Finance Committee on Dec. 13th, 2021

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

Ms. Chatel, thank you for the question.

To recap some of what I said earlier, the Liberal government has been there from the beginning. Since 2015, it has invested a lot of money in organizations like the CBC, the Canada Media Fund, Telefilm Canada, the Canada Council for the Arts and so on.

What did we do when the pandemic hit? As early as April, the government invested $500 million in emergency funds to maintain jobs and support business continuity. We realized that this sector needed an extra boost. Then on November 30, as part of the 2020 fall economic statement, the government announced an investment of $281 million. One of the purposes of this investment was to respond to the film and television industry's request for assurances, to ensure that they would be covered if something happened during filming. Subsequently, there was a record investment of $1.93 billion in the 2021 budget. These are huge sums.

We are now continuing to provide assistance through Bill C-2. As you said, this bill affects cultural organizations, agencies and businesses. However, it lacks direct assistance to self-employed workers. We provide this assistance through Canadian Heritage and existing programs. So we don't need a bill because, as we promised in our platform, we will make an investment of about $50 million. In addition, we will continue to fulfil our election commitments, such as holding a summit in a month and a half, among other things. There is a continuity in all of this, which is to never forget our workers in the cultural sector.

[The Chair, Liberal, Peter Fonseca]

You're right on time, minister.

On behalf of the committee, the members and all the staff, we really appreciate your appearance. Thank you for your testimony and your answers.

Have a great day.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

Thank you very much for the invitation.

[The Chair, Liberal, Peter Fonseca]

Members, we're going to suspend right now so that we can switch witnesses.

[The Chair, Liberal, Peter Fonseca]

I call this meeting back to order.

Welcome back, everybody. We have our second panel of witnesses with us today. All of our witnesses for the second panel are virtual.

From the Office of the Auditor General of Canada, Karen Hogan is with us.

Thank you, Ms. Hogan, for being able, in really short order, to make it here to our committee. We appreciate that.

She is accompanied by Philippe Le Goff, principal.

Representing the Canadian Labour Congress, we have Bea Bruske. She is the president.

Bea, I believe, is having some technical difficulties with her sound, so we will see if that works or not. If it doesn't work for the interpreters, it may not be possible to have Bea today.

No strangers to our committee are representatives of the Canada Revenue Agency. We heard from them just a couple of meetings ago. We have Frank Vermaeten, assistant commissioner of the assessment, benefit and service branch; Marc Lemieux, assistant commissioner, collections and verification branch; Cathy Hawara, assistant commissioner, compliance programs branch; and Janique Caron, chief financial officer and assistant commissioner, finance and administration branch.

Each of the organizations will have a five-minute opening statement.

We will start with the Auditor General, Ms. Hogan, for five minutes.

[Karen Hogan, Auditor General of Canada, Office of the Auditor General]

Thank you, Mr. Chair.

Mr. Chair, I wish to acknowledge that the lands on which we are gathered are part of the traditional unceded territory of the Anishinaabeg People.

Thank you for this opportunity to contribute to the committee's study of Bill C‑2, An Act to provide further support in response to COVID‑19..

I'm happy to discuss our audit reports, including the Canada Emergency Wage Subsidy and the Canada Emergency Response Benefit, which were tabled in the House of Commons on March 25. Joining me today is Philippe Le Goff, who was the principal responsible for the CEWS audit.

Our audit of the CEWS, or Canada Emergency Wage Subsidy program, focused on whether the Department of Finance Canada provided analysis on the program and whether the Canada Revenue Agency limited abuse by establishing appropriate controls in its administration of the program.

Overall, we found the department and the Canada Revenue Agency worked together within short timeframes to support the development and implementation of the Canada Emergency Wage Subsidy, CEWS.

The design and rollout of the subsidy highlighted pre-existing weaknesses in the Canada Revenue Agency's systems, approaches, and data. One of the weaknesses is related to the lack of up‑to‑date tax data, which meant that the agency did not have all the relevant information for assessing the applications before issuing payments. This revenue information would have allowed the agency to validate the reasonableness of the revenue drop that was declared by applicants.

To prioritize issuing payments quickly, the Canada Revenue Agency decided to not implement certain controls that it could have used to validate the reasonableness of subsidy applications. For example, the agency decided that it would not ask for employee social insurance numbers, although this information could have helped prevent the doubling up of applications for financial support.

The limitations of the agency's information technology systems affected its ability to perform some pre-payment validations, as did the absence of complete and up‑to‑date tax information. As a result, the agency will have to perform more post-payment verification work.

Let's now turn to our report on the Canada emergency response benefit. This audit focused on the analysis carried out by Employment and Social Development Canada and the Department of Finance in the design of the benefit. It also examined whether Employment and Social Development Canada and the Canada Revenue Agency designed mechanisms so that the benefit would support eligible workers who had suffered a loss of income for reasons related to the COVID-19 pandemic.

Working within a short time frame, Employment and Social Development Canada and the Department of Finance supported the design of the benefit to quickly deliver support to workers who had lost income because of COVID-19. The department and the agency made an early decision to focus on post-payment controls to simplify the process and expedite issuing benefit payments. The department and the agency introduced additional controls once the benefit was rolled out.

Based on our audit work on the original design of the two programs, both will need to rely heavily on post-payment verification, which will be time-consuming and costly. The post-payment work on these two programs was expected to be the subject of an audit by my office to begin in early 2022. However, we have been informed by the Canada Revenue Agency that it has deferred or delayed its work and that it is highly unlikely that a significant amount of post-payment work will be completed by 2023. Given that there will be little for us to audit, we have postponed our work.

This concludes my opening remarks. We would be pleased to answer any questions the committee may have.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Hogan. We appreciate that.

