THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Wednesday, February 15, 2023
The Standing Senate Committee on National Finance met with videoconference this day at 6:45 p.m. [ET] to study matters relating to federal estimates generally and other financial matters.
Senator Éric Forest (Deputy Chair) in the chair.
[Translation]
The Deputy Chair: Welcome everyone, all senators and all Canadians watching us on SenVu.ca.
My name is Éric Forest; I am a senator from the province of Quebec, in the Gulf region. I am the Deputy Chair of the Standing Senate Committee on National Finance.
I would now like to ask my colleagues to go around the table and introduce themselves, starting at my left.
Senator Gignac: Clément Gignac from Quebec.
[English]
Senator Pate: Kim Pate, from here on the shores of the Kitchissippi, the unceded, unsurrendered territory of the Algonquin Anishinaabeg.
Senator Loffreda: Welcome. Senator Tony Loffreda, Montreal, Quebec.
Senator Bovey: Patricia Bovey.
[Translation]
Senator Smith: Larry Smith from Quebec.
[English]
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
[Translation]
Senator Dagenais: Jean-Guy Dagenais from Quebec.
The Deputy Chair: We have with us our clerk as well as our committee analysts, who help us do our work.
[English]
Senators, we are meeting today under our general order of reference and we have the pleasure to welcome the Auditor General of Canada, Ms. Karen Hogan.
[Translation]
Ms. Hogan, thank you for taking the time to meet with us this evening. We always greatly look forward to discussing some of your reports, which are very instructive.
You are joined by Mr. Andrew Hayes, Deputy Auditor General; Ms. Susan Gomez, Principal; and Ms. Mélanie Cabana, Principal. Welcome to all of you and thank you for accepting our invitation to appear before the Senate National Finance Committee.
We will now proceed to your preliminary remarks. Ms. Hogan, the floor is yours.
Karen Hogan, Auditor General of Canada, Office of the Auditor General of Canada: Thank you, Mr. Deputy Chair.
Thank you for giving us the opportunity to discuss both of the COVID-19 reports we presented to Parliament on December 6, 2022.
I would like to acknowledge at the outset that this hearing is taking place on the traditional unceded territory of the Algonquin Anishinaabe people.
I will start with our audit of COVID-19 vaccines. In this audit, we examined how the federal government procured, authorized and distributed vaccines to the provinces and territories to support the largest immunization program in the country’s history.
Overall, we found that the Public Health Agency of Canada, Health Canada and Public Services and Procurement Canada worked together to respond to the urgent nature of the pandemic. Between December 2020 and May 2022, the federal government paid for 169 million vaccine doses. Over 84 million were administered to eligible people across the country.
In 2020, Public Services and Procurement Canada established advanced purchase agreements with seven companies that showed the potential to develop viable vaccines. This was done so that Canada could obtain enough doses to immunize all eligible people once vaccines became available.
We found that Health Canada followed a systematic process to authorize COVID-19 vaccines and that it adjusted its processes to accelerate approvals. For example, the department reviewed information for manufacturers as it became available instead of waiting to receive a complete application package.
On average, the Public Health Agency of Canada delivered vaccines within two days of receiving a province’s or a territory’s request. This is successful considering the logistics of transporting temperature sensitive materials to sometimes remote locations.
We found that the Public Health Agency of Canada and Health Canada collected and analyzed COVID-19 vaccine surveillance data to monitor the safety, coverage, and effectiveness of the vaccines.
However, because data sharing agreements with the provinces and territories were not finalized, the agency struggled to effectively share detailed case-level safety surveillance data with Health Canada, the World Health Organization and vaccine companies.
We found that problems with information sharing also affected the Public Health Agency of Canada’s ability to accurately gather inventory, wastage and expiry information. Delays in implementing important functionalities of VaccineConnect also contributed to the agency’s lack of ability to track wastage.
By the end of May 2022, Canada had 32.5 million doses of COVID-19 vaccines — estimated to be worth about $1 billion — in federal, provincial and territorial inventories. Another 50.6 million doses were deemed surplus and offered for donation.
[English]
Between December 2020 and May 31, 2022, which marked the end of the period covered by our audit, 15.1 million doses were wasted. The Public Health Agency of Canada informed us that from June to December 2022, another 11 million doses expired before they could be used or donated. Wastage can happen for many reasons, and given the evolving nature of the pandemic, some wastage was to be expected.
We raised concerns about the sharing of health data between federal and provincial or territorial health authorities in 1999, in 2002, in 2008 and again in 2021. These long-standing issues including implementing a pan-Canadian framework for sharing information must be urgently addressed because the sharing of health data is a cornerstone of effective surveillance to keep Canadians safe.
I’m going to now turn to the second audit we released in December. This audit examined six COVID-19 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 the programs provided value for money. We also looked at whether benefit payments were accurate and made to eligible recipients and whether procedures to recover overpayments and payments made to ineligible recipients were timely.
At the start of the pandemic, the department and the agency effectively delivered COVID-19 benefits to provide quick financial relief to individuals and employers. To issue payments quickly, the government decided to limit prepayment controls by relying on information provided by applicants. In doing so, it recognized that post-payment work would be needed to verify that benefit payments were accurate and made to eligible recipients.
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 had no corresponding prepayment control.
For all the programs we audited, we found that overpayments of $4.6 billion were made to ineligible recipients. We also estimated that payments of at least $27.4 billion should be investigated further to confirm whether recipients were eligible.
We found that the number of post-payment verifications that the department and agency had planned was low. The department and the agency did not plan to verify all the payments made to recipients identified as potentially ineligible.
Efforts to collect amounts owing had been limited at the time of our report. As of the summer 2022, approximately $2.3 billion of COVID benefit overpayments had been repaid.
