August 27, 2024

Summary:  This pilot project was planned for three years, running from 2021 to 2023 but has been extended by the Canada Revenue Agency (CRA) for a fourth year to the end of 2024.  In reviewing the CRA’s public data on the CVITP for the 2021 to 2023 period, we show that the number and amount of grants awarded has increased from well below what was expected to way above what was budgeted for annually, that the funding formula has been become relatively more generous but that none of the changes were timed to produce any incentive effect, and that the administrative arrangements were unnecessarily burdensome and somewhat inappropriate for the way the funds were likely to get used by host organizations.

We also show that the results achieved as per the CRA’s stated objectives for this pilot project make it next to impossible to draw any firm conclusions about the success of the pilot grant project after the third year of operation.  Strangely, increasing the number of individuals served by the CVITP was not a stated objective of this pilot project.  While the number of individuals assisted has increased over the three years, one needs to remember that the CVITP last reached its peak in the 2019 tax season, after which it fell dramatically during the 2020 tax season largely because of the COVID related restrictions.  Although the number of people assisted in 2023 surpassed the peak reached in 2019, it was only slightly larger.  Thus, the only thing we can say with some confidence is that the CRA may be able to attribute to the pilot project the return in 2023 to CVITP performance levels achieved in 2019.  The pilot project may have served as an incentive to entice host organizations that had stopped offering CVITP services during COVID to begin doing so again.

Toward the end of 2023, the CRA announced that it would extend this pilot grant project for a fourth season.  However, the funding formula for grants remains the same as it was for the 2023 season.  We expect the numbers of returns filed and individuals assisted to increase further in the 2024 tax season.  But the stagnation in the number of host organizations between 2022 and 2023 does not bode well for further rapid expansion of the CVITP.  Thus, we remain sceptical that the growth in the number of individuals assisted will keep pace with the growth in the number of those living in poverty during that same period.  This would not be a good as the CVITP was already serving only a fraction of those most in need of this service.

Prior to the 2021 tax season, the Canada Revenue Agency (CRA) had never offered financial support to all the community-based organizations providing CVITP services.  In an article posted on November 28, 2020, we argued that it should be doing this.

In February 2021, the CRA announced a new pilot grant project that provides financial support to eligible CVITP host organizations.  This pilot project was intended to run for three tax seasons, from 2021 to 2023.  (When it was introduced, we had a lot to say about it here.  We also commented after the first year and then again after the second year of operation were completed.)  This pilot project completed its third year of operation in October 2023.

Implementation (2021 – 2023)

a. Project Expenditures and Grant Recipients

Originally running from the 2021 to the 2023 tax season inclusive, this pilot project was allocated a grant budget of $10 million by the CRA for the three years of operation.  This is, on average, to $3.3 million in grant funding being available per tax season.

Here are how the funds have been spent to date by tax season:

Next, let’s look at the number of organizations which received the funding:

In sum, we don’t know for certain how much money has been spent to date nor how many grants have been provided to date.  Even if we don’t know this, one must assume the CRA has accurate information on these two aspects.  However, all the information communicated to date has been through press releases which are better suited to delivering political messages than providing rigorous reporting on what has happened.

b. Financial Resources

The financing formula has evolved significantly over the three years.

2021 : When the pilot project was first announced, we voiced our concerns here about the insufficient amounts of money being made available for hosting CVITP clinics.  Following the first year of implementation, we heard some clinic coordinators say that the financing was too little (relative to the time it would take to comply with the administrative arrangements) and thus they did not apply for a grant.

2022 : On October 14, 2022, toward the end of the second year of the pilot project, changes to the original financing formula were announced. These would apply to applications received for the second year.  These included:

• an increase in the amount paid per return filed to $5, $500 for basic expenses rather than a variable amount based on reported expenditures, and
• supplemental payments of $250 to host organizations serving northern and/or indigenous communities.

It is noteworthy that the grants were being issued in October, several months after the relevant grant period for filing returns had finished (May 31).

2023 : On May 25, 2023, the Minister of National Revenue announced two changes to the grant financing formula for the third year of the pilot project:

• The amount paid to host organizations to cover basic expenses would be tripled from $500 to $1,500 for those that filed more than 50 returns and
• A supplemental payment of $250 would be made to host organizations serving rural and remote communities.

While no reason was given for the enhancements to the financing formula announced for the third year of the pilot project, they are certainly welcome as they provide an increased monetary incentive, in theory, for community-based organizations to host CVITP clinics.  We say “in theory” because, just as in the second year of the pilot project, these changes were not announced at the beginning of the tax season as one would normally expect if the CRA wanted to induce community-based organizations to host CVITP clinics.  Instead, they were announced at the end of the relevant grant period for filing returns.

c. Administrative Arrangements

While we are not directly involved in the application for grants and reporting on the use of CRA grant funds, we understand this has evolved over time to become somewhat easier for host organization clinic organizers to manage.

Nevertheless, it is surprising the CRA believes it needs to issue 20-page long grant agreements to each of the over 1,500 organizations to which it provides grants.  This strikes us as excessively bureaucratic for the management of grants.

