Public Accounts Committee on Dec. 6th, 2022

[The Chair, Conservative, John Williamson]

Good afternoon.

I call this meeting to order.

Welcome to meeting number 43 of the House of Commons Standing Committee on Public Accounts.

Pursuant to Standing Order 108(3)(g), the committee is meeting today for an information session with the Auditor General about her December 2022 reports, that is, Report 9. “COVID‑19 Vaccines”, and Report 10, “Specific COVID‑19 Benefits”, which were submitted to the committee on Tuesday, December 6.

I'd now like to welcome back our witnesses, Auditor General Karen Hogan and Mr. Andrew Hayes.

It's good to see you both.

I know it's been a long day for everyone. I want to say right off the top, thank you for your work. I know this report was largely the result of a vote in Parliament, and we appreciate your quick response to that motion. As well, I want to thank you for the work you did to have your officials present this morning for the lock-up and for your presentation as well. I think it was very helpful for members both to have time to review the document and, of course, to ask you questions this morning prior to its release.

Without further ado, I understand that you have a brief opening comment.

Members, we're going to have the first round as we normally do. Then we're going to have more informal questions to the Auditor General, and we have her here for an hour.

It's over to you, Ms. Hogan and Mr. Hayes.

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

Thank you very much, and we appreciate your feedback on the lock-up. We'll always strive to improve that every time we release reports.

I saw the interest in maximizing question time, since we have only an hour. I was asked to give a really quick roll-up, so I will try to do that from scribbled-together notes. Hopefully, it will be a good summary of the opening statement I delivered earlier today.

I will start with our audit on COVID‑19 vaccines.

We found that the Public Health Agency of Canada and Health Canada, supported by Public Services and Procurement Canada, worked together to respond to the urgent and evolving nature of the pandemic.

Health Canada adjusted its usual authorization process to speed up the regulatory approval of COVID‑19 vaccines. Public Services and Procurement Canada secured enough vaccine doses for the provinces and territories to vaccinate everyone who wanted it in Canada.

However, we observed that the Public Health Agency of Canada's efforts to minimize wastage were unsuccessful. Long-standing issues remain with respect to sharing of data, and delays in implementing functionalities of VaccineConnect affected the government's response.

I'll turn next to the audit that we did on specific COVID-19 benefits. In that audit we found that the support programs were effectively delivered by Canada Revenue Agency and Employment and Social Development Canada. The early decision in 2020 to align with international best practices to limit prepayment controls and rely on attestations allowed the government to get support to Canadians and employers quickly while meeting its goal of preventing an increase in poverty and income inequalities and helping the economy bounce back.

The government also knew that in making these decisions there was an increased risk that money would be paid to ineligible recipients. Our audit found that overpayments of $4.6 billion were paid to ineligible individuals. We also estimated that at least $27.4 billion in payments to individuals and employers should be investigated further.

Where it's confirmed that benefits were paid in error, notifications should be sent and amounts recovered. Under the current system, that's what the government is required to do. If it wants to choose a different approach, for example by forgiving some amounts owing, then it needs to be clear and transparent with Canadians.

We would be pleased to answer any questions the committee members may have.

[The Chair, Conservative, John Williamson]

Thank you very much, Ms. Hogan.

Ms. Hogan, I want to inform you—you're probably aware of this, but I would not want for you not to be aware—that this is a public meeting. I want to double confirm that you and all members are aware of that.

Is there a point of order?

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

[Inaudible—Editor] Are these informal questions, Mr. Chair?

[The Chair, Conservative, John Williamson]

They are, except for the first round. The first round we're going backwards, so I'll come to you right after, but Mr. McCauley has the floor for six—

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

I'm sorry. I misheard. Fair enough.

[The Chair, Conservative, John Williamson]

It's just that the first round is kind of typical. Then I'm going to try to balance it based on the members who are here, with proper representation, but if any members or parties want to defer, they can do that as well, depending on the questions, but we will continue this until the questions are exhausted.

Mr. McCauley, you're up first for six minutes.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thanks, Mr. Chair and Auditor General Hogan.

It's nice to see you back again, Mr. Hayes.