While the effective delivery of benefits early in the pandemic helped prevent an increase in poverty and income inequalities and helped the economy bounce back, I am concerned by the limited progress in post-payment verification work. The government knew that its decisions to limit prepayment controls would require significant verification work later. However, neither resources nor plans have been sufficiently adjusted to support this work.
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 interests of being fair to all taxpayers, the government must carry out rigorous verification work. After identifying the payments that went to recipients who were not eligible, the government can then decide how and when it wants to collect those amounts. 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 Deputy Chair: Thank you very much for your statement.
[Translation]
I’d like to welcome the other senators who just joined us.
We will now proceed to questions.
Before proceeding, I wish to inform senators that they have five minutes for the first round and three minutes for the second round. I ask you to be concise, as much as possible, when addressing the witnesses.
I am sure the witnesses will also respond concisely.
[English]
Senator Marshall: Thank you to the witnesses for being here tonight.
Ms. Hogan, in your opening remarks you talked about the $4.6 billion in overpayments found by the auditors and you are suggesting $27.4 billion requires further investigation. So how much did the Canada Revenue Agency, or CRA, and Employment and Social Development Canada find? I am just trying to get a handle on what is exactly in that $210 billion.
I know that you identified overpayments and you identified over $27 billion that needs to be further investigated, but how much have the CRA and the Employment and Social Development Canada found so far?
Ms. Hogan: So how much have they identified as payments made to ineligible recipients?
Well, they fully agree with us on the $4.6 billion in payments to individuals.
Senator Marshall: I was aware.
Ms. Hogan: It is clear that there were double payments or lump sum overpayments, and they are sending letters to follow up with those individuals.
When it comes to the estimate is where they disagree with us, particularly on the estimate of $15.5 billion related to employers. They do not agree with our methodology used to determine that.
Senator Marshall: That is for the wage program, right?
Ms. Hogan: For the wage subsidy program, absolutely. I can point you to the appendices because this is almost six different audits rolled into one report for you. I will point you to the appendices to take a look at the post-payment work. There is some work that they’ve started on the wage subsidy, and they’ve identified small amounts that went to ineligible recipients, but that work is very early on.
Senator Marshall: And they are not big amounts like your $27 billion, right? Are they smaller amounts?
Ms. Hogan: They are smaller amounts, but what I would highlight is they had done about 1,700 or so employers so far. While they found small dollar amounts, it is almost two out of every three files investigated that had an issue. That high level of error rate requires you to really look more into the calculation.
Senator Marshall: I am just trying to make sense of the numbers — is it possible to back into a number that says of the $210 billion, this amount looks to be okay, or $50 billion looks to be okay? No? You cannot say that, can you?
Ms. Hogan: Well, I don’t know. Andrew breathed in; I assume that means he wants to speak. I do not think that was the intent when we approached it. We took the assumption that individuals were eligible unless they did not meet one of the eligibility criteria, so we sampled that way. Andrew, do you want to add to that?
Andrew Hayes, Deputy Auditor General, Office of the Auditor General of Canada: I would only add that the approach that we took was very generous to the taxpayer in the sense that, for example, if there was an income threshold, we looked at it over two years instead of one year.
When we say there is at least $27.4 billion that needs to be further investigated, that is the minimum amount.
Senator Marshall: Fine.
Mr. Hayes: Yes.
Senator Marshall: Okay. That brings me to the post-payment verification. In your report, you are saying that the department intended to audit 4% of the people — of the $3.7 billion in the Employment Insurance Emergency Response Benefit payments. You are saying that is not enough. What percentage are you suggesting?
Are you suggesting 100%?
Ms. Hogan: No, not at all. I do not think following up with 100% of the recipients makes sense. We targeted recipient eligibility criteria. We really focused in on the criteria linked to revenue, since that was typically, for individuals, the biggest criteria. Especially for employers, that revenue decline was a big one.
We identified what I will say are heightened risks. I think they should follow up with all of those where there is heightened risk.
You talked about 4%. To give you a bit of an example, the Employment Insurance program does very rigorous prepayment vetting. There is a lot of work done to ensure that an individual is eligible for Employment Insurance. Then there is still post-payment work done by the department to about the same percentage as we’re seeing here.
In these programs, it was all attestation-based. While there were some prepayment controls, there were very few. That just translates to having to do more work than you would normally do, and we think they should target those who have a heightened risk of being ineligible.
Senator Marshall: But they are strongly pushing back against the $27 billion.
In your audit report, you talk about the complexity of the post-verification. Why do you think they are pushing back so strongly not to be undertaking additional work? When I read it, I had visions of the problems with Phoenix. It seemed like they got into a quagmire and couldn’t get out again.
Why are they pushing back so strongly against doing anything additional?
Ms. Hogan: First off, they are really only pushing back on the $15.5 billion related to the wage subsidy program. They have not communicated any disagreement with us when it comes to the $11 billion or so that we believe they should follow up on the recipient side, the individual side. It is really on the wage subsidy side.
I believe their main concern is the methodology we used. There is very little information at the Canada Revenue Agency on a monthly basis. Very little information was collected on applications; it was all attestation-based.
The way to be eligible is that an employer had to have demonstrated a revenue decline over a four-week period. In the absence of that information, we turned to GST returns. As you may know, GST filers can file monthly, quarterly, annually or not at all because they are exempt. We looked to the monthly filers, who received about 64% of the wage subsidy, and we went through all of them and identified those where, in a given month, there was a concern. We tallied them up. We came to the numbers we came to and then, by analogy, used it for the rest of the population. We audited the businesses that had received over 60% of the wage subsidy in order to come to our estimate.
[Translation]
Senator Gignac: Welcome to our witnesses and thank you for your work. I think it will reassure taxpayers to know that people are watching to see if the money is being well spent.
One of your audit’s goals was to determine if the government’s COVID-19 benefits programs were well-managed, efficient and getting results in terms of optimizing resources.
