Probe of $27B in suspicious COVID payouts urged

TIME RUNNING OUT TO PROBE $27.4B IN SUSPECT COVID BENEFIT PAYMENTS, AG FINDS

Canada's auditor general says a “minimum” of $27.4 billion in suspicious COVID-19 benefit payments need to be investigated because the government did not manage the aid programs efficiently, and it will likely fail to recover “significant” amounts in overpayments.

That's in addition to $4.6 billion in confirmed government overpayments solely in double-dipping applications for the various COVID-19 aid programs launched within the first months of the pandemic, according to a new report by auditor general Karen Hogan published Tuesday.

“The Canada Revenue Agency and Employment and Social Development Canada did not manage the selected COVID-19 programs efficiently given the significant amount paid to ineligible recipients, the limited adjustments as programs were extended, and the slow progress on post-payment verifications,” the report concludes.

During a news conference, Hogan said she was “concerned” by CRA's and ESDC's “lack of rigour” in their efforts to identify and recoup overpayments from the half-dozen COVID-19 aid programs she audited. She called on the government to “act now” before it's too late (the law limits eligibility verification to 36 months after payment).

“The number of post-payment verifications included in the plan is insufficient to address all payments at risk of being ineligible,” she said.

Hogan's latest report is her first dive into the $210 billion in payments made via the government's six COVID-19 financial aid programs, with the most generous being the $100-billion Canada Emergency Wage Subsidy (CEWS), the $74.8-billion Canada Emergency Response Benefit (CERB) and the $28.4-billion Canada Recovery Benefit (CRB).

Many of the programs, but particularly the $2,000-per-month CERB that was launched in April 2020, were designed to urgently get money into Canadians' pockets during COVID lockdowns by setting aside the usual prepayment verifications such as with Employment Insurance.

Hogan's report applauded the government for succeeding in that objective. She said the programs “quickly offered financial relief to individuals and employers, prevented a rise in poverty, mitigated income inequalities, and helped the economy to recover from the effects of the pandemic.”

When it came to the wage subsidy, Hogan found the program did seem to have helped companies in sectors that suffered the worst job losses during COVID-19.

But that's about where her praise ended.

Her report notes there are at least $27.4 billion in suspect payments that CRA and ESDC let through over the six programs that now need to be investigated on top of the $4.6 billion in overpayments it has already identified and is trying to claw back.

And that's just the tip of the iceberg, Hogan warns. The report chronicles a separate series of eyebrow-raising CERB payments, such as $1.6 billion to individuals who appear to have quit their jobs (instead of losing it due to COVID-19), $6.1 million to incarcerated recipients and $1.2 million to dead people.

In a joint statement, ministers Diane Lebouthillier (CRA) and Carla Qualtrough (ESDC) celebrated Hogan's findings about the positive impacts of the programs, all the while stating that the government would pursue a “compassionate” and “responsible” approach to recouping overpayments and catching fraudsters.

The Conservatives denounced the lack of transparency or “proper plan” to fix the “lack of control” over federal pandemic program disbursements.

“Conservatives are calling on the Liberals to present the plan that shows that they're going to take this report seriously and put in the controls the attorney general is also calling for,” said CPC MP Adam Chambers.

Hogan is cynical about how much of that will ever be recovered. She says the government's efforts to identify and recover overpayments or ineligible claims “have not been timely” and “significant unrecoverable amounts are likely to materialize.”

In her recommendations, she pushes CRA and ESDC to increase their post-payment verifications to capture all possible ineligible payments.

That drew an exceptional response from the government, who only “partially agreed” because it believes it would not be “cost effective” nor “best practices” to go after “100 per cent of all potentially ineligible claims.”

During her press conference, Hogan pushed back. “My advice to them is if they wanted to make a decision about recovery, one that might either forgive payments or be empathetic, then that's something they should be clear and transparent to with Canadians. But current legislation would require them to follow up with those individuals in recovery.”

A few months after the first programs were launched, CRA did start adding prepayment verification to benefits for individuals around June 2020 (when tax filings for the previous year finished rolling in), such as holding payments for those who did not seem to meet the $5,000 income threshold. The CRA stated that saved “billions” in overpayments to over 544,000 people.

But Hogan said that control was “ineffective” for several reasons, one of which was that CRA still sent payments to 366,000 recipients it knew didn't appear to meet the income threshold.

In the case of CEWS, the report estimates that there are $15.5 billion in suspected overpayments to ineligible companies, based on a comparison of their HST and GST filings before and during the pandemic (CRA has previously contested this method of calculation as overbroad and inaccurate).

Hogan also discovered CRA doesn't have the data to measure the program's overall objective: getting companies to retain or rehire employees during lockdowns.

“It was difficult to assess the impact of the program and how effectively the program met its objectives because of the limited information employers were required to provide upon application. For example, the program did not require employers to submit any information on rehiring,” she noted.

IT WAS DIFFICULT TO ASSESS THE IMPACT OF THE PROGRAM AND HOW EFFECTIVELY (IT) MET ITS OBJECTIVES.