Public Accounts Committee on Feb. 2nd, 2023

[The Chair, Conservative, John Williamson]

I'll now call the meeting to order.

I know some members are still getting settled, but those members know it takes me a few minutes to go over some of the rules and introductions.

Thank you, all, for coming in today. It's wonderful to see so many witnesses here in person.

Welcome to the 47th meeting of the House of Commons Standing Committee on Public Accounts

Pursuant to Standing Order 108(3)(g), The committee is meeting today as part of its study on Report 10, "Specific COVID-19 Benefits", of the Auditor General of Canada.

I'd now like to welcome our witnesses. I know there are a lot of people here today.

We have Karen Hogan, the Auditor General. It's nice to see you. We also have Mélanie Cabana, principal, and Lucie Després, director of the Auditor General's office.

From Canada Revenue Agency, we have Bob Hamilton, commissioner of revenue; Marc Lemieux, assistant commissioner, collections and verification branch; Gillian Pranke, assistant commissioner, assessment, benefit and service branch; and Adrianna McGillivray, director general, compliance programs branch.

With us from the Department of Employment and Social Development is Jean-François Tremblay, deputy minister; Tammy Bélanger, senior assistant deputy minister, benefits and integrated services branch, by video conference; Catherine Demers, associate assistant deputy minister, skills and employment branch; Mary Crescenzi, assistant deputy minister, integrity services branch, Service Canada; Cliff C. Groen, business lead, benefits delivery modernization; and Nathalie Manseau, acting chief financial officer and director general, financial management advisory services, also by video conference.

We'll hear from our witnesses.

Ms. Hogan, you have the floor for five minutes, after which we'll go to Mr. Hamilton and Monsieur Tremblay.

Ms. Hogan, it's over to you, please.

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

Mr. Chair, thank you for this additional opportunity to discuss our report on specific COVID-19 benefits, which was tabled in the House of Commons on December 6th, 2022.

I would like to acknowledge that this hearing is taking place on the traditional unceded territory of the Algonquin Anishinaabe people. Joining me today are Mélanie Cabana and Lucie Després, who were responsible for the audit.

This audit examined six COVID-19 benefit programs intended to support individuals and employers through the pandemic. We looked at whether Employment and Social Development Canada and the Canada Revenue Agency managed these programs efficiently and effectively and whether they provided value for money outcomes. Our work also examined amounts paid to recipients and whether procedures to recover overpayments and payments made to ineligible recipients were timely.

For all the programs we audited, we found that $4.6 billion was overpaid to ineligible individuals. We also estimated that payments of at least $27.4 billion should be investigated further to confirm whether recipients were eligible. This includes $11.9 billion in benefits paid to individuals.

At the committee’s request, we are focusing today on benefits to support individuals. We concluded that Employment and Social Development Canada and the Canada Revenue Agency quickly delivered financial support to individuals. Programs that normally would have taken months or years to design were operational within weeks and helped those most affected by the pandemic. This included women, visible minorities, youth, and Indigenous people, as well as people who lost their jobs or otherwise suffered a marked drop in income. COVID-19 programs were effective at preventing an increase in poverty, reducing income inequalities, and helping the economy bounce back.

To issue payments quickly, Employment and Social Development Canada and the Canada Revenue Agency decided to limit prepayment controls. This meant that they would have to do more work later to verify whether payments paid were accurate and had gone to eligible individuals. This is consistent with international best practices for delivering support during an emergency.

As the pandemic continued and programs were extended and modified, the department and the agency added some prepayment controls. However, for each program some eligibility criteria still had no corresponding prepayment control.

Given limited prepayment controls, Employment and Social Development Canada and the Canada Revenue Agency made the early decision to focus on post-payment verifications. However, we found that the number of planned post-payment verifications was low and that the department and the agency did not plan to verify all the payments to recipients identified as potentially ineligible. In addition, because the department and the agency delayed post-payment verification work as the pandemic continued, they are now at risk of not completing planned post-payment verifications within legislated time frames.

Efforts to collect amounts owing had been limited at the time of our report. As of the summer of 2022, approximately $2.3 billion of COVID benefit overpayments had been repaid.

As with the wage subsidy in support of employers, I am concerned about the limited progress in postpayment verification work for these programs. The federal government spent billions of dollars to help people in a time of crisis, and it does not know whether that money always went to eligible recipients. In the interest of being fair to all taxpayers, the government must carry out rigorous verification work. Regardless of the approach it takes, it must be clear and transparent with Canadians.

Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions the committee may have.

Thank you.

[The Chair, Conservative, John Williamson]

Thank you very much, Auditor.

I'll now turn to Mr. Hamilton, CRA commissioner.

It's over to you, sir.

[Bob Hamilton, Commissioner of Revenue, Canada Revenue Agency]

Thank you, Mr. Chair, for this opportunity to discuss the Auditor General's report entitled “Report 10: Specific COVID-19 Benefits”.