I was surprised to read your statement saying it was clear the government knew from the beginning of the pandemic that offering a COVID-19 benefit could lead to some people leaving the labour market, because they earned more from the benefit than from working.
I noted you had no recommendations targeting this sector. If the audit focused on optimizing resources and you recognized that certain beneficiaries were better off receiving benefits — which, in fact, represented up to 119% of their previous income —, why not make a recommendation on this point? Is this a practice you’re comfortable with?
Ms. Hogan: Many factors contribute to someone’s decision not to return to the labour market. In our audit, we really emphasized programs and income replacement. I’m aware that other factors contribute to the decision not to return to the labour market, such as health or problems with homelessness. So many situations can contribute to this decision. I think the idea of making a recommendation based solely on income replacement was not necessary.
We also saw the government adjust the subsidy somewhat during the pandemic. In the beginning, there was a certain threshold, and it was known to be an incentive not to return to the labour market, which led to reducing the amounts and number of weeks. The government then recognized what had happened. For us, it was an analysis to inform the future.
I think our recommendations regarding access to information in real time truly represent the right way forward for better management of a future program, like the one implemented during the pandemic, as long as the recommendation is followed, instead of just focusing on a completed program.
Senator Gignac: Thank you. Employers had a lot to say about it. They criticized the program for being too generous in some cases.
[English]
In the 2021 audit on the Canada Emergency Wage Subsidy, or CEWS, program, you noted that the Canada Revenue Agency did not require employees’ social insurance numbers for businesses that applied, which prevented the CRA from properly assessing the impact of the program.
What is the difference? Could you explain what that means? How could the CRA better assess the impact with social insurance numbers?
Ms. Hogan: Absolutely. When we looked at the payments to individuals, we were able to assess, with a lot of information from Statistics Canada, that the Canada Emergency Response Benefit, or CERB, helped reduce poverty and so on.
But when it came to the wage subsidies, the goal of those programs was to maintain that employer-employee relationship and to ensure that individuals who were working with a business were still working with them post-pandemic or that they were rehired or that those businesses survived throughout the pandemic.
Without the information on the employees against which businesses were claiming the wage subsidy, it is impossible to assess whether or not the programs met those objectives because we do not know which individuals were employed beforehand, against which individuals the wage subsidy was received and if they are still employed by those businesses post-pandemic.
Senator Gignac: If I understand correctly, it is hard for you to have any idea of this overlap between the two programs, yes?
Ms. Hogan: I would say it is impossible for the government and for us because that information was not collected.
Senator Gignac: Thank you.
Senator Smith: Thank you for being with us tonight, Auditor General.
The rollout of the COVID-19 vaccine program was a monumental task that required several different government departments and agencies to work in collaboration and communicate effectively. Additionally, the various federal supports during the pandemic relied heavily on the various departments and agencies working collaboratively.
I would like to know whether you believe all of the departments and agencies responsible for rolling out the vaccine program, as well as providing emergency supports, worked well in this regard, or are there areas where there could have been better collaboration?
Ms. Hogan: That’s a tough one. I think we saw a ton of excellent collaboration. It is hard to sit back now and forget what it was like in March 2020.
If you go back and look at the uncertainty and all of the stress that everyone was under — the need to get these programs out, the need to have people stay home to help our health care system, the scramble for who would develop a vaccine first — we saw a lot of very good collaboration and, I would say, a huge focus on service to Canadians while putting aside some of the bureaucracy and red tape.
What I’d love to see going forward for the public service is that continued focus on service to Canadians first, but to bring back some of those needed mechanisms to demonstrate due diligence and prudent use of public funds.
There has to be a middle ground between the way programs were rolled out, designed and administered pre-pandemic, to learn from what was done during the pandemic to improve service delivery post-pandemic.
Senator Smith: Continuing with that thought, and I recognize that because it’s easy to be critical after such a huge undertaking that was put out by the government, but what would be the key learnings — if there are two or three, top three — that come to your mind as to what needs to be improved upon from a management perspective when you’re doing a post-mortem? What would those two or three be, top of mind?
Ms. Hogan: I would point to the sharing of information. The first would be across the federal government, but with provinces and territories. The sharing of health data on so many levels could be improved and needs to be improved. My office made recommendations related to this going as far back as 1999, after H1N1 and SARS. That is a big one.
Senator Smith: That was my follow-up question. In 1999, 2002, 2008 and 2021 — thank you very much; you led us right back into your next answer.
Ms. Hogan: Yes. For me, sharing information across the federal government and, when needed, across different layers of government is definitely something that needs to be ironed out.
Senator Smith: Is that a systemic problem that exists, or was it caused by this major event?
Ms. Hogan: No. That problem existed. We identified this problem following H1N1, following SARS.
Senator Smith: Right.
Ms. Hogan: We are on the third major health crisis in the country. We need to figure that out.
It’s even as simple as across government programs, the sharing of information between Employment Insurance and the Canada Revenue Agency to help facilitate rolling out the CERB program. I think that would be a really big one that I would highlight as needing to be fixed.
The health data information is on so many levels. If they had implemented VaccineConnect better, and if the provinces were able to use that program, there would have been better sharing of information between the provinces and territories on expiry dates. That would have helped minimize the wastage of vaccines. We saw great collaboration with the Public Health Agency and Health Canada, but we needed the provinces and territories.
Senator Smith: Will you make some recommendations to the various departments so they could at least accept what you’re saying as a post-mortem feedback so that they can improve?
Ms. Hogan: We absolutely did make those recommendations in our reports.
Senator Smith: Okay.
Ms. Hogan: Not necessarily these, but if you go back to my report on pandemic preparedness and border control measures, we had that recommendation in there, again, to act on this long-standing, known issue of resolving sharing of health information. As long as they are acted on before the next crisis, this is the time for us to do it, when we’re not all scrambling to react to something and get it fixed.
