After $500M of double CERB payments made, investigation needed into fraud: AG

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Canada’s auditor general said while she applauds the government’s efforts to get money out the door quickly to Canadians who had been impacted financially by the COVID-19 pandemic, less rigorous eligibility screening did lead to cases of abuse.

In a report released Thursday, Karen Hogan said that approximately $500 million of Canada Emergency Response Benefit (CERB) payments were made to recipients who had applied for support under both the Canada Revenue Agency (CRA) and Employment and Social Development Canada.

This issue was addressed with subsequent pre-payment control measures.

“Information on applicants was shared between the department and the agency as of mid-April 2020, about a week after the benefits were launched. A control was introduced by the organizations to stop payments to an applicant when the applicant had already received the other benefit,” the report reads.

Hogan states the risk of instances of overpayment and fraud was surpassed by the need to quickly get funds out, which both ESDC and the CRA understood prior to the implementation of the program.

“We found that ESDC and the CRA focused on delivering the benefit quickly to help workers who had lost income as a result of the COVID-19 pandemic. Both organizations understood the risks of emphasizing quick delivery instead of their usual approaches to validating eligibility, which includes more controls,” she noted.

Hogan said the two bodies relied instead on applicants’ general good faith, and attestations to assess eligibility for the CERB. Applicants were required to confirm that they did not quit their jobs voluntarily and that they had stopped working because of the pandemic, rather than be required to provide documentation needed for other support programs, like record of employment or a medical note.

The CERB was one of the government’s signature COVID-19 benefits, providing immediate relief to Canadians who had lost income as a result of the pandemic. Eligible recipients – those 15 years of age and older and who had earned a minimum of $5,000 in 2019 or in the 12 months prior to the date of their application – could receive a taxable benefit of $2,000 for up to 28 weeks, following an extension announced in August 2020.

In the fall of 2020, the Liberals transitioned CERB beneficiaries to a revamped EI program.

Hogan also said a pre-payment screening measure could have been applied at launch to identify and weed out “suspicious” applications.

In May, following reports of fraudulent applications and of the government’s instruction of bureaucrats to ignore warnings or red flags, Prime Minister Justin Trudeau said Ottawa’s priority was getting support off “rapidly and efficiently.”

“Of course there’s going to be a few people that misrepresent themselves and try to defraud the situation,” said Trudeau at the time, adding that the government would “clean up” the mess later.

Shortly thereafter, the CRA announced it had opened a snitch line so Canadians could report suspected abuse of the system.

Hogan said while there is an intention from both organizations to undertake a post-payment investigation of fraudulent claims, there must be a streamlining of efforts and details on when that would be completed and what resources would be needed to conduct it.

As such, the auditor general recommends the ESDC and CRA “finalize and implement” their plans and determine what if any of the findings can be used to guide the distribution of future emergency aid.

Both bodies agreed with Hogan in their response.

“Following confirmation of funding in the Fall Economic Statement 2020, the department developed a comprehensive four year operational plan for post-payment integrity activities and has begun execution of cases of serious fraud. Integrity activities are underway and will continue as per the four year operational plan. The plan will be refined on a regular basis as the department gains experience and knowledge from its investigations and ensures that it remains responsive to the continued pandemic context while maintaining alignment with the Canada Revenue Agency,” said ESDC.

The CRA meanwhile said a plan remains “evergreen” because of the variable economic and public health landscape and the reliance of data that will become available during the spring 2021 tax season.

“It is important that our risk assessments include 2020 tax data to calibrate our verifications using current data. This will help avoid unnecessary reviews of recipients that may in fact have been eligible to receive benefit payments or may have already completed voluntary repayments, or both. Post compliance work will commence in September 2021,” the agency said.

They also agreed to provide assessments of failures and successes, to determine what aspects of the current program can be harvested for future emergency scenarios.

Speaking to reporters on Thursday, Hogan said her office will be following up in the fall with ESDC and CRA to look at the “effectiveness” of their planned review and to ensure errors are corrected and recovered.

CANADA EMERGENCY WAGE SUBSIDY

As with the CERB, the auditor general also found that in the implementation of the Canada Emergency Wage Subsidy (CEWS), the government chose speed over heavy scrutiny.

For instance, to get cash out quick, the CRA – with oversight from Finance Canada – didn’t require that applicants provide employee social insurance numbers, nor did they obtain all relevant earnings and tax data.

“We also found that 28 per cent of the subsidy applicants did not file a return for the goods and services tax/harmonized sales tax (GST/HST) for the 2019 calendar year. Therefore, the agency did not have all the information it needed to validate the reasonableness of the applications before issuing payments,” reads the report.

“The subsidy was paid to applicants despite their history of penalties for failure to remit and other advance indicators of potential insolvency. Indeed, the agency held no legislative authority to deny access to the subsidy on the basis of an employer’s history of non-compliance with tax obligations.”

Also announced in March 2020, the CEWS applies to individuals, corporations not exempt from income tax, registered charities, and non-profits with an active CRA payroll account on March 15, 2020, and who meet a revenue decrease threshold. Eligible applicants can see up to 75 per cent of employee wages subsidized.

Hogan said the CRA missed an opportunity to conduct post-payment reviews during the summer and fall of 2020 based on June findings and will now have to rely on “costly and comprehensive” reviews starting in spring 2021.

POLITICAL RESPONSE

In a subsequent press conference, Employment Minister Carla Qualtrough praised the department and CRA’s ability to move nimbly throughout the pandemic and make changes on the fly.

“We delivered this major income support program to help buffer some of the hardest economic circumstances we faced in a century, and we did it despite not having the usual time required to design, analyze, and implement a new benefit of this size,” she said.

Qualtrough added that her team will start addressing more deliberate cases of fraud in their upcoming investigation and work their way down to simple application errors.

The Conservative Party weighed in on the reports in a statement to CTVNews.ca.

“It’s very concerning the Liberal government was not transparent with this information 12 months ago. How much more mismanagement of tax dollars are they hiding? The OAG report is only the beginning. Taxpayers will be on the hook for Liberal mismanagement during the pandemic for years to come,” said Raquel Dancho, Conservative critic for future workforce development and disability inclusion.

Correction:

Correction: A previous version of this story stated that payments were paid to recipients of the federal Employment Insurance program.

Sources: CTV News

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