Public Accounts Committee on April 15th, 2021

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

With regard to this quick turnaround, could you please elaborate on the steps that ESDC took when considering key areas of the benefit's initial design and how the analysis conducted in key areas led to certain policy decisions?

[Graham Flack]

On the design, working with CRA, obviously it was paramount to have something that could be delivered quickly, given the nature of the crisis. That led to the decision to move to a flat benefit on both the CERB side and the EI side, whereby we converted EI claimants who came into the system to a flat benefit of $500.

In terms of the amount, that amount was, among other things, calculated through an analysis of average EI payouts in the previous years, which were close to $500. I think the amount was about $473. There was initial analysis done in terms of where to set the income threshold for individuals eligible. As you would know, we typically have an hours requirement for people coming into EI. We were now expanding the system quite radically to include people who were not traditionally eligible for the EI system. A $5,000 income threshold was chosen to make the benefit as inclusive as possible while still ensuring that we had individuals who had some attachment to the labour force.

I think those were the core criteria. There were additional ones considered as well, but I think maybe I'd start with those.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Thank you.

I'll turn now to the CRA.

According to the OAG, when some applications were blocked by the CRA because of suspicious information, applicants were prompted to call the agency and provide the required documentation for their applications to proceed. As of December 20, approximately 141,000 individuals contacted the agency, and only 11% were actually eligible for the non-employment insurance emergency benefit.

Does this small proportion of people who were eligible among those who were contacted by the agency lead you to believe that this proportion is similar for all benefit recipients?

[Bob Hamilton]

I think essentially we would say that most Canadians were honest. While they may have made mistakes, they were honest about applying for these benefits. Nevertheless, there's always some degree of misappropriation or inappropriate benefits being received, and confusion. I'd be careful not to extrapolate too far the 11% who were eligible. It's a relatively modest number, but I think it's a good indicator that there were people who were, for one reason or another, trying to get benefits that they weren't eligible for. It was a relatively small proportion.

In terms of the earlier question, as we administer these benefits, there's a combination of upfront verification and back-end clarification. We did what we could up front to try to eliminate as many inappropriate claims as possible, but we always have the back-end verification that we can count on. We use tax data that comes to us, and is coming to us now in this filing season, to revisit the claims. This is in many ways similar to the normal operation of the tax system, which is accomplished by some upfront checking and then some back-end checking as well. There are still opportunities to determine exactly where funds might have gone to people who were ineligible and to take action.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Can you tell me what some of the front-end checking applications were?

[Bob Hamilton]

To put this in context, as I think everybody has mentioned, we put the system in place very quickly. It was simple and had probably fewer verifications than you would have normally, but we asked people to attest that they understood the rules of the program and that they were applying in good faith.

As we went along and experienced and saw some of what was happening, we adapted somewhat. For example, if someone who was claiming was over 75 years in age, we would ask them to give us a call—those were some of the calls you refer to—just so that we could verify it. If something was suspicious, was there a reason to block it right out of the starting gate? Alternatively, the person could explain the situation to us and we could let it go through.

It was really trying to identify some of those outliers, based on what we were seeing, so that we could introduce additional tests, again without slowing down the process too much. We were balancing between trying to get the benefits into the hands of people as they needed them and introducing some integrity into the system that would slow down that process. We were walking that balance line as we went through it.

[The Chair, Conservative, Kelly Block]

Thank you very much, Mr. Hamilton

I will now go on to Mr. Blanchette-Joncas for six minutes.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Madam Chair.

I would like to acknowledge all the witnesses here.

Ms. Hogan, your report leaves me a little dissatisfied.

I understand that we don't have enough data yet to obtain an overall picture of the Canada emergency response benefit. However, if we were to implement this type of program again tomorrow morning, in short, what should be improved?

[Karen Hogan]

Thank you for your question. It's a bit difficult to answer it. We would need to know exactly what issue we're trying to address. If the goal was to provide financial support to Canadians, the Canada emergency response benefit program hit the mark.

In terms of the controls, we saw some prepayment controls. For example, the individual's social insurance number and age were verified and it was confirmed that the individual hadn't died. We now know that the next step is to prevent any possibility of double payments.

I think that we can already learn some good lessons from this program. If the program were to be launched again, I would encourage the departments to do a better job of sharing information. People often don't have enough information to know whether they can access another support program. Perhaps this should be done before, during the process, rather than later.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Let's talk about communication, since it's the foundation of how departments work. We know that there are sometimes a number of subgroups and employees. In May, after only a few months, we realized that people who were already receiving employment insurance benefits could obtain the Canada emergency response benefit.

What concrete steps could have been taken to consolidate the information?

In the end, the same job was done twice, and these people had already received benefits.

[Karen Hogan]

It's a tough question. The deputy ministers may want to comment if you would like to ask them the question afterwards.

The information could have been shared a little earlier. As Mr. Flack said, there were some issues with the technological systems, but as soon as the information could be shared, it was. However, there's also the issue of access to other programs managed by the same department. The Canada Revenue Agency manages several programs, so it's also necessary to share information among the different groups within the department. Our office often sees this issue in its audits, which means that better communication and information sharing are needed. Sometimes it's really about technology issues and not a lack of willingness on the part of individuals.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Just so I understand, if departments have trouble communicating with each other, would it have been more effective to have the Canada emergency response benefit managed solely by the Canada Revenue Agency or by Employment and Social Development Canada?