Senator Smith: Thank you.
Senator Loffreda: Thank you, Ms. Hogan and your team, for being here tonight and for all that you do. Thank you for very insightful and always excellent reports.
I would like to further explore some of your findings from your tenth report on the COVID-19 benefits. You argue that benefit and subsidy amounts paid to ineligible recipients or recipients should be investigated further. You report a total of $32 billion, as we discussed: $4.6 billion in overpayments, and at least $27.4 billion that should be investigated further.
I can understand that the verification of millions of benefit applications is an extensive task for the CRA. You have made recommendations to avoid similar administrative failings in the future. However, the CRA needs a more efficient and proactive plan of action today.
As the Parliamentary Budget Officer reminded us last week, the CRA doesn’t seem it worthy, appropriate or worth the effort to go after an alleged $15 billion in potential overpayments, which I would agree with him is a bit disconcerting. In fact, I would go even further and suggest it’s quite troubling.
What I want to emphasize is billions of taxpayer money and dollars is worth attempting to recover. It is important for Canadians to see that the government is doing all it can to retrieve their hard-earned money.
Do you think it would be a good idea to assemble a special task force at the CRA dedicated to the recovery of these COVID-related overpayments? Do you think it has the resources to undertake such an initiative?
It may also be beyond the scope of your audit, and I understand, but do you think a cost-benefit analysis would be worth it? I feel like the CRA thinks otherwise. Auditors may always find worthy recommendations. You’ve seen so much during the course of your career. I respect that and I want your expertise on this dilemma, which many Canadian taxpayers would like an answer to.
Ms. Hogan: I must admit I don’t really understand the statements made by the commissioner.
In my mind, in order to treat taxpayers fairly, the current legislation — whether it be the Income Tax Act or the Taxpayer Bill of Rights — tells you that every taxpayer should be treated fairly. If an individual or a business receives something they are not entitled to, it should be repaid.
What I’m looking for is that fair treatment for individuals who have already repaid, individuals who rightly received the benefits they received or individuals who — perhaps by an honest mistake — applied for something they’re ineligible for. And then there are likely some who deceived the government and received money when they shouldn’t have. You need to assess it all.
Do I believe a task force is needed? Do I believe they have enough resources? As you said, I did not look into their resourcing around this.
In my mind it was really clear. If at the beginning you knew that you were going to have limited prepayment controls, you needed to do extensive post-payment work. I would have expected the department to have lined up a comprehensive plan and figured out how to have the resources in order to carry out that plan.
About a task force, I think the first step that needs to be taken is identifying whether payments were made to businesses or people who were ineligible. That is really step one. You do need to do some work to get there. Then the decision is made around collection or non-collection.
You asked about a task force on trying to collect. I think that’s really the second step. The first step, for me, is getting the much-needed post-payment work done to just identify ineligible payments first, and then the government can make a decision from that point on.
Senator Loffreda: Part of the task force would be identifying those payments, because they don’t seem to have the resources to do so, right? You would agree that step has to be taken, the second step?
Ms. Hogan: I think that they have resources to carry out some of the work. If you look in our appendix where we looked at the wage subsidy program, what they’re planning to look at is a sizable amount of money and benefits. They do have the resources to do that.
I just think that it should be targeted on areas where there is a heightened risk or a potential demonstration that a business or an individual was ineligible.
These audits take a very long time, especially with businesses. There was very little information collected and, as I mentioned earlier, very little monthly information already available at the Canada Revenue Agency. So what we’re seeing is some of these audits are taking over a year to carry out. You need to start that if you want to identify payments before the clock stops ticking on when you can identify ineligible payments.
[Translation]
Senator Dagenais: My question is on the McKinsey firm issue. The firm was in the background, advising the government on certain COVID files.
In Canada, a contract for 80 years represents a period corresponding to 20 governments. I’m talking about the 81-year contract ending in 2100, signed by the current government. Among the facts we became aware of regarding the millions spent on the McKinsey firm, as strange as it may seem, I don’t see any contractual amounts for advice given to the government during the COVID pandemic.
The next 20 governments leading the country will have their hands tied by this agreement with the McKinsey firm. I find this practice rather strange and irresponsible on the part of politicians. And I don’t want to digress on the subject of the armed forces, which are ill-equipped.
Is it a common and acceptable practice to sign a contract lasting 81 years? How can a government sign such an agreement and commit future governments to this contract? Did the firm give good advice to the government during the COVID pandemic?
Ms. Hogan: I admit that I am not aware of the contract you referred to. It is difficult for me to comment on the clauses of a contract I have not read. Two House of Commons committees asked me to audit the use of service contracts linked to the company you mentioned. The other chamber also held a concurrence vote.
I wrote the clerk to inform her we would be starting an audit. However, we are currently assessing its scope. We could review the clauses and the use of service contracts within the government at that point.
Senator Dagenais: I was in the Senate when there was an auditor general’s study of Senate expenses, and it cost $23 million. I hope you will look into the McKinsey contracts, because the firm was involved in government decisions about COVID-19.
How long could this contract of over $100 million last, and how much will it cost taxpayers? I understand you will be doing a study and I imagine you will provide us with details on this.
With the chair’s permission, I’m going to ask a question that may be relevant to Quebec, the other provinces and territories. Could the poor communication with the provinces regarding the availability of vaccines be responsible for the additional costs that the provinces had to absorb, in addition to the costs that fell under their jurisdiction?
Ms. Hogan: You are talking about the poor communication between the federal and provincial governments.
Senator Dagenais: Yes; this resulted in additional costs at some point being absorbed by the provinces in terms of vaccine distribution and so on.
