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$4.6B in COVID-19 financial aid went to ineligible recipients, audit finds

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Canada's auditor general says that while the federal government effectively delivered emergency COVID-19 benefits during the pandemic, deciding to not front-end verification resulted in $4.6 billion in overpayments to ineligible individuals.

After sending out an estimated $211 billion in COVID-19 aid, a performance audit tabled in the House of Commons on Tuesday found that the Canada Revenue Agency and Employment and Social Development Canada are "falling short" when it comes to following through on belatedly verifying recipients' eligibility.

The audit notes that, in initially rolling out benefits like the Canada Emergency Response Benefit (CERB) and the wage subsidy starting in 2020, in order to expedite financial assistance to those who needed it the government chose to rely on attestation information provided by applicants and limited federal pre-payment checks before the funding was provided. As the pandemic evolved, these payment verification plans were put off further, while knowing at the time that money could have gone out the door to people who weren’t eligible.

Now that these massive financial aid programs have stopped, auditor general Karen Hogan says that the federal bodies responsible for the programs are still tallying up how much money may have gone to those who aren’t eligible. And, with legislated deadlines approaching, the federal government "may be running out of time" to identify and recover the amounts owing and it's likely a significant amount of the funds will not be recovered.

In her report, Hogan also noted that despite these issues, the federal aid prevented a rise in poverty, benefitted individuals most impacted by the pandemic, and did assist in Canada's economic rebound from the global crisis.

Of the $4.6 billion in overpayments to ineligible recipients, the audit found that $3.1 billion was paid to 1.8 million recipients who received an advance lump-sum EI overpayment. This, the report states, could have been either through the initial Employment Insurance Emergency Response Benefit, or the later evolution of that program into the Canada Emergency Response Benefit (CERB), while $1.5 billion went to more than 710,000 recipients who received more than one benefit per period.

The auditor general found that, in addition to the billions of dollars in overpayments, another estimated $27.4 billion in payments to individuals and employers should be "investigated further" for potential ineligibility, including $15.5 billion that went out through the wage subsidy program.

Hogan said she was flagging this additional chunk of potentially problematic funding, because through her audit she was "pretty confident" there are indicators that certain individuals and businesses were not eligible for the amounts that they received, such as not meeting the income metrics or not showing sufficient revenue declines.

"A more definitive estimate of payments made to ineligible recipients and amounts to be recovered by the government will be determined only after the agency and the department have completed their post-payment verifications," reads the report.

So far, the CRA's efforts to collect overpayments have largely been limited to responding to Canadians looking to voluntarily pay back their COVID-19 benefits, the audit found. Through these efforts, approximately $2.3 billion has been recovered as of this summer.

Asked by reporters on Tuesday how much she thinks the overpayments are a result of good-faith mistakes by Canadians versus what may be fraud, Hogan said she couldn’t confidently say because of the limited information the CRA had when she was doing her audit. 

WHAT IS NEEDED TO RECOVER BILLIONS?

Hogan is now calling for a series of changes to see as much of the improperly-paid funding returned as possible, including:

  • Updating the government's post-payment verification plans to "include all activities to identify payments to ineligible recipients of COVID 19 benefit programs";
  • Ensuring appropriate data is collected from applicants going forward to better assess outcomes; and
  • Pursuing implementing a real-time payroll system.

The auditor general also advocated for the CRA to, before the end of the year "put system functionalities in place to apply refunds against COVID-19 amounts owed," in order to "increase the recovery of COVID-19 amounts owed and reduce the administrative burden."

While the federal government has agreed at least in part with Hogan's findings, they were defensive about their "risk-based" approach—which was backed by Parliament— ultimately supporting millions of Canadians.

The CRA has already suggested, in its response to Hogan, that they won't be going after all of the ineligible funds. The CRA said this is because: "It would not be cost effective nor in keeping with international and industry best practices to pursue 100 per cent of all potentially ineligible claims."

Responding to this, Hogan said that the government is required under current legislation to take action when it comes to money being sent to those who shouldn't have received it, and if the Liberals choose a different approach, such as writing off these losses, they "must be clear and transparent with Canadians." 

HOW MUCH DID THE FEDS PAY IN COVID-19 AID?

In addition to detailing the overpayment and ineligibility concerns, the audit provides a clear breakdown of how much the federal government paid out through each of its COVID-19 benefit programs.

Here's the bill:

  • Canada Emergency Wage Subsidy: $100.7 billion
  • Employment Insurance Emergency Response Benefit/Canada Emergency Response Benefit: $74.8 billion
  • Canada Recovery Benefit: $28.4 billion
  • Canada Recovery Caregiving Benefit: $4.4 billion
  • Canada Recovery Sickness Benefit: $1.5 billion
  • Canada Worker Lockdown Benefit: $0.9 billion

In the audit, Hogan found that while Employment and Social Development Canada did adjust certain benefit programs to try to address disincentives to work, there wasn’t enough data to assess how effective the wage subsidy program was, in part because employers weren’t required submit any information on rehiring.

In their response to the report the Liberals made a point of emphasising how many people benefitted from each of these programs, stating that for the $211 billion spent, the programs had helped:

  • Canada Emergency Wage Subsidy: 460,000 businesses to keep 5.3 million employees on the payroll
  • Employment Insurance Emergency Response Benefit/Canada Emergency Response Benefit: 8.5 million people
  • Canada Recovery Benefit: 2.3 million people
  • Canada Recovery Caregiving Benefit: 560,000 people
  • Canada Recovery Sickness Benefit: 1.2 million people
  • Canada Worker Lockdown Benefit: 455,000 people

"I remain incredibly proud of the way our government responded to the economic and public health challenges of the pandemic," Minister of Employment, Workforce Development and Disability Inclusion Carla Qualtrough told reporters on Parliament Hill on Tuesday. "We made it clear that eligibility would be verified after, and this process remains ongoing.

"We're trying to work with Canadians in a very difficult time, and I wouldn't mistake a lack of aggressive pursuit for not doing it," Qualtrough said. "It's just, we're being compassionate."

CONSERVATIVES BALK AT 'WASTE'

Reacting to the auditor general's findings, the federal Conservatives weren't buying the Liberals' compassion argument, telling reporters instead that this potential multi-billion dollar loss was indicative of a pattern of wasteful Liberal spending.

"Today the auditor general confirmed what Conservatives have been warning about since 2020," said Conservative MP and finance critic Jasraj Singh Hallan. "The lack of controls put in place by the Liberal government as identified by the auditor general undoubtedly contributed to this mess that taxpayers will be forced to pay."

The Conservatives are now calling for the Liberals to present a plan "that shows that they're going to take this report seriously and put in the controls that the auditor general is also calling for."

Responding for the NDP—who throughout the pandemic pushed for the Liberals to go further in offering financial assistance—MP and finance critic Daniel Blaikie focused on how the AG's office noted how needed this income supports were.

"New Democrats do not believe that Canadians who applied in good faith to these programs and do not have the money to pay it back should be persecuted," Blaikie said, calling for a low-income "repayment amnesty."

"This will allow the government to apply its limited resources to pursuing fraudsters and those who have the financial means to repay their debt," Blaikie suggested. 

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