Human Resources Committee on June 15th, 2006

[The Chair, Conservative, Dean Allison]

I call the meeting to order. Pursuant to Standing Order 108, the Standing Committee on Human Resources, Social Development and the Status of Persons with Disabilities is meeting to follow-up the Auditor General's 2002 status report, chapter 1, “The Integrity of the Social Insurance Number”.

Before we start, I would like to take the time to acknowledge the presence of a delegation from the Audit Board of the Republic of Indonesia, led by its vice-chairman, Mr. Abdullah Zaini. Welcome.

[Some hon. members]

Hear, hear!

[The Chair, Conservative, Dean Allison]

The Office of the Auditor General is hosting a three-day visit of the delegation, for it to learn about the role and the work of the office and its relationships with key stakeholders.

We welcome all of you and are most certain that your visit will fulfill all of your expectations, as you are surely in very good hands.

Today we are receiving the Auditor General in follow-up to the letter she sent us on May 12, 2006, concerning the 2002 study on the integrity of the social insurance number. The Auditor General will make a brief presentation, and then she will be available to answer members' questions. It should take approximately 30 minutes, then Ms. Fraser will have to leave because of another commitment. The officials of the department will provide us with a briefing regarding work accomplished since the AG's study was released, and will also provide us with information on upcoming projects in regard to these issues.

Without further comments, I would like Ms. Fraser to give her presentation.

[Sheila Fraser, Auditor General, Office of the Auditor General of Canada]

Thank you, Mr. Chair.

We thank you for this opportunity to meet your committee and to discuss our most recent audit on the integrity of the social insurance number.

I'm accompanied today by Nancy Cheng, the assistant auditor general in charge of this portfolio, and Sylvain Ricard, the audit principal for the portfolio.

We have been monitoring the management of the social insurance number for several years. However, our most recent audit work was reported in 2002. Our comments today are therefore based on observations from four years ago. Since then there have been major changes in the organization of the department that is mainly responsible for managing the social insurance number, Human Resources and Social Development Canada.

We initially audited the management of the SIN in 1998 and observed serious weaknesses in the process for issuing SINs and in maintaining the Social Insurance Register. We followed up in 2000 and found that the department had taken several measures to improve the management of the SIN and was planning more. When we looked again at progress in 2002, we concluded that the Department had not done enough to safeguard and strengthen the integrity of the SIN.

This Committee and the Public Accounts Committee undertook studies of the management of the SIN after the tabling of our report, and made additional recommendations.

In 2002, we made observations and recommendations in four areas: the role and use of the Social Insurance Number; the process for issuing SINs, the integrity of the Social Insurance Register; and the conduct of investigations of SIN-related fraud.

We observed that the Department was not limiting its uses of the SIN to those authorized by government policy. Under government policy, programs can only use the SIN if they are authorized to do so by legislation or with approval by Treasury Board. We reported that three programs in HRSDC were using SINs without authorization.

While these specific cases were clearly not consistent with policy, we also observed that government policies on the use of the social insurance number had not been updated since 1989 and were not entirely clear on how the number should be used. In that regard, we observed that it was unclear whether HRDC was using the social insurance number as simply a number to manage a client's file or also as a means to establish their identity. Properly identifying clients is a fundamental control of any government program. We reported that the Treasury Board Secretariat was undertaking a review of government policies related to the social insurance number.

With regard to the issuance of social insurance numbers, we found that the department's policies and practices did not meet the intent of the Employment Insurance Act and regulations. We found that the documents the department required before issuing social insurance numbers were not sufficient to prove both identity and citizenship; that staff lacked adequate tools and training to confirm that the documents presented were authentic; and that the 900-series social insurance numbers, intended for temporary use, had not expired.

We also reported that there was still a difference of five million, at that time, between the Canadian population according to Statistics Canada and the number of usable social insurance numbers listed in the social insurance register. While there could be valid reasons for a difference, we observed that HRSDC needed to explain the variances fully. As well, there were still more than eight million usable social insurance numbers in the register that had never been supported by proof of identity documents, because they had been issued before 1976. We recommended that the department set goals on how complete and reliable the information in the register should be, and to take steps to meet them.

Finally, we observed that the department had not done a comprehensive risk assessment to manage investigations of possible fraud related to social insurance numbers.

Each year we request updated information from all government departments on action and responses to our recommendations. This information is used to assess our performance and is reported in a summary form in our departmental performance report. Through this process, we have received updates on progress since 2002 by the department on how it has been addressing our recommendations on the social insurance number. We do not audit this information, but we do assess its plausibility based on other publicly available information and our ongoing knowledge of the department.

Information provided through this process indicates that actions remain incomplete on certain recommendations from the 2002 audit, including: obtaining authorization to use the SIN for all departmental programs that are currently using it; setting goals for the completeness and reliability of the Social Insurance Register; and implementing a means to check the validity of identity and citizenship documents with the issuing authorities.