Ms. Hogan: I cannot look at the provincial costs. My job ended once the federal government distributed the vaccines to the provinces. After that, the provinces managed those costs. The government paid for the vaccines and the delivery of them to the provinces. I also believe that it provided some financial assistance to the provinces, particularly for the storage of the vaccines.
A lot of things were federally funded, but we didn’t really look at which provinces had additional expenditures, because we couldn’t look at provincial expenditures.
Senator Dagenais: I have one last question for you. Thank you for your answers, Ms. Hogan.
To what extent was the unchecked financial assistance that was given to citizens responsible for the labour shortage that has persisted across the country since the pandemic began? It must be understood that people chose not to go to work during the pandemic. Will the government’s generosity have long-term consequences, especially for businesses that are having difficulty finding workers?
Ms. Hogan: That is interesting. As I mentioned to your colleague, there are many reasons why an individual does not return to the labour market.
We found that the wage subsidy went to the businesses most affected by the pandemic, such as restaurants or services. Those most affected, such as women, received the wage subsidy. As for returning to the labour market, there are many things to consider before making that decision.
I can only comment on income. That’s why when you look at wages in Canada, those who earn the least were really able to replace 119% of their income. That’s an incentive to stay out of the labour market, but there are a lot of other things that feed into that decision.
Senator Dagenais: Thank you very much, Ms. Hogan.
[English]
Senator Bovey: It’s wonderful to see you again. I do enjoy your reports and I enjoy your presentations.
One of my questions you probably can’t answer. You’re going to tell me it’s beyond your purview, but it is a reality that I think needs to be on the record.
With the individual payments, are you aware that some provinces clawed back their support for those individuals to the amount that the CERB paid for them?
Ms. Hogan: I’m going to say you’re correct. We didn’t look at what the provinces did. Our work really stops and starts with what the federal government provided to individuals.
Senator Bovey: I think that comes to my point. I really agree that there needs to be more health data sharing. I would hope at some point people can look at the provinces that do claw back revenues for hard hit individuals who desperately needed the money and then they found it was clawed back by the provinces. I know that hit a number of artists, which the CERB was not supposed to hurt them; it was supposed to help them.
My other question: In terms of eligibility checks for the programs for individuals, I think I’m right that the legislation said they had to be complete within 36 months. So 36 months on the date at which the benefits are paid or 72 months if the department or agency has reason to believe the recipients have made false statements — is that doable?
Ms. Hogan: You’re right that the current legislation says that from the point a payment is made to an individual there is 36 months to identify whether or not they were eligible for that payment. That’s extended approximately to 72 months if there was fraud or intent to deceive.
For many payments, if they went out in March of 2020, we’re pretty much there, which is why we would have expected some post-payment verification work to be done sooner and much more rigorously so that you can do that first step of identifying who is eligible or ineligible.
Senator Bovey: Thank you for that. I thought that might be where you were sitting on that.
I think I read that you found that almost 41% of the workers who received the monies were visible minorities, and another 40.5% were from Indigenous groups, compared with 29.9% of those outside these groups.
Have you got any idea of the factors that explain those differences? That struck me as being really interesting, and I wonder if you have any thoughts behind that or uncovered the whys or wherefores of it. Does that lead you to have questions or concerns that we as a committee should be looking into further in terms of service to Canadians and support of Canadians?
Ms. Hogan: You’re pointing to exhibit 10.7 in our report. What it really just points to is that of individuals in the country who identify as Indigenous, a little over 40% of them actually received one of the income replacement subsidies.
I think it speaks to perhaps the industries in which they work, but we didn’t delve that far. When we did look at industries, we saw those most impacted by the pandemic, by shutting down — service industry, entertainment industry were mostly impacted.
So it stands to reason that what was closed down completely, if you worked in that industry, you would have received it, but we didn’t really delve into that granularity through Statistics Canada. They might have some of that information, but we didn’t look at that.
We did look at the government’s Gender-based Analysis Plus, and they had factored in that women are more heavily in the service industry, so they had already analyzed that certain populations, certain demographics would likely receive more payments than others, and what we saw was their analysis was actually almost accurate. It was closely linked.
Senator Bovey: That’s interesting. Thank you. I think those are very good statistics for us to go on in various other sectors of our work, Mr. Chair, because sometimes these gems or these pieces of information can evoke other questions in other aspects of what we have to analyze. So I thank you.
Senator Pate: Thank you all for being here and thank you for your work. Following up on Senator Bovey’s points, last May, the CRA indicated that they were actively pursuing 250,000 individuals to return financial support received through the CERB, through the emergency benefit, and some of those people were low-income people, some of whom had their supports clawed back by provinces and then were actually ejected from the provincial support programs. So they now have CERB debt and are having to reapply to get on social assistance rolls.
The way the benefit was structured, many of those people had no idea they were not eligible, not because the federal government said they weren’t, but because the provinces said they weren’t. And we know that about 3.5 million — as far as we can tell — people who were really in need of benefits did not get anything because they were on assistance but were not working. If they were on assistance and working, they were eligible. I’m curious whether you have any of the breakdown between the economic and social characteristics.
What sparked me to ask you this is that you have correlated the CRA data and Statistics Canada, and presumably there is some information there. How many of the people who owe debts are amongst the lowest-income earners? Obviously, that wouldn’t hit the very lowest income, some of whom I met here who were homeless and still working full-time on minimum wage, which goes to the whole issue of how they are going to be able to pay this back when they do not have two and three jobs anymore and employers have rolled back.
Then, if I can, I will ask a second question, just in case I run out of time. The Canadians for Tax Fairness recently issued a report which states that 37 companies with a tax gap of $100 million or more received the Canada Emergency Wage Subsidy directly and that some $173.5 billion — almost half of the combined gross profit — was actually spent on dividends, share buybacks and acquisitions.