Many of the clauses in these agreements could be made into conditions that host organizations must accept if they intend to apply for a grant.  Other clauses are ill-suited to the agreement, implying that the grant is being advanced by the CRA to support expenditures the recipient host organization will undertake whereas the reality is that much of it will be used to reimburse the organization for expenditures it has already incurred to operate in the last tax season.

Results (2021 – 2023)

When the pilot grant project was first announced, the CRA did not include any framework for assessing the project’s performance over time.  But it did expect that the project would encourage more community-based organizations to offer CVITP services and therefore to serve more clients.

At that time, we commented on the difficulty the CRA would face in determining whether the project was a success.  In particular, we identified two challenges:

• The project launched in the 2021 tax season, after the very poor performance in 2020 due to the COVID pandemic public health restrictions.  Thus, it would be difficult to distinguish between the incentive effect of the project funding and the normal rebound in CVITP service numbers that could be expected after the COVID related public health restrictions were lifted and many of the host organizations that had shut down their operations during the pandemic reopened for operation.
• In each of the years prior to 2020, the CVITP service numbers had grown even when no funding was available.  Thus, it would also be difficult to distinguish between the incentive effect of project funding and any further growth that could normally have been expected.

It was only in the second year of the project that the CRA published the project’s objectives and the measures it would use for assessing the performance of this project.

Below, we revisit the CRA’s stated objectives, measures used to assess performance and results for the three years of implementation.  (In reporting on results, we use the new statistics the CRA posts on the CVITP website.)

Comments

1Administrative costs: It is strange for an element of the project design to be a stated objective of the pilot project.  Surely there must be more fundamental reasons for offering to cover some of the administrative costs.  The other stated objectives seem to get more closely at these reasons.

2Growth in number of participating host organizations:  It is worrisome to see that this declined in 2022 and then remained stagnant in 2023.  This would suggest that the grant program is not a sufficient incentive to attract new host organizations (or to retain former host organizations).

3Retention of host (participating) organizations:  As the CRA gathers this information, it should be publishing it.

4Expansion in the reach of clinics:  As no performance measure has been provided, it is unknown how the CRA will assess whether the grant program is successful in meeting this objective.

5Expansion to vulnerable population segments:  Again, as no performance measure has been provided, it is unknown how the CRA will assess whether the grant program is successful in meeting this objective.

6Increase in the number of volunteers:  This is not a stated objective of the project.  The CRA gives no explanation as to why it thinks that by providing modest sums of money to host organizations, this should lead to an increase in the number of their volunteers.  The CRA does not distinguish in its data between host organizations which are grant recipients and those which are not.  So, it is impossible for us to make any comparison between the changes in the numbers of volunteers associated with these two groups.

7Increase in the number of returns filed:  This is not a stated objective of the project.  While the CRA gives no explanation for the inclusion of this performance measure, it is reasonable to assume that by providing a payment for each of the returns filed (for the taxation year 2020 onward), the CRA hoped this would be an incentive for host organizations to file more returns. However, the CRA does not distinguish in its data between host organizations which are grant recipients and those which are not.  So, it is impossible for us to make any comparison between the changes in the numbers of returns filed associated with these two groups.

(There is a further problem with the data which the CRA publishes.  For the three years of grant awarded to date, the eligibility activity period does not correspond with the period which the CRA uses to publish data on CVITP activity.[ix]  It is conceivable that the CRA has data on CVITP activity which corresponds with the eligible activity periods for the CVITP grants.  If so, it has not published any of it.  Instead, it cites CVITP figures in its press releases which do not correspond with the eligible activity periods for the grants.)

This mixed record makes it next to impossible to draw any firm conclusions about the success of the pilot grant project after the third year of operation. 

But it is strange that the CRA did not include an annual increase in the number of people served as a stated objective.  The real measure of success should not be whether the numbers of host organizations, volunteers or returns filed are maintained or increased.  Instead, it should be whether more individuals get served and, by extension, more returns get filed.   Indeed, the last time the CRA published any targets for the CVITP, it focused on the number of individuals assisted.

How did the CVITP do on this measure?  Here is the CRA data on the number of individuals assisted during the period of the pilot project:

This looks like a success story.  But hold on.  One needs to remember that the CVITP last reached its peak in the 2019 tax season, helping 741,400 people.  Then this number fell to 407,408 in the 2020 tax season largely because of the COVID related restrictions.

While the number of people assisted in 2023 has finally surpassed the peak reached in 2019, it is only slightly larger.  And it must be remembered that this rebound came at a cost to the CRA as the 2019 figure was achieved before the introduction of the pilot grant project.

The only thing we can say with some confidence is that the CRA may be able to attribute to the pilot project the return in 2023 to CVITP performance levels achieved in 2019.  The pilot project may have served as an incentive to entice host organizations that had stopped offering CVITP services during COVID to begin doing so again.  But would it be enough to make the CVITP grow to meet future demand?

What Comes Next (2024)?

The grant project was originally conceived as a three-year pilot from 2021 to 2023.  At the end of that period, one would normally expect an assessment to have been undertaken to determine the success of the program.  (The previous section details some of the challenges such an assessment would face.)  However, no assessment was announced.