I emphasize that these updates are not audited information. During the parliamentary committee hearings that followed the tabling of the 2002 report, we committed to conduct a further follow-up audit of the management of the SIN at a future date. We are currently planning that audit, and expect to report it next year. At the same time, we will be in a position to provide a more complete assessment of progress in responding to our 2002 recommendations. We welcome the Committee's views on any issues that may be of particular interest to it and that we should consider when we conduct this audit work.

Mr. Chairman, that concludes my opening statement. We would be pleased to answer your Committee's questions regarding our previous work or any other matter relating to our role, mandate and audit work.

Thank you.

[The Chair, Conservative, Dean Allison]

Thank you, Ms. Fraser.

In light of the fact that you can only be with us for another 20 minutes, I'm going to suggest that each party has one round of five minutes before we move into the next round.

Mr. Regan, please.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you very much, Mr. Chairman.

Ms. Fraser, thanks for coming this morning with your officials.

Let me ask you a bit about the process you follow in terms of following up past reports you've done. You talked about how you receive information from each department, and that you assess it on the basis of publicly available information and your ongoing knowledge of the department.

Can you tell me how long it's been since you've last done that with relation to HRSD and these issues? How does that work?

[Sheila Fraser]

We do that follow-up—though I'd hesitate even to call it follow-up. We receive information from the departments on the progress they're making on recommendations, for use in our own performance measures in our departmental performance report. So each year we indicate how many recommendations have been implemented four years after we have made them. So the information is used to do that performance indicator.

I would hesitate to go into a lot of detail on what the department has given us, because we haven't actually audited it and are thus reluctant to do that. But based on the information we have received, we can see there has been some progress, but it would appear there are still outstanding issues that have to be dealt with. Obviously we will be confirming the status of progress when we do a complete re-audit, which we will be undertaking very shortly.

[Geoff Regan, Liberal, Halifax West, NS]

Mr. Chairman, one of the things that concern me, and many people of course, about the SIN and the concerns you've raised is not only that a social insurance number by itself allows people to obtain certain benefits from government, but also that it may perhaps be used to get other identification or to prove identification.

Could you elaborate a bit on your concern today, as things stand, about the process used to get a SIN card? In other words, how valid is the SIN card as a proof of identify, and what dangers may it present when it is used?

[Sheila Fraser]

When we did our last audit in 2002, we raised a major concern about the use of the social insurance number because, as Mr. Regan mentioned, it is used very much in the private sector and is used in many cases to establish the identity of a person.

We were also concerned with the whole question of theft of identity. If it were very easy to get the card, it would make it easier for people to assume someone else's identity. We encouraged the government to address that issue and to clarify what purpose they saw the social insurance number filling. The response at the time in 2002 was, “The government reaffirmed its policy that the SIN was only an account number for authorized federal programs”. Our status report went on to say that the government, “To help protect personal information...is implementing the Personal Information Protection and Electronic Documents Act”.

I would certainly encourage the committee to perhaps re-question the department on that, because it's our understanding that as the government moves forward with Service Canada and one-stop service delivery, the social insurance number is becoming even more key in that whole delivery mechanism.

The integrity of the program or the validity or checking of who actually receives a card is one thing, but with all the cards that have been issued without any check on the authenticity of documents, which happened before 1976, there are discrepancies between the numbers of population and the numbers in the registry. So the integrity of the registry becomes even more important, I believe, which will obviously be an issue that we look at going forward.

[Geoff Regan, Liberal, Halifax West, NS]

I only have a few seconds, so let me ask you this: do you feel there should be some mechanism whereby a stronger link is made between the individual and the number, so that the person can't, for instance, pass the card to someone else without the government really knowing who's who? The identity thing can be very difficult to prove.

[Sheila Fraser]

We were certainly encouraging the department to explore the exchange of vital statistics with provinces, for example, and to re-look at the documents they were accepting. For example, they were accepting baptismal certificates, and I think a lot of provinces have indicated there are problems with their authenticity. If I recall correctly, what we found a little surprising at the time was that the passport wasn't an accepted document to get a social insurance number, yet it's one of the few documents where you can actually have proof of citizenship and who the individual is, because of the picture.

So there were issues around the documents that could be used in the application and around the notification from provinces, for example, of deaths. I believe some work has gone on with that, and I'm sure the department will be briefing you on that.

[The Chair, Conservative, Dean Allison]

Thank you, Ms. Fraser.

We'll move to the second round.

Mr. Lessard, for five minutes, please.

[Yves Lessard, Bloc, Chambly—Borduas, QC]

Thank you, Mr. Chairman.

First of all, I want to thank Mrs. Fraser and her entire team for joining us today. I'd like her to know how very much we appreciate the work she is doing as well as the high level of professionalism displayed by her and her audit team. The work you do is always very relevant and enlightening to us.