We just came from question period, and we had a rather shocking attack on the integrity and independence of the Auditor General's office by the Minister of National Revenue.

I want to quote her. She said, in regard to the AG's calculation of ineligible recipients of the wage subsidies, that the AG's figures were “exaggerated” and that it's not her fault because, “We all know that she was pressured by the opposition”. She doubled down later and said it was also because of a lack of time.

I wonder if you could confirm the integrity of your numbers, whether the report was done under pressure from the opposition parties, and how your office feels about such a partisan attack on the integrity and independence of your office?

[Karen Hogan]

Obviously I stand by the findings in my audit report. Our audit work is very vigorous. We are confident in the findings and the numbers we have put forward. In fact, that's why we put it as at least $27.4 billion. We took an approach that was favourable to individuals and businesses when we did our audit work.

We based our work on the limited information that was available at the Canada Revenue Agency. Because very little was collected on application, we could look only at what information was available, and we believe we looked at the best information available and came to the best conclusions.

I know we also highlighted in our report some of the post-payment work the Canada Revenue Agency is doing, more specifically on post-payment work on businesses. I would point you to the annex at the back, showing a phase 1 round of preliminary audits in which the error rate was approximately 40% to 42%, and then phase 2, where the Canada Revenue Agency has informed us that it improved its sampling strategy, and the error rate in phase 2 is about 60% of the businesses received amounts that were ineligible.

While the total dollar values might be small, that indicates to me that a much more rigorous approach to post-payment verification work is needed.

[Kelly McCauley, Conservative, Edmonton West, AB]

Have you ever changed results or your report based on pressure by an opposition party, as claimed in question period today?

[Karen Hogan]

The requirement to do the audit on the specific COVID benefits was included in an act. The act has a long name, so I had to write it down. It's an act to provide further support in response to COVID-19. That act outlined the programs we should look at and some of the scope of our audit, and gave us a deadline to provide it to the clerk by December 17 of this year. We staffed accordingly and had sufficient time and great co-operation from the department, and we stand by our findings.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thank you.

The $27 billion, that is, as you said, the best-case scenario for taxpayers, basically. That's the bare minimum. Is that correct? However, could it be substantially higher?

[Karen Hogan]

We say “at least” because there is missing information in order to verify. It is likely that some of the payments to individuals or businesses that we identified as potentially ineligible are ineligible, but there are others that we haven't identified, and we included some of that in parts A through F of our report, in part 2, and that's why we believe the government just needs to do more work to identify ineligible payments and then make a decision about recovery.

[Kelly McCauley, Conservative, Edmonton West, AB]

In 10.35 of your report you comment that it is difficult to assess the program impact of the wage subsidy because of the limited information required by employers on the application. Is this limited information requested by the taxpayers or the government from businesses for the wage subsidy—the fact that we required so little information—going to factor into higher losses for taxpayers or a higher number of ineligible payments?

[Karen Hogan]

In that paragraph we were talking about whether or not the emergency wage subsidy had met its intended objective, and some of those objectives were to maintain the employer-employee relationship, to rehire employees and to allow businesses to bounce back when the economy reopened. It was hard to assess whether or not the employer-employee relationship was maintained, because there was no information gathered, such as the social insurance numbers of employees, in order to be able to know if that relationship was maintained. What this could mean is that there were individuals who were receiving individual support payments, but then the employer was also claiming a wage subsidy, which may mean that it was ineligible on one side or the other. However, we've identified all of those, we believe, in our testing, and have made that information available to the Canada Revenue Agency.

[Kelly McCauley, Conservative, Edmonton West, AB]

The final bill for the wage subsidy was almost $100 billion. How concerned are you that so much money in support went out the door with so little information backing it?

As you mentioned, we were not tracking social insurance numbers. Someone could have been collecting CERB and working part time at the same time their wage was being subsidized.

[Karen Hogan]

As I mentioned, in the first audits we did in 2021 on the wage subsidy program and on the emergency response program, the approach to limit prepayment controls was one that is seen as an international best practice in the time of an emergency, but that comes hand in hand with needing to do rigorous post-payment verification to confirm eligibility and take the necessary steps afterwards.