[Karen Hogan]

I don't feel ready to answer that question. There has been an incredible amount of benefit claims. The number of employment insurance benefit claims that Employment and Social Development Canada normally receives has multiplied. I don't know whether any agency would have been able to properly handle this. This may be a question for the government. That said, there was an incredible amount of claims at the start of the pandemic.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Okay.

I want to address the operational plan included in your report's recommendations. The departments agreed with this recommendation. It will take four years to verify whether there was fraud and abuse, whether people who weren't entitled to benefits received them.

In your opinion, is this a satisfactory time frame?

[Karen Hogan]

I recognize that we will need time to carry out post-payment verifications that will help determine whether benefits have been paid to ineligible individuals and whether benefits have been paid by mistake. Tax season will be a crucial period that will enable us to obtain information. One of the CERB eligibility criteria is an income of at least $5,000. It is really important to have that tax information in order to begin work.

I know that this is a long period of time, but post–payment verifications require some back and forth. A good plan must be implemented. That is why my office intends to verify post–payment compliance activities. We plan to wait a few months and to begin, if possible, in late 2021. That way, we will be able to provide advice to improve the process, as needed.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Ms. Hogan, I would like to quickly discuss post–payment compliance activities.

According to the Canada Revenue Agency, in December 2020, only 11% of the 141,000 people who contacted the agency about their CERB application were eligible for the benefit. This means that about 90% of those individuals were not eligible for the CERB.

Of course, this is a small sample, but is it a sign that the proportion may be the same for the rest of the claimants?

[The Chair, Conservative, Kelly Block]

We'll have a very short answer, please, Ms. Hogan.

[Karen Hogan]

I am not sure whether I can come to that conclusion. I expect plans to be based on a risk assessment, and departments and the Canada Revenue Agency to focus in the beginning on higher risk samples before they broaden the scope of their work.

[The Chair, Conservative, Kelly Block]

Thank you very much.

We will now go to Mr. Green for six minutes.

[Matthew Green, NDP, Hamilton Centre, ON]

I think it's worth allowing Ms. Hogan to expand on that, because there have been some aspersions cast on the way the programs rolled out.

Before Ms. Hogan continues, I'll begin with a statement to acknowledge the scale, the scope and the historic nature of how our public sector delivered for Canadians.

I firmly believe that without this program, we would actually be worse off in what is already a bad situation. I'm in awe of the way in which the government was able to pivot and go offline, have people work from home, transfer IT technologies and continue to deliver. I want to begin by thanking them for that.

I want to allow Ms. Hogan to draw on some of the confusion we hear around the risk assessment process, just so we can get clear about it.

[Karen Hogan]

Thank you for the opportunity to continue to expand on the previous member's question.

He was referring to paragraph 6.57, I think, within our audit report. I think it's hard to draw the analogy that because there were some blocked payments, we could then draw a conclusion based on the entire population when only a small percentage were actually ineligible recipients. This group was a group of what we'll say are our “suspicious” accounts. The Canada Revenue Agency has a lot of data, and they use some of that data to inform risk assessments and decisions. They flagged these as potential files that were of a suspicious nature for many reasons.

I don't think it's appropriate to make the analogy that all of the payments would be like that. I think it's important to acknowledge that there are likely ineligible applicants and that there are probably intentionally misrepresented applications—

[Matthew Green, NDP, Hamilton Centre, ON]

Sure.

[Karen Hogan]

—but for the most part, applications were likely eligible applications, and that's what the post-payment work will look at.

[Matthew Green, NDP, Hamilton Centre, ON]

Yes, and I'll just insert this in an anecdotal way about our office in Hamilton Centre. We have the third-lowest household income in the country, and we were unclear and I was unclear in terms of how these programs rolled out. You'll recall they rolled out in multiple iterations. First it was $900 with this kind of patchwork EI program, and then it was shifted again and then again, and we finally got to around $2,000 a month, which we thought would allow folks to batten down the hatches and survive.

By way of commentary, I also want to recognize that the previous speaker, Ms. Dancho, was really adamant on pursuing the $500 million. I just want to state that from my calculations, that amount represents about 1% of all payments through CERB. I'm very much looking forward, for the fiscal conservatives who are out there and watching, to taking a look at the wage subsidies.

I'll give you an example. Imperial Oil claimed $120 million in wage subsidies and issued $320 million in dividends. That to me is a kleptocracy. The folks who are at home just trying to get by, whether or not they're employed, are a completely different subset of social conditions and questions.

I want to shift to the way in which some of these decisions were made. The OAG found that Finance Canada had analyzed the impact of the proposed changes to the Canadian emergency response benefit on the labour supply and the incentive to return to work. What impact did the benefit have on our labour supply? For example, if the benefit had been half the amount, how would that have affected the labour supply or the unemployment rate, in your opinion?

This is to the Department of Finance, which I'm sure did the analysis on the impact.

[Michelle Kovacevic, Assistant Deputy Minister, Federal-Provincial Relations and Social Policy Branch, Department of Finance]

Thanks.

The data and the analysis that we were doing—and continue to do, obviously—as the program was unfolding involved going over the information that ESDC and CRA both shared with us. On the number of applicants and beneficiaries of the CERB, we would look at surveys done by, for instance, the Canadian business federation of what Canadian businesses were doing, in terms of what they were seeing in layoffs and reductions in revenues. We were looking at—