I would like to focus first on the purpose of the SIN, which originally was threefold: to identify people, to monitor the Canada Pension Plan and the Quebec Pension Plan, and to monitor Employment Insurance. Over time, measures were not put in place to prevent the use of the SIN for other purposes. And that's exactly what has happened.

Did your audit give you some idea of how the SIN might be used productively today, compared to its initial purpose and in light of circumstances which have evolved over the years?

[Sheila Fraser]

As I indicated earlier, we last reviewed this matter in 2002. At the time we were greatly concerned about SIN use. Obviously the federal government uses the SIN to identify program benefit recipients. However, we also know that it is widely used for different purposes by the private sector. We queried the government about the situation and wondered if perhaps it shouldn't amend its policy to make the SIN nothing more than an identification number for federal government programs. The government reiterated its position at the time, that is in 2002, that the SIN was indeed nothing more than an identification number for federal government programs.

Clearly, this is an issue that we will be examining once again. We're hearing, as is Service Canada, that the importance of the SIN is growing. We need to find out whether or not the federal government has changed its policy.

Perhaps that's a question that the committee could put to departmental representatives who will testify after us today. You could ask them if they've examine the whole issue and if they have different opinions as far as the policy is concerned.

[Yves Lessard, Bloc, Chambly—Borduas, QC]

In fact, we've observed that in the case Service Canada, which handles service requests for 12 or 14 different departments, it's relatively easy to use the SIN for other purposes.

Now then, I'm going to stray a bit from the subject at hand, because I believe that along with our colleagues, we'll be able to look into this matter.

In the course of your work, have you had an opportunity to examine the budget allocated for compassionate care leave? I'd like to take advantage of your presence here today to ask you to examine the whole area. If memory serves me correctly, $159 million was allocated for compassionate leave. Apparently, the cost of administering this leave was $70 million, whereas the actual cost of compassionate care benefits was $11 million.

We'd like some assurances that this analysis is correct. Perhaps you could enlighten us further at a later date, unless you're able to do so right now.

[Sheila Fraser]

This is not an area that we've looked into thus far, but we will certainly consider this at some future date.

[Yves Lessard, Bloc, Chambly—Borduas, QC]

I just think it would be a good idea to examine this program and the whole area of employment insurance, one of the department's largest budget components. It accounts for $16 or $17 billion annually. It would be useful for us to take a closer look at the EI account and discuss with you the potential social impact of diverting funds from this account.

I use the word “divert” without any hesitation. I suppose I could use a different word, but I find it quite appalling that over the past 10 or 12 years--and you even warned us about this--close to $50 billion has been diverted from the EI account.

[Sheila Fraser]

As you doubtless know, each year our Office conducts a financial audit of the EI Account. Approximately two or three years ago, we did a management audit and made a number of observations about the surplus in the account. If you like, we'd be happy to come back and discuss with you our audit work.

[The Chair, Conservative, Dean Allison]

Thank you, Mr. Lessard.

Mr. Martin, five minutes please.

[Tony Martin, NDP, Sault Ste. Marie, ON]

Thank you very much. I know from your report that since the 2002 report you have asked the department for regular updates. How many of those have you actually got from the department?

[Sheila Fraser]

We get an update every year. Every year we get updates from all the departments on the progress made on recommendations.

[Tony Martin, NDP, Sault Ste. Marie, ON]

Okay. And you've suggested in your report this morning that even though you got those updates, there really wasn't any indication that anything significant was being done to respond to the recommendations you made.

[Sheila Fraser]

I believe there has been progress in some areas. But we still know the areas where there are concerns; for example, authorization around the use of the social insurance number, gaps between the numbers and the integrity of the registry. We won't be able to confirm those concerns until we do the re-audit, which we are about to undertake.

[Tony Martin, NDP, Sault Ste. Marie, ON]

Certainly I've heard of instances of identity theft over the last couple of years. We've had a number in my own riding. It starts out with one piece, and then it grows. Before you know it, the whole thing is out of control. In the instances I've tried to look into, it's also been difficult for me to get a response from the department on how we might do something about that.

Did you make any recommendations on how individual cases might be dealt with?

[Sheila Fraser]

I don't believe we looked at individual cases per se and how they could be dealt with. We did raise our concern about identity theft and the importance of the social insurance number, and that it might affect government policy on the use of the social insurance number. Government policy, as we said--they restated it in 2002--was that it's simply a file identifier. If you treat it as a file identifier you will put in much different procedures to verify its integrity than if you treat it as a number that could be used by the private sector, for example, for a whole lot of other reasons.

The level of protection and effort you put in the system to ensure the identity of the person varies. In 2002, government reaffirmed they'd treated it as a file identifier. That may have changed since then, and that is obviously an issue we will be looking at.