I'm concerned that there isn't a more rigorous and more comprehensive approach planned on that post-payment work.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thank you.

[The Chair, Conservative, John Williamson]

Thank you.

I had promised the floor to one member, but I have a note from another one.

Mr. Fragiskatos, you have the floor for six minutes, but, Mrs. Shanahan, we will certainly get to you.

[Peter Fragiskatos, Liberal, London North Centre, ON]

We will. There is time.

Thank you, Auditor General, for your work and that of your office.

I listened to Mr. McCauley. I think there's a disagreement in terms of how the minister's statement in question period today should be interpreted. Looking at the statement, I didn't hear an accusation of a lack of independence. I don't want to get into this, because I know that the Conservatives in the past—as recently as 2021—went after the Auditor General's office in a way that left a lot to be desired. I think we should focus on the substance of today's report. Again, I deeply respect your independence and the work that you do.

I looked at the report closely. There are a number of things that stand out and a number of things that remind me about the peak of the pandemic and where people were, including in my own community. I think members of Parliament around the table will certainly attest to my experience, which was a deep concern about where the country was going economically and levels of poverty that people would have faced if the government had not moved very quickly to introduce the benefit that it did.

Your report gives specific figures about where things could have gone if the government had not introduced benefits as quickly as possible. Can you delve into that a bit more?

[Karen Hogan]

One thing we looked at in the specific COVID benefits program was whether these programs helped meet some of the objectives—one of which was to get money out to individuals and businesses quickly—whether efforts were made to mitigate poverty and income inequalities, and whether the economy was able to rebound.

What we found was that the people most impacted by the pandemic received support, whether they were individuals or businesses. We looked at information from Statistics Canada around poverty levels. Statistics Canada indicated that poverty would have increased by five points over the 6.4% that it was at in 2020 if these income supports had not been there.

We also looked at whether those in the lowest-income quintiles across the country received support to replace their income. We found that they did. In fact, some individuals received more than the income they would have earned in the prior year. We did, however, notice that the government tried to make adjustments to deal with that disincentive to return to work.

We also looked at the rebound of the economy and whether or not economic activity had returned to where it had been prepandemic. We found it had done that by November 2021.

All indications point to the fact that these supports met those objectives. However, the early decision resulted in some inefficiencies, and now it's time to do the hard work to identify payments made to ineligible individuals and businesses.

[Peter Fragiskatos, Liberal, London North Centre, ON]

I understand, certainly, and work is ongoing on the part of CRA, as we see.

It started with poverty, but you have pivoted in the way I wanted to, which was to look at the economy and GDP. Without these benefits and various supports, what would have happened to our economy? I know that's a theoretical question.

Let me phrase it another way. To what extent did these benefits help to stave off a deep economic decline?

Your report talks about GDP, for example, and the way it dropped. You just mentioned November 2021, when we were returning to preCOVID levels in terms of economic activity and employment.

[Karen Hogan]

Again, the report has a table that highlights measures that Statistics Canada gathered. We noted that there was a 17% decline in economic activity in early 2020. That's based on GDP and economic activity. It was back to preCOVID levels by November 2021.

We also looked at hours worked and noticed that there was a sharp decline, almost 28%, in the early part of the pandemic, which was in line with the severe health restrictions that were in place, but then again, by May 2021 that had bounced back to prepandemic levels.

All indications show that the support payments helped Canadians stay home, and the economy bounced back as expected.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Reading your report, one can't help but be struck by the fact that unprecedented times require unprecedented responses.

I'd like to know your thoughts on the attestation-based approach and the speed that allowed for. That speed, it sounds like, was essential to some of the very good outcomes we've seen both in terms of keeping poverty low, or as low as possible, and also in helping the economic recovery.

Do you have any further comments, Auditor General, on the speed and how attestation helped with that?

[Karen Hogan]

I would agree that adopting the approach of limited prepayment controls, which then relied on personal attestation, increased the speed and helped the government meet the objective of getting support to individuals and businesses in a quick fashion. That is an approach that is unusual and one that should be done in unusual times, but it does come hand in hand with the need to do very rigorous work afterwards to verify eligibility.