Have you been able to assess that? I know you have indicated there is a huge concern there. When I saw that report, it elevated that concern. Have you had an opportunity to look at those largest corporations and see how they actually utilized the public funds? And I take your point that we need transparency, and then it will be up to a public policy decision whether the government pursues it or not, but it strikes me as some really major differences here in terms of means.
Ms. Hogan: I will see if Andrew Hayes wants to jump in, but I will try to tackle the first one and see how far I can get.
Again, we didn’t look at the linkages between provincial programs and federal programs. It is just not in our domain, and it’s not our right to look at provincial programs. It is really hard to see that, so I can’t really talk about the correlation of data. I think your questions and the previous senator’s questions really speak to the importance of disaggregated data and the need for the government to just start gathering it for a whole myriad of reasons.
I would even highlight the recommendations that we put forward about having real-time monthly income from businesses and from real-time payroll information that would just help inform and better manage another income support program, if needed, and then maybe less reliance on having to make these correlations and data linkages if systems like that were put in place.
To turn to your second question about the wage subsidy and the businesses, the wage subsidy program, when it was designed, a design feature was not to discriminate against a business on its size or location, so every business was eligible.
The question you asked about whether the funds were used as intended is really something that I would expect the Canada Revenue Agency would be looking at when they do post-payment work. First is to determine whether the business was eligible: Did they demonstrate the revenue decline and other criteria? And then were the funds used for salaries? That can only be done if post-payment verification work is done. And right now, in my opinion, there is much too little being done in that domain, and more efforts should be put forward there.
I don’t know, Andrew, if there is something you wanted to add to that.
Mr. Hayes: Just on the question that you raised first about ability of people to pay, our recommendations are really about getting a clear picture on the amounts owed, and, after that, the CRA has been on record about being compassionate in terms of sorting out agreements with taxpayers on how to pay back and schedules and that sort of thing.
That is entirely within their policy right to be able to sort that out. Our main point there was for the government to be transparent about its plans.
Senator Pate: Point taken.
Senator Yussuff: Thank you for being here. This is exhaustive work. I was the president of the Canadian Labour Congress during this crisis, and it wasn’t pleasant. There was nothing pleasant about it. It was truly a crisis and a monumental task to figure out how you keep this country together when nobody had a clue as to what we were doing, much less how we were going to do it.
I will start with the first question. There were a lot of things that were done properly. I think evidence has shown that we have had one of the fastest recoveries in history from the crisis. Did that factor in any way in regard to the myriad of spending granted overall? I mean, that is there. Certainly, others have written about it.
We have never seen a shutdown of a country and a recovery of a country in this short of a period. Was that a consideration in your audit?
Ms. Hogan: Well, we did look at that in the COVID benefit audit to see whether or not the programs met their objectives. There were many objectives. One was getting money out quickly to individuals, which they absolutely did. Another was to limit income inequalities and poverty. We see through the data — and we’ve provided analysis on that — that that was, as well, effective.
Second, we looked at whether the measures — well, actually, we looked at the economy rebounding, and, as you say, the economy rebounded rather quickly and, we highlight, even faster than the economic crisis.
Then we looked at whether the measures and the income support matched the severity of the health restrictions. As the health restrictions are higher, you would expect more people to receive benefits, and as they lessen, you would expect fewer people to receive benefits as they return to the labour market. What we saw there was that for CERB it was rather effective and rather matched. It is called a “stringency index” that we looked at in our report.
When it came to the Canada Recovery Benefit, or CRB, that is where we saw the disincentive really spike up, where fewer people returned to the market as measures lessened because they were able to replace more than their annual income by remaining on the benefits.
Senator Yussuff: But it would be fair to say that a lot of those people — because the data you provided here actually points that out — were working in the service sector, where they were interacting with individuals who could infect them in a way that they had no control over.
I am serving you a drink. You wear a mask or you don’t wear a mask. I’m subjected to that. So my working environment I had no control over versus if I was working in an office or on Zoom, then I had control of my environment.
Was that also a consideration in how you analyzed the data?
Ms. Hogan: As I mentioned previously in other responses, there are so many factors that contribute to an individual making a decision about whether or not to return to the labour market, and income is just one of those.
We were tasked with looking at the programs to determine whether they met eligibility criteria. I cannot — and did not — have the means to look at individual circumstances. There may be health reasons. There may be housing insecurity reasons. There are a myriad of reasons why an individual may make a choice not to return to the workforce, and we didn’t address that. We really stuck to whether the programs met their intended objectives.
Senator Yussuff: Or I’m a single mother and I don’t have sick payments when I get sick, so I cannot afford to get COVID and stay at home because ultimately my family is going to be devastated.
Ms. Hogan: Absolutely. I think we could come up with a lot of examples, and I think Andrew would like to add to the dialogue, if possible.
Mr. Hayes: Yes, I might add that one of the purposes of some of these benefit programs was to have people stay at home also to protect our health care system. So there were other reasons for these benefits, and that is an important factor.
Senator Yussuff: I also notice on the employer subsidy, one of the metrics you wanted to look at but couldn’t — because the social insurance number will tell you if you had X number of people, we could identify who they are and ultimately if you should have them on your payroll and if you were using the subsidy to pay their wages. Is there a restriction because of privacy laws that you would not know, or did the government have that information? Would they have asked the employer to provide them with that information if they were applying for the subsidy?
Ms. Hogan: Well, the government did not ask employers to provide that information when they made the application.
An employer makes an application and says, “My business revenue for this four-week period has declined by more than X per cent, so I meet the criteria. I have Y number of employees and I am going to claim the wage subsidy for all of them based on my payroll.”
They could have provided the social insurance number. The Canada Revenue Agency has everyone’s social insurance number, so I don’t see the privacy there. I mean, it is not being shared. It was really to demonstrate eligibility. But that would have allowed the government, as well as us, to determine whether or not one of the objectives of the program — to maintain the employee/employer relationship — was a success. We could not do that because we did not know against which employees the wage subsidy was being received. Who was the ultimate recipient? Were they still employed by those businesses? It was impossible to determine.
