Auditor-General Karen Hogan said billions of dollars in ineligible COVID-19 benefit payments are at risk of going uncollected because the federal government is doing a poor job of identifying individuals and businesses that should pay back funds.
The Auditor-General found $4.6-billion in overpayments to ineligible recipients and an additional $27.4-billion that should be investigated further. That includes $15.5-billion for businesses that received the Canada Emergency Wage Subsidy but did not suffer from a significant drop in revenue, the report says.
The report also says the $27.4-billion is the minimum amount that should be reviewed. Additional areas flagged in Ms. Hogan’s report include $1.6-billion in Canada Emergency Response Benefit (CERB) payments to 190,254 individuals who quit their jobs, $6.1-million in CERB payments to 1,522 people who were in prison and $1.2-million to 391 dead people.
The Auditor-General also urges the government to take a closer look at $2.2-million in CERB payments to 434 children who were under 15 years old at the time of application.
Federal ministers rejected the Auditor-General’s key numbers Tuesday, insisting that the final amounts of ineligible payments will be much smaller and that officials are working hard to identify and collect what is owed.
More than $210-billion in payments were distributed to individuals and businesses between early 2020 and mid-2022 in an unprecedented effort to avoid a spike in poverty and business bankruptcies as large swaths of the Canadian economy were forced to shut down or scale back during the pandemic.
In the interest of speed, the Liberal government decided to rely on self-attestation and vowed to confirm eligibility after the fact.
But Tuesday’s audit report states the two main federal bodies responsible for the benefit programs are doing a poor job of identifying payments that should be returned.
Ms. Horgan told reporters Tuesday that the Canada Revenue Agency (CRA) is treating these programs like any other by only focusing on samples of cases based on potential risks.
“In our view, that’s just not rigorous enough when you have such limited pre-payment controls,” she said. Given that many individuals who received ineligible payments are low-income workers, Ms. Horgan said it may be a “reasonable” approach to allow some forgiveness. But if that’s the government’s policy, it should say so clearly, she said.
“I think one of the greatest things about our country is you can expect fairness and transparency and I’m just asking the government to be clear with its decisions and its approaches to Canadians,” she said.
Ms. Hogan tabled two reports in Parliament on Tuesday: The report on federal benefits reviewed how the CRA and Employment and Social Development Canada (ESDC) managed all pandemic-related support programs, including the CERB, its successor, the Canada Recovery Benefit, the Canada Worker Lockdown Benefit, Canada Recovery Sickness Benefit, Canada Recovery Caregiving Benefit and the Employment Insurance Emergency Response, all of which are aimed at individuals.
That audit also reviewed the Canada Emergency Wage Subsidy (CEWS) program, which went directly to employers.
The second report focused on the federal government’s efforts to secure COVID-19 vaccines. That report found that federal agencies managed to secure enough vaccine doses for Canadians, but a lack of data-sharing with provinces meant that efforts to reduce vaccine wastage were not successful.
The report on benefits notes that the government fell short in ensuring it was gathering key information related to the largest of the benefit programs, CEWS. Payments to businesses through the CEWS accounted for $100.7-billion of the $210.7-billion spent on pandemic benefits.
The program was meant to ensure businesses keep workers on the payroll during temporary closings or periods of steep revenue loss.
However, Tuesday’s report said the CEWS application form did not require employees’ social insurance numbers, meaning the government was unable to track the exact number of employees that benefited from the program, whether employees remained working for the same employers or the exact number of employees who were rehired.
The audit found about $15.5-billion in CEWS payments should be investigated further because sales tax filing data suggest they did not meet the program’s thresholds for revenue decline.
Conservative Leader Pierre Poilievre highlighted this finding in Tuesday’s Question Period.
“We already knew that the government paid billions of dollars in wage subsidies to profitable corporations that were able to pay out dividends to their wealthy executives. Now we know they also paid $15-billion to companies that did not have a significant revenue drop, and so they were able to pocket the cash at the expense of the Canadian people,” he said, before directly criticizing the Liberals. “Why do they always take from the have nots and give to the have yachts?”
NDP finance critic Daniel Blaikie said in a statement that the government should implement a low-income repayment amnesty for individual benefits, “so that Canadians in dire straits are not hounded for money they do not have.” He said this would allow the government to focus on fraudsters and those who have the financial means to repay their debt.
Revenue Minister Diane Lebouthillier told MPs in French that CRA officials “do not agree” with the Auditor-General’s “exaggerated” estimate of inadmissible payments.
Employment Minister Carla Qualtrough told reporters Tuesday that the government is reviewing every file and working on individualized payment plans.
“I wouldn’t mistake a lack of aggressive pursuit for not doing it. It’s just we’re being compassionate,” she said. Ms. Qualtrough was asked why the government doesn’t forgive the debts.
“It’s a good question,” she said. “Right now, our thinking, from a matter of fairness is ... a lot of Canadians have paid back these overpayments. A lot have negotiated repayment agreements. So, we are trying to balance risk and fairness and get to a point where we’re pursuing but not jamming Canadians.”
In terms of broader economic impact, Tuesday’s audit report said COVID-19 benefits prevented a spike in the poverty rate in 2020. However, the benefit programs were also found to have created a disincentive to work because some lower-income recipients were receiving more in pandemic supports than they had previously been earning in wages.
The CRA and ESDC responded to the report by agreeing with five of the auditor’s six recommendations related to pandemic benefits. However, they only “partially agreed” with the recommendation that Ottawa should update its post-payment verification plans and include all cases identified as being at risk of being ineligible.
“It would not be cost effective nor in keeping with international and industry best practices to pursue 100 per cent of all potentially ineligible claims,” the two responsible federal bodies said.
Economists have been generally supportive of the federal government’s decision to intervene with massive support for businesses and individuals during the height of pandemic-related shutdowns. However, in retrospect, it is now widely acknowledged that the emergency spending could have been wound down sooner.
A report released Monday by Bank of Nova Scotia economists said the stimulus spending has contributed to current high levels of inflation, which are now the Bank of Canada’s focus as it attempts to bring inflation back down via higher interest rates.
The Scotiabank report said about half of the increase in inflation since late 2019 can be attributed to global factors such as U.S. inflation and commodity prices, while another 35 per cent comes from supply-chain challenges. The economists say about 12 per cent is due to government support programs.
“These programs had a large and welcome impact on the economy,” the Scotiabank report said. “But the economic and employment response of these programs created more inflationary pressures than would otherwise have occurred.”