June 19, 2023
In 2021, the Canada Revenue Agency (CRA) introduced a new pilot grant project that provides financial support to some CVITP host organizations. This pilot project is intended to run for three tax seasons, from 2021 to 2023. When it was introduced, we had a lot to say about it here. The project has completed its second year of operation and the third year is now underway.
In the first part of this article, we look at what happened to the CRA’s financial support for the second year of implementation. In the second part of this article, we look to see if the results obtained to date measure up to the CRA’s expectations for the pilot grant project.
PART ONE – FUNDING
Late in 2022, we published a review of the first year of implementation. At that time, we lamented the dearth of data the CRA was sharing about this grant project. It is no different for the second year of implementation. All we have to work with is the information contained in a CRA news release produced in October 2022. (We had hoped that the CRA would also provide an update in its most recent Departmental Plan, as it had done the previous year for the first year of implementation. But this did not happen.)
The “Quick Facts” section of the news release confirms that $ 0.9 million was awarded to 817 host organizations in the first year of the pilot. This works out to an average of $1,102 per host organization. This is not an amount that would come close to covering the host organization’s costs of running CVITP clinics. (There is probably considerable variation in the distribution of payment amounts as these are largely a function of the number of returns filed by host organizations and we know that these latter numbers do not represent a normal distribution. Thus, it would be more telling to report the median amount. But the CRA does not provide any data to determine this.)
Increase in funding for the second year
What the news release says about the second year of implementation is equally interesting. The main purpose of the news release was to announce changes to the pilot grant project’s funding formula effective starting with the second year of implementation.
The increase in the grant amounts was no doubt in reaction to the low number of applications received for the first year. (According to the CRA, 3,490 host organizations were registered to operate in 2021. This means that less than a quarter of these host organizations applied for the pilot grant funding.) As we had anticipated when the pilot grant program was first announced early in 2021, the insufficient funding on offer probably led to the low number of applications.
Timing of the funding announcement
The timing of the announcement of the changes to the funding formula is also interesting. The objectives of the project, as stated by the CRA, are to:
- defray some of the administrative costs that organizations incur in hosting free tax clinics,
- encourage growth in the number of participating organizations,
- increase retention among participating organizations,
- encourage participating organizations to expand the reach of their clinics (for example, by extending the number of day and|or hours of operation, or offering additional clinic locations), and
- expand access to free tax preparation services available to vulnerable population segments.
The “Quick Facts” section of the news release notes that by October of 2022, 3,380 host organizations were operational within the CVITP. As few new host organizations choose to start operating in the last few months of the calendar year, we can safely use the 3,380 number as indicative of host organization participation in 2022. This represents a modest decline over the 3,490 figure reported for 2021. Not surprisingly, the funding on offer in the first year of pilot grant project failed to encourage the growth or even the retention of participating organizations.
So, if the CRA wanted to increase the number in 2022, why did it wait until after the second eligible activity period for host organizations (June 1, 2021 to May 31, 2022) to announce the increase in funding? This increase played no role in producing an “incentive effect” in the second year of implementation, all of which took place in the first half of the year, as it was only announced late in 2022.
Whether or not it will be sufficient to provide the CRA’s intended incentive for host organizations remains to be seen. The CRA will have only the difference between the results from 2022 and 2023 to measure the “incentive effects” of this funding increase.
Second year spending
Again, the “Quick Facts” section of the news release reveals that 1,067 host organizations had applied for grant funding in the second year and that the CRA anticipated disbursing $2.4 million. This translates into $2,249 on average in grant funding per host organization, more than double the average provided in the first year of implementation. (Again, there is probably considerable variation in the distribution of payment amounts as these are largely a function of the number of returns filed by host organizations and we know that these latter numbers do not represent a normal distribution. Thus, it would be more informative to report the median amount, but the CRA does not provide any data to determine this.)
This significant increase is no doubt welcomed by host organizations. However, it is still far from enough to cover most host organizations’ costs of running a CVITP clinic.
See PART TWO – RESULTS TO DATE here.