers of funds are quite common between federal departments and agencies.)  These other partners should be supportive of any assistance provided to the CRA which will improve the uptake in the various benefits and credits they manage.

Direct Financial Support

One form of financial support would be provided directly to the host organizations.  We are not proposing that the CRA cover all of the host organizations’ costs in delivering CVITP services.  This would prove very expensive and administratively onerous, to say nothing of opening up the question as to why the government would be privileging this particular group of organizations with generous government financing.

There are many possible ways of providing the funding.  In some instances where not-for-profit organizations manage program or project delivery, a federal department or agency provides matching funds, offering $1 or a multiple for every $1 provided by the outside organization.  The matching funds may be in grant form, with virtually no conditions, or in the form of a contribution which has some conditions attached to its use.  In other instances, funds are provided through a service contract.  In this instance, we are proposing grant funding which is the simplest to administer.  But the grant funding would be directly tied to the level of service provided by the host organizations.

Our idea comes from the Quebec government which has led the way in recognizing that the service these clinics provide is essential to meeting its own objectives, and is paying host organizations a nominal but symbolic fee for offering the service.

A few words are necessary for those less familiar with how the income tax and benefit return process works in Quebec.  In that province, residents fill out two separate returns, one for the federal government and another for the provincial government.  (In other provinces, the CRA integrates the provincial return with the federal return so that residents fill out one return for both governments.)  CVITP volunteers in Quebec help their clients to fill out both the federal and the provincial returns.  In recognition of their efforts, the Quebec government pays these host organizations a small amount (presently $1) for every return filed by their volunteers.  Admittedly, the amount it pays does not begin to cover these organizations’ costs.  But a welcome precedent has been set.

The CRA could do similarly.  As volunteer tax preparers are provided with unique Efile numbers which they insert into the Ufile software together with the name of the host organization which they are assisting, it should be easy to keep track of the number of returns filed by volunteers on behalf of a specific host organization. At the end of the tax season, the CRA could tally the number of returns each organization has filed and pay a grant to the organization corresponding to that number.

The CRA could offer more than just a token amount per return while still at a modest cost.  Take the 2018 tax year, the most recent for which there is information publicly available.  For that year, the CRA reports that the CVITP clinics processed 835,216 returns.  If, for example, the CRA had paid host organizations $10 for every return they had processed for their clients, this would have cost the federal government $8.35 million.

Sound like a lot?  Let’s put this in its proper context. This compares with the $13 million the CRA spends annually just to manage its internal CVITP operations.  And remember, this would be a small price to pay for a service that channeled federal and provincial/territorial benefits and credits to over 740,000 low and modest-income individuals in 2019.

Although there is no data presently available on the median number of clients served by host organizations, we suspect it ranges from 100-200, which would amount to $1,000-$2,000 being offered by the CRA to most host organizations.  To build economies of scale, the CRA might wish to introduce a floor for the number of clients a host organization must serve to qualify for the funding.  The particular form of payment we are suggesting represents an equitable way of compensating host organizations, proportional to their efforts.  Additionally, it provides an incentive, however modest, to organize clinics to increase the number of returns processed.

In any event, the amounts paid would never cover the full cost of providing this service.  Host organizations would continue to bear the lion’s share of the costs with their own in-kind contributions.  Nevertheless, such an injection of funds could mean the difference between a service which lives a precarious existence from year to year, and one which is internally recognized by the host organization as a core part of its mandate.  Our experience also suggests that the provision of a revenue line changes the way a host organization perceives and manages the service associated with the revenue line.

We believe a payment from the CRA is crucial, to recognize and communicate to host organizations that their CVITP service plays a valuable role in the government’s efforts to reduce poverty.  It situates some of the cost where it belongs: with the federal government which is the one seeking the service from host organizations.

Paradoxically, while the proposed fee structure falls short of covering the full cost of providing these services, we believe that this direct compensation might prove sufficient.

To learn why, read Part 3 where we explain the second of the two ways the CRA could be offering support.