You have already introduced my colleagues who are with me here at the table.

As I stated at my appearance before this committee last week, I want to thank the Auditor General and her team for their essential and diligent work. Work at the agency has already begun to respond to the Auditor General's recommendations.

The CRA fully agrees with six of the Auditor General's recommendations and partially accepts the recommendation that applies to both ESDC and CRA. This is noted in CRA's action plan, which has been submitted to this committee.

In the context of the pandemic, the CRA was tasked with administering 12 emergency programs in order to deliver critical support to Canadians who lost their jobs, couldn't go to work because they were sick or had to stay home in order to take care of a loved one or to comply with local health guidelines.

The attestation-based approach put in place by the government guided the implementation of all the COVID-19 emergency and recovery support programs administered by the CRA, ensuring that funds needed by Canadians were issued in a timely and compassionate manner.

Delivering benefits to Canadians was key to the government’s response. The CRA’s approach throughout has been to ensure that people got the help they needed when they needed it.

Relying on our robust systems and a strong experienced workforce, we were well placed to administer these programs by conducting application processing and compliance activities.

Let me be clear: We were not perfect. Each week we learned something new in this extraordinary time based on the intelligence we were gathering. These lessons learned allowed us to refine our prepayment controls and adjust the manner in which we administered the programs. Those lessons learned were shared with this committee on March 31, 2022.

A key prepayment control was added in the summer of 2020, when tax data was used to proactively block 700,000 applicants. Our controls also prevented a potential of $5 billion in additional ineligible payments.

Postpayment verification activities, also part of our compliance strategy, are now well under way within the CRA, with hundreds of thousands of postpayment verifications planned.

As I noted in my appearance last week, the approach adopted by the CRA optimizes recoveries and prioritizes the stewardship of public funds and efficient use of resources. It also reduces the impact on Canadians by limiting the number of audits of eligible applicants.

The CRA will continue to work with ESDC to identify compliance risks and act accordingly.

As of January 19 of this year, the CRA has sent out more than 960,000 notices of redetermination to individuals, with thousands more to be sent, informing them that they have an unpaid debt on their account. These notices represent approximately $4.2 billion.

In addition, as part of our compliance efforts, the CRA and ESDC will continue to pursue all of those cases where individuals were provided with an advance lump sum payment for EI-ERB, as well as cases where individuals received more than one type of benefit for the same period. All recovery efforts are progressing.

It is important to note that our compliance work can involve vulnerable populations, many of whom are struggling. The CRA's recovery approach continues to be flexible and rooted in empathy to respond to the situations that these Canadians face.

In closing, I want to once again recognize the dedicated work of CRA employees during this difficult time as they administered these programs which, in the words of the Auditor General herself, "prevented a rise in poverty" in Canada.

Additionally, our employees have done all of this while continuing to deliver upon our core tax and benefit administration programs, including the processing of individual and business returns and issuing benefits, credits and refunds to Canadians.

Thank you, Mr. Chair. I'd be pleased to answer any questions.

[The Chair, Conservative, John Williamson]

Thank you very much.

Deputy Minister Tremblay, you have the floor for five minutes.

[Jean-François Tremblay, Deputy Minister, Department of Employment and Social Development]

Mr. Chair, I am happy to answer questions today on the Auditor General's report on the COVID-19 benefits. I am joined by the people you have already named very well, so I won't repeat their names.

We want to thank the Office of the Auditor General for this work and for the report.

I also want to recognize that we are gathering today on the unceded territory of the Algonquin Anishinabe nation.

At the start of the COVID-19 pandemic, we acted quickly to provide access to emergency income support to millions of Canadians, including the self-employed

With Parliament’s support, the CERB was implemented with an attestation-based application process, rather than upfront controls. This approach allowed us to process applications and deliver the CERB as quickly as possible in April of 2020.

The front-end attestation-based application process was balanced by the back-end risk-based integration framework, focused on fraud detection prevention measures as well as postpayment verification of claimants' eligibility.

The International Public Sector Fraud Forum has acknowledged that the attestation-based process is the best practice when providing emergency support. Right from the start, we made it clear that eligibility would be verified after the fact using tax data.

Overall, the Auditor General’s report found the government’s COVID-19 benefit programs—including the CERB—achieved their objectives in terms of helping mitigate poverty and income inequality as well as facilitating an economic rebound.

We now have a strong plan to conduct post-payment verification and we are carrying out this work methodically.

Data analytics has assessed 100% of all the CERB applications for potential ineligibility. As of January 6, 2023, ESDC has sent 55,000 fact-finding letters to potentially ineligible recipients requesting proof of eligibility. We also have issued 1.8 million overpayment notices to individuals to reconcile advance payments of emergency benefits.