[Translation]
The Deputy Chair: I will ask a question. From the beginning, when the minister appeared before our committee, I’ve thought it was indecent that some companies would use the assistance program for employers intended for retaining employees and then, upon receiving those benefits, pay dividends to their shareholders or bonuses to executives. I remember Air Canada, but because of public pressure, the executives refused their bonus.
I didn’t understand why the eligibility rules were revised in early September without banning this practice. Are we in a position to know — because these are public companies — how much of the $15.5 billion received by the companies was diverted to bonuses paid to senior executives or dividends paid to shareholders?
Ms. Hogan: Concerning the companies that received the wage subsidy, this information was public. The Canada Revenue Agency had a website. I don’t know if it’s still available, but that search could be done.
As for the use of money for purposes other than individuals’ wages, in my opinion, that requires a Canada Revenue Agency investigation. Post-payment verifications need to be done for me to be able to answer this question.
The Deputy Chair: In my mind, it’s clear that, if you get a subsidy for wages, we’re talking about communicating vessels. Money that has enabled companies to pay dividends is being freed up. There’s even a company — I can’t remember its name — that paid out a 7% dividend increase. It’s very indecent to take public funds and, yes, pay wages, but also save and pay dividends. That’s pretty indecent.
Ms. Hogan: I know that other countries have implemented certain criteria, but that was not a decision that our government made here during the program’s design.
The Deputy Chair: Thank you very much. We’ll move on to the second round. We’ve been so efficient that I’m going to be generous and allow you four minutes each for questions.
[English]
Senator Marshall: Thank you very much, Ms. Hogan, for your responses so far.
You probably do not remember James Macdonell, the Auditor General in the mid-’70s who famously said that government had lost or was close to losing control of the public purse.
I realize that the audits we’re discussing here tonight are focused on certain programs and not government as a whole. But it is. It does concern billions of dollars spent. In response to a question from Senator Loffreda, you were talking about fairness to individuals and that if individuals were not entitled to a benefit, the government should go back and recoup. The government is actually reluctant to implement robust post-payment verifications.
In my opinion, that is undermining the integrity of the public purse. They should be out there trying to recoup millions, maybe billions of dollars. Can you just comment on that, on maintaining the integrity of the public purse?
Ms. Hogan: I would add a few things.
When I talk about treating taxpayers fairly, a taxpayer can be an individual or a business. Every taxpayer should be treated fairly, regardless of whether they are a person or a corporation.
I think it maintains the integrity of the tax system, which is aligned to the public purse, but it is more about the integrity of the tax system, right? There are certain rules, laws. There were eligibility criteria here that needed to be met in order to demonstrate that an individual or a business was eligible.
Following up on those and enforcing those maintains the integrity of Canada’s tax system. Our tax system is a voluntary one. We want to hope that every Canadian is going to be “Canadian” and be honest. But to maintain the integrity of the tax system, there are checks and balances that are needed, so I believe that a lot more work needs to be done to identify ineligible payments.
Senator Marshall: A significant portion of the money that was used to pay for the COVID programs is borrowed money. And taxpayers are on the hook to repay that money.
For me, it seems unfair that individuals or taxpayers who received only what they are entitled to receive are paying a significant amount of money in taxes for individuals who are receiving benefits to which they are not entitled and which the government has no intention of pursuing.
I would like for you just to elaborate on the fairness of our tax system and the fairness of what is happening with regard to the COVID programs and the government’s reluctance to pursue the collection of millions if not billions of dollars.
Ms. Hogan: Well, I said it in my recommendations. I would highlight that the CRA has disagreed with us. Part of that disagreement is about the extent of work that needs to be done.
I very firmly believe that the first step of identifying ineligible payments to individuals and businesses needs to be taken.
The next step of collection or not, a compassionate approach, whatever the government decides is up to them. Then it is about transparency to Canadians.
There are Canadians who have reimbursed already, and in fairness to them, you should follow up to individuals who are ineligible.
There are so many measures that need to be weighed. That is why I think extensive work is needed. I firmly support the decision that limited prepayment controls were needed in a time of crisis. That is an international best practice. But it comes with the flip side of rigorous and extensive post-payment work. That is what we’re just not seeing right now, which is why it needs to happen.
Senator Marshall: My last question: What are the options open to you now with regard to this issue? You have recommended a robust post-payment program. The Canada Revenue Agency and the government say they are not going to do it. What happens now? Does it just get dropped?
We have our Senate committee meetings, the House of Commons has theirs, and that’s it? We wrap it up? What recourse is available to you?
Ms. Hogan: I have no ability to compel. I just hope that senators and parliamentarians will encourage the Canada Revenue Agency to do the work that is needed.
[Translation]
Senator Gignac: As I said in the beginning, I am a senator from Quebec. I live in the Quebec City area. We were disappointed when Medicago announced that it was closing its doors. Yet, the Canadian government invested $173 million in this company at the beginning of the pandemic to help build a plant.
I understand that this is not one of the programs you analyzed, but I am interested in hearing your opinion. Health Canada approved the vaccine, but it was very well known, apparently, even at the time, that if there was any connection between the ownership and a tobacco company — in this case, Philip Morris — it would not be approved by the World Health Organization.
Yet the government went ahead and invested $173 million in this. But, as far as I’m concerned, it’s still related to the COVID pandemic. Have you looked into that or do you have an opinion on it?
Ms. Hogan: No, we have not reviewed the Medicago agreement. We reviewed the advance purchase agreement for vaccines as part of our vaccine audit. Medicago was one of seven companies with which the government had signed an advance purchase agreement.