My understanding is that the Canada Revenue Agency officials, who appeared before our committee just last week, will not be making an opening statement. They'll be going right into questions.

From the Canadian Labour Congress, Ms. Bruske, I understand you are on the phone now and connected to our committee. We just have to see if the interpreters can work with the sound. Ms. Bruske, if you can hear me, you have the floor for up to five minutes.

I think we've lost Ms. Bruske.

Witnesses and members, we're entering our first round, with six minutes of questions for each of the members. We are going to start with the Conservatives and Mr. Poilievre.

[Pierre Poilievre, Conservative, Carleton, ON]

My question is for the Auditor General.

As you know, the Financial Transactions and Reports Analysis Centre of Canada has reported that people not living in Canada received the CERB. People who were engaged in illegal and suspicious financial activity also received the CERB. Some people received more than one CERB deposit in less than a week, even though it was supposed to be strictly a weekly payment. Scammers used personal identity information to apply for the CERB. The list goes on.

Now the department tells us that they have not gone back and verified whether the people who got CERB money were eligible for it. Your job was to audit whether or not they followed their rules in ensuring that only people entitled to the money got it. Today you're telling us you're not going to do your job until 2023 or later, because the department has not done its job.

Have I accurately characterized your testimony? If not, please correct me.

[Karen Hogan]

In your question, you're referring to post-payment verification work. An audit is of value when there is information and data to audit. Hence, without post-payment work having yet begun, it would be difficult for us to go in and see whether or not the mechanisms put in place by the Canada Revenue Agency to identify if payments had been made in error and to recover them if needed have worked. It's impossible to do until that work is done.

[Pierre Poilievre, Conservative, Carleton, ON]

They sent out the money. They're not verifying if the people who got it should have. You're saying that, because they're not doing any verification, there is no verification to audit. Therefore, you won't hold an audit. Is that right?

[Karen Hogan]

I absolutely intend to hold an audit. I was very clear when we tabled our audit report on the wage subsidy and the emergency response benefit back in March that this was my intention.

[Pierre Poilievre, Conservative, Carleton, ON]

When?

[Karen Hogan]

I was expecting to do it as soon as their work had begun. As I mentioned, it's impossible to audit something that has not yet been done.

[Pierre Poilievre, Conservative, Carleton, ON]

Right. When do you expect to do the audit, though?

[Karen Hogan]

I think you'll have to ask the Canada Revenue Agency when they will get their work done. I am in continual dialogue with the agency in order to monitor the progress of their work so that we can do it in the most timely way possible because, as I mentioned back in March, I think this work is critical. I'm concerned that it has been delayed.

[Pierre Poilievre, Conservative, Carleton, ON]

It seems like you're rewarding them for it. If they don't do their verification job, you won't audit them. That's just great. Imagine if Canadian taxpayers could do the same thing. They just won't do any of the verification that their own filings are right, and then CRA would never audit them because there's nothing to audit. That's essentially what you're saying.

[Karen Hogan]

No.

[Pierre Poilievre, Conservative, Carleton, ON]

You're giving them a free ride because they haven't done their job.

Your audit is of particular value when agencies don't do their jobs. That's when your audits should occur, but you're telling us that you're going to give them a break precisely because they didn't do their job. Aren't you rewarding bad behaviour?

[Karen Hogan]

I am very concerned that they have made the decision to delay their work or defer it. I will continue to be in constant dialogue with them because, as I mentioned back in March, when you delay prepayment controls, post-payment work becomes critical. I expect that if an individual received public funds in error, that recovery efforts would occur.

[Pierre Poilievre, Conservative, Carleton, ON]

But they haven't. We know that now. Basically, this government gave out billions of dollars in cheques. We now know that some of it went to criminals, scammers, people not living in Canada, people who received multiple payments in the same week—even though that is not allowed—people who used false identities, but they have not gone back and done verification on any of the recipients. It's almost two years after the CERB program began, and you're rewarding them by not beginning your audit until they're good and ready, which, at this pace, will be never.

Your job is not to do “dialogue” with the agency. Your job is to be the auditor of the agency, to be their watchdog.

Why is it that you seem so intent on giving this agency and this government such a free ride in the billions of dollars that was given out to fraudulent applicants?

[Karen Hogan]

I believe that as I mentioned, an audit is of value when there is something there to audit. You need data and information in order to be able to go in. Otherwise, our auditors can't do their jobs.

I am continuing to apply pressure on the Canada Revenue Agency to start the post-payment work because of how critical it is to the success of the payments being made to those who are eligible.

[Pierre Poilievre, Conservative, Carleton, ON]

Right, well, your audit could actually go ahead, and you could publish a report showing that the post-verification of the fraudulent recipients never happened. That could be the material that you publish in an audit, instead of simply letting the government continue to rag the puck, waste time and reward them for their incompetence by delaying your work.

A final question—

[The Chair, Liberal, Peter Fonseca]

That's your time, Mr. Poilievre.

[Pierre Poilievre, Conservative, Carleton, ON]

I have a point of order, Mr. Chair.

I have a document I'd like to table here. It's from Blacklock's Reporter, and it's titled “Audit Contracts Questioned”. The piece says:

The Commons public accounts committee yesterday questioned the Auditor General’s Office over favouritism in contracting to a Liberal lobbyist, Susan Smith.... MPs did not comment after the committee spent more than an hour behind closed doors questioning Auditor General Karen Hogan....

As you know, Mr. Chair, it is not common for independent, non-partisan officers of Parliament to give untendered contracts to partisan lobbyists—

[Julie Dzerowicz, Liberal, Davenport, ON]

I have a point of order.