This money flowed to people quickly, as you may remember, within days of applying, and then needed to be reconciled after. We have recovered $1.68 billion from more than 1.8 million Canadians as of January 6 from those overpayments.

We have the resources to perform these integrity measures. ESDC has committed to completing 157,000 postpayment verifications over the four-year period. It would not be cost-effective nor keeping with international or industry best practices to investigate 100% of potential ineligible claims. I also want to be clear that this approach is evergreen and will be adapted as the circumstances warrant.

Many Canadians may have acted in good faith at the time they applied for and received benefits, even though they were ineligible.

Through rigorous post-payment verification activities, applicants found to be ineligible for the CERB or who made fraudulent claims will be required to repay the amount owed.

The Government of Canada is committed to working with Canadians to ensure they will not be put into financial hardship by having to repay the emergency benefits they received. This reflects our “people first” empathetic approach.

Mr. Chair, we appreciate the Auditor General's recommendations, and they will, of course, inform our work going forward.

Thank you.

[The Chair, Conservative, John Williamson]

Thank you all very much.

I'm now going to turn to the rounds. I'm going to be fairly judicious with the time because we started a little bit late.

I'll turn first to Mr. Chambers.

Mr. Chambers, you have the floor for six minutes, please.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you, Mr. Chair.

Mr. Hamilton, welcome back.

There was an Order Paper question about the cost associated with some of the postverification audits that have been done. What is the amount that's been spent to date? Is it about a billion dollars? Is that a number you have handy? That was what was disclosed at the end of last year, in November or December.

[Bob Hamilton]

I don't have the number handy in front of me. I recall the Order Paper question. I expect that what's in there is correct.

[Adam Chambers, Conservative, Simcoe North, ON]

Do you have an estimate of what the department will spend on postpayment verification between now and when you plan to finish that work?

[Bob Hamilton]

I don't have that estimate in front of me, but I can get that to you. I know that we're planning to have our postpayment verifications extend out to 2025, so we would have to compute that number based on that.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you.

Monsieur Tremblay, do you have a similar number that you could share with the committee in writing, if you don't have it at hand?

[Jean-François Tremblay]

At the moment, what I can tell you is that we did receive $25 million in the beginning, and we received an additional $114 million to do postpayment verification. These, I think, are the numbers we have at the moment.

[Adam Chambers, Conservative, Simcoe North, ON]

To clarify, did I hear you correctly that ESDC is planning to review 100% of the potential ineligible payments under the CERB, or under the benefits provided by ESDC?

[Jean-François Tremblay]

We have, with Revenue Canada—and Mary can explain more—done data analyses on all cases, because we have information on those people. We have their revenue numbers, for example. We were able, through that, to find out and to attest whether people were meeting some of the criteria.

[Adam Chambers, Conservative, Simcoe North, ON]

It's hard to keep this all straight. The Auditor General says there's a certain amount that should be investigated. Are you saying that, for the amounts that relate to ESDC, you are investigating all of the amounts that the Auditor General—

[Jean-François Tremblay]

I would not call it an investigation. I will call it doing data analysis—

[Adam Chambers, Conservative, Simcoe North, ON]

Confirmation.

[Jean-François Tremblay]

Yes, confirmation and also trying to find out, in that pool of $3.7 billion for EI-ERB, for example, what percentage or number of them had numbers that were not necessarily aligned with the criteria. This could be for good reasons, to be honest, but it's how many of them were, potentially, people who received money they should not have received.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you.

I will go back to the CRA briefly.

What's the total amount of the payments that have been reviewed to date? How many billions have been reviewed, wherein you'd consider we've looked at them, we've confirmed them and we're no longer concerned?

[Bob Hamilton]

I'm not sure if one of my colleagues has that figure in front of them. If not, we can definitely get it to you.

We're just talking about the individual benefits here. Is that...?

[Adam Chambers, Conservative, Simcoe North, ON]

I would prefer both, since it's quite a substantial number. We did discuss this last week. If there is a discussion about how much we've spent so far and this is how much we've reviewed, I think that would be a reasonable return-on-investment analysis that one might consider doing.

[Bob Hamilton]

I'll turn it to Marc Lemieux, my colleague.

[Marc Lemieux, Assistant Commissioner, Collections and Verification Branch, Canada Revenue Agency]

As it was explained earlier, the agency does a business intelligence exercise on all of the cases. That's how we do our risk-based approach. We assess every Canadian who received an amount through CERB against the risk factors that we have.

As we explained for the CEWS early last week, it's the same approach. We look at all of the payments and we assess the risk for all of them. Then we choose which ones we will audit.

[Adam Chambers, Conservative, Simcoe North, ON]

Here is a different question, then: What amounts are you not going to look at with your risk-based approach? How much?

Based on your risk-based approach, you're deciding what you're going to look at. Is that correct? What are you not going to look at?