February 8, 2021
3. Administrative Arrangements
Here, in brief, is the current timeline for organizations’ registration, hosting of free tax clinics, and application for grant funding.
1. Before the tax season begins: organizations apply to the CRA to obtain a registration.
2. Once approved, host organizations can run CVITP free tax clinics.
3. To obtain grant funding, a registered host organization first determines its eligibility.
4. Between May and June: if it is eligible, it can submit a funding request for the eligible activity period ending May 31.
5. Funding requests will be considered on a first come, first served basis within each province and territory.
6. Between August and September: successful applicants will be notified.
7. Between September and October: grant funds will be disbursed.
The Treasury Board Secretariat of the federal government defines the conditions which departments and agencies must respect when managing funds. The terms and conditions for managing grants are among the most flexible and least administratively burdensome. (See appendices D and F of the Directive on Transfer Payments.) As the amount of money any single host organization can obtain through the grant program is quite small, it is important to keep the administrative burden proportionate to the amount of funding being sought.
Furthermore, as the CRA has a relatively sophisticated system for income tax and benefit return processing, the risk that a host organization, duly vetted and registered with a CVITP Organization Identification Number or COIN, would be able to commit fraud on a large scale through the submission of legitimate returns is very low.
These two elements suggest that it is reasonable to use grants. Yet, the CRA’s grant application process is an excessively complicated way to proceed in managing a federal government grant program, especially one that has the potential to hand out only small amounts of money to a relatively large number of organizations.
The CRA should eliminate the grant application process and, instead, make greater use of its annual registration process that all host organizations must undergo in order to be authorized to run CVITP services. First, all of the information needed to assess the eligibility of host organizations for grant funding could be collected at that time. For example, the current grant process requires the applicant to outline the total government assistance the organization has received for the purpose of hosting a free tax clinic. (Most of the host organizations we are familiar with which are partially dependent on government funding receive no government funding at all to host free tax clinics.) Second, when the application for registration is screened and approved by the CRA at the beginning of the season, as part of its notification process the CRA could indicate the formula that it will use when awarding grant funding to the host organization.
This streamlining of the procedure would entail two additional advantages. First, it would eliminate the “first come, first served” characteristic of the current grant arrangement. The present CRA process is likely to skew successful funding applications towards larger organizations which have the staff available to prepare the grant application. Yet, it is questionable that larger organizations are the ones in greater need of the financial resources. Confirmation of eligibility in principle for grant funding at the same time as registration of the host organization means the grant funds will be distributed in a broader, fairer manner.
Second, it would eliminate a lot of the uncertainty host organizations will face around CRA financial support under the present grant arrangement. Currently, the CRA process only provides clarity on the funding formula it will apply to successful funding applicants long after the eligible activity period in which the free tax clinics are run is over. This uncertainty reduces any modest incentive effect that the grant might otherwise have. Confirmation of the funding formula the CRA will apply at the same time as registration of the host organization means the host organization knows exactly what financial support it can expect to receive for its efforts and can plan for this accordingly.
In summary, the CRA should use the annual registration process for the approval of host organizations to:
– Collect all of the information required to assess the host organization’s eligibility for grant funding; and
– Notify eligible host organizations of the funding formula it will use to determine the amount of grant funding they could receive at the end of the eligible activity period.
In our conclusion, which you can read here, we examine how the CRA will know if this pilot project is successful.