Instead, the CRA announced that it would extend this pilot project for a fourth year, running from June 1, 2023 to May 31, 2024 with a funding budget set at $5.9 million.  The CRA explained that this extension was due to the “impressive results” achieved to date.

No announcements were made about any further enhancements to the grant funding formula before the eligible activity period for the fourth year started on June 1, 2023.  This could be interpreted as a signal to host organizations that the enhancements to the grant funding formula announced on May 25, 2023, would remain the same for the extension year of this pilot project.

The budget for the fourth year is $700,000 more than the $5.2 million paid out in the third year.  This sounds like a lot more money.  But one should be cautious before concluding that this will support further growth of the CVITP.  Given that the COIN was introduced with the 2020 returns, for each additional year the grant project is in place, more returns filed for prior years will become eligible to be counted toward the grant.[x]

At present, the CRA does not give any breakdown of its data on CVITP returns filed by tax year.  All we know is that the number of returns filed has exceeded the number of clients served by 11% on average over the last five years but appears to be rising over time.  This means that most of the grant funds pay for the filing of the most recent tax year returns.  Yet, these are the ones that most host organizations were already filing prior to the introduction of the pilot project.

We expect the numbers of returns filed and individuals assisted to increase further in the 2024 tax season.  But the stagnation in the number of host organizations between 2022 and 2023 does not bode well for further rapid expansion of the CVITP.  Thus, we remain sceptical that the growth in the number of individuals assisted will keep pace with the growth in the number of those living in poverty during that same period.  This would not be a good as the CVITP was already serving only a fraction of those most in need of this service.

Conclusion (beyond 2024)

We hope that the CRA will undertake a review of this pilot project and make public the findings of this review.  We believe that grant funding should become a permanent fixture of the CRA’s future support to the CVITP.  However, the form this funding should take remains an open question.

When it was first launched, we wrote that the pilot grant project needed to be targeted differently if the CVITP was to better contribute to the poverty reduction objectives set out in the federal government’s 2018 Poverty Reduction Strategy.  We suggested that the project needed to be designed in a way that encouraged host organizations to prioritize offering free CVITP services to those most in need: those living in poverty.

In the intervening years, the federal government has further increased its use of the income tax and benefit return (most recently with the Canada Dental Care Plan and the forthcoming Canada Disability Benefit) to achieve its income security and poverty reduction goals.  This has only reinforced our conviction that, upon completion of the pilot project, the CRA will need to think more strategically about how to use limited grant funds to induce community-based organizations to host more CVITP clinics.  This includes designing its funding formula to support specific objectives for the CVITP’s evolution, much as it has been doing with the supplemental payments (for serving northern, indigenous, rural and remote communities) which are, at present, very modest.

We will revisit implementation when the fourth-year extension of this pilot project has been completed sometime in the fall of 2024.

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[i] See Quick Facts in CRA’s October 14, 2022 news release entitled “Minister of National Revenue announces more support for organizations that help to improve access to benefits and credits”

[ii] See Quick Facts in CRA’s October 14, 2022 news release entitled “Minister of National Revenue announces more support for organizations that help to improve access to benefits and credits”

[iii] See Quick Facts in CRA’s November 16, 2023 news release entitled “The Canada Revenue Agency continues to invest in free tax clinics”

[iv] See Quick Facts in CRA’s November 16, 2023 news release entitled “The Canada Revenue Agency continues to invest in free tax clinics”

[v] See Quick Facts in CRA’s October 14, 2022 news release entitled “Minister of National Revenue announces more support for organizations that help to improve access to benefits and credits”

[vi] See Quick Facts in CRA’s October 14, 2022 news release entitled “Minister of National Revenue announces more support for organizations that help to improve access to benefits and credits”

[vii] See Quick Facts in CRA’s November 16, 2023 news release entitled “The Canada Revenue Agency continues to invest in free tax clinics”

[viii] CRA response to recommendation #3 in the Taxpayer’s Ombudsman’s 2022-2023 annual report (November 2023)

[ix] The eligible activity periods for the CVITP grants are as follows:

2021: February 22, 2021 to May 31, 2021

2022: June 1, 2021 to May 31, 2022

2023: June 1, 2022 to May 31, 2023

However, the CRA does data collection and reporting periods are as follows:

• 2021: CVITP data is available from May 16, 2020 to May 15, 2021 and also, under the CRA’s new annual format, for all of 2021.
• 2022: CVITP data is available from May 16, 2021 to May 15, 2022 and also, under the CRA’s new annual format, for all of 2022.
• 2023: CVITP data is available only under the CRA’s new annual format, for all of 2023.

[x] To illustrate:

• In the 2021 tax season (up to May 31, 2021), only returns filed for the 2020 tax year were eligible.
• In the 2022 tax season (up to May 31, 2022), returns filed for the 2020 and 2021 tax years were eligible.
• in the 2023 tax season (up to May 31, 2023), returns filed for the 2020, 2021 and 2022 tax years were eligible.
• in the 2024 tax season (up to May 31, 2024), the returns filed for the 2020, 2021, 2022 and 2023 tax years will be eligible.