On any other issue regarding the possibility of manufacturing vaccines in Canada, it is up to politicians to decide if that is something Canada wants to do. The need for this advance purchase agreement was due to the fact that Canada could not manufacture its own vaccine for COVID-19. I haven’t looked into the matter, but it would be of interest.
Senator Gignac: Canada producing its own vaccines was a laudable goal. However, the World Health Organization’s rules were well known — if a manufacturer had ties to a tobacco company, the vaccine could not be approved for use.
I would like to know if you had the full cooperation of the Canada Revenue Agency and Employment and Social Development Canada during your audit. I have sat on a number of boards of directors and I know that we always want to know if the auditors had full cooperation.
This time, the committee is not meeting in camera, but we are still interested in hearing your opinion.
Ms. Hogan: I would tell you the truth even if we were meeting in camera. Yes, we had very good cooperation from all the departments. The Public Health Agency of Canada and Health Canada spent a lot of time with us. This is not the first audit we have done during the pandemic. Despite their onerous task, they took the time to provide us with information. We have no concerns in that regard.
Senator Gignac: Thank you. It will be an example to follow for the Office of the Parliamentary Budget Officer to get such good cooperation from departments.
The Deputy Chair: Yes.
[English]
Senator Smith: Following up on Senator Gignac’s questions, sourcing vaccines during the pandemic proved to be difficult. Global supply chains for vaccines, but also protective equipment, came under heavy stress. This raised a lot of concerns about our domestic capacity to respond to future health issues.
Moving forward, is there a plan in place to prepare for the next time? If so, what type of implications would you have? You do a lot of post-audit reviews. Will they bring you into the play of making up or participating in the plan to prepare for the next major health issue? Is that a realistic expectation, or is it out of your purview of responsibility?
Ms. Hogan: While it is not up to me to help design policy or comment on policy decisions, I’m always happy to offer advice on controls, prudent use of public funds and being more effective and efficient. It is hard to help design that and then audit it. We are always available to have conversations with the public service to help to improve service delivery.
Senator Smith: I do realize that, so that we do not go backwards into some form of an issue. But with the experience that you have and have developed during an extremely tumultuous time, I would think that the learnings you got out of this could reinforce and benefit policy development by government departments. I know it sounds strange. I know that your role is doing an audit and post-work.
With what you have learned — and I know that probably people within government departments have had massive learning — who is putting together an outline of what has to be done the next time? The next time you will be involved with the audit, with your knowledge now, I would think that could be very beneficial to departments and their planning, even though it is not necessarily your mandate.
Ms. Hogan: The first comment I would make is about addressing our recommendations. Our recommendations in the series of COVID audits that we used were intended to be forward-looking — not to say, “Well, you should have gone back and done this differently,” but to help the country prepare going forward.
A lot of recommendations centred around a better pandemic preparedness plan, testing out that plan, ironing out the agreements between provinces and territories to share health data, getting the IT systems in place to facilitate the sharing of that data, agreeing on commonalities to be shared, the real-time payroll and salary information. Those are all measures to help improve the next response to a crisis. Also, some of them will benefit regular delivery of programs and services to Canadians.
With CERB and CEWS, we came in early on, in the early parts of the pandemic in early 2021, looked at the design of those two programs and made some recommendations. Most of them were not acted upon in that time frame but will hopefully inform the next design of programs. That is a way that we can come in early on to help look at design and implementation, as long as there is a willingness to adjust and improve the program on the fly.
Senator Smith: Initially, I asked you the question on the systematic issue of information sharing. The thought that I just proposed was based on if there is an issue of information sharing as a systematic issue across federal departments, it could be that — and I know your role is completely different — you can have the impact of being of great assistance to that issue of making sure that you outline what needs to be fixed next time and say, “Hey, if we go back to the first part, did you actually have that process in place in terms of that information flow?” Because it is critical. When you are trying to run some form of a business or a department, it would appear that it is important to have that concept of whether you have the mentality or the systems in place so that you can effect that sharing or passage of information that is key to your planning process. I hope I’m making sense.
Ms. Hogan: Yes. I am supposed to give a quick answer.
What I would say is that we have put a team together that is going to spend a lot of time following up on recommendations and measures from our past audits. I am hoping that will help to see some action. But I encourage committees in both the Senate and the House to keep encouraging action because far too many recommendations are being repeated that really shouldn’t be.
Senator Loffreda: There is so much to discuss. Your recommendations are well read and well considered.
I would like to get back to something that is very important, namely, the fairness of the tax system.
In your report, you remind us that according to the legislation, for most COVID-19 benefit programs, verifications of eligibility must be completed within 36 months — that was clear — 36 months after the benefits have been paid and that if either the department or the agency suspects that recipients misrepresented the information — in other words, there was a fraud — then the time frame could be extended to 72 months.
Do you believe we should change the legislation that imposes a 36-to-72-month time frame of eligibility to verify benefits, given the nature, extent and timing of your findings? It would be a real shame if this limited time frame were used by the CRA or the department as an excuse for the lack of rigour that is necessary to do such an immense task.
You mentioned that right now you are not seeing that rigour that would be required. Maybe it is the time frame. We’re here to propose legislation. Is that a recommendation you would make?
Ms. Hogan: That really is a policy question to decide whether or not to change what is in existing legislation.
Senator Loffreda: But do you feel the extended time would change their perspective and give them better results in the long run?
Ms. Hogan: What I can offer up is that the Canada Revenue Agency was very busy during the pandemic in delivering many programs and running the usual tax work and investigations that they do.
I think that’s a question between the policy-makers and the commissioner at the Canada Revenue Agency if they believe they need more time. I hope that if they did go down that route, they would then increase the post-payment verification work that they plan on doing.
Senator Loffreda: Thank you.
Senator Yussuff: Let me again thank you and your team. I know it’s not the easiest thing to tell people things they don’t want to hear. It’s a challenge, but this was a massive undertaking, and