Benefits & Pensions
Federal government faces costly path to recoup wrongly paid aid: auditor
By Jordan Press
OTTAWA — The federal auditor general says the government missed chances to flag fraudulent claims for emergency benefits last year, potentially paying money to insolvent companies, and will now have to rely on costly, years-long efforts to recoup the money.
Those efforts will begin this spring for the $97.6-billion Canada Emergency Wage Subsidy, and this fall for the $74-billion Canada Emergency Response Benefit.
Auditor general Karen Hogan’s reviews of the programs released Thursday noted how quickly the programs rolled out last March and April, eschewing the usual months-long policy-development process to quickly get aid to businesses and workers hit hard by the COVID-19 pandemic.
She acknowledged the government prioritized speed in paying aid, rolling out the programs in record time under extraordinary circumstances, and always intended to review claims after-the-fact to claw back wrongful payments.
How costly those reviews might be, Hogan couldn’t say.
Her audits flagged multiple moments when federal officials could have made program changes that may have prevented the wage subsidy from going to companies with unpaid tax bills, or the CERB from potentially going to known fraudsters.
For instance, the Canada Revenue Agency didn’t ask for social insurance numbers for employees whose wages were subsidized, which could have helped prevent double-dipping between the two aid programs.
Nor did the the CRA have all the information it needed to make sure a company needed the payroll help, as the audit noted that $295 million in subsidies went to employers at higher risk of insolvency.
The CRA seemed to be aware of potential problems in June when officials reviewed sales tax remittances that suggested companies may have fudged revenue figures to qualify for aid.
The wage subsidy has handed out nearly $71.5 billion since its launch to nearly 437,000 companies, according to the latest federal data. The wage subsidy is set to run until mid-June.
The CERB paid out $74 billion, plus an extra $7.56 billion for those eligible for employment insurance, creating two streams of the program.
Officials have previously flagged fraudulent claims as a concern in the program, and the audit team found that about $500 million in double-payments from each benefit stream were made before a fix was introduced.
Employment Minister Carla Qualtrough said the majority of CERB recipient audits will be done relatively soon, but some files will be very complex and it could take years to unwind sophisticated fraud.
Hence, what she called the long runway to follow threads to assure Canadians the government is “doing the due diligence we promised we would do after the fact” and to learn more about the government’s ability to mitigate this kind of fraud.
The audit team said the two departments involved in the CERB did use some pre-payment controls to quickly validate eligibility, but information that could have flagged fraudulent claims early didn’t roll out until May, weeks after the $500-a-week benefit launched.
The audit team said it expected the Canada Revenue Agency to have used its data holdings to flag high-risk applications at the launch of the CERB, but was told to do so would have meant a delay in launch.
Now, the CRA and Employment and Social Development Canada, which was involved in the development of the CERB, will spend four years trying to track down every wrongful payment.
The work will start in earnest in September and will partially rely on 2020 tax returns, due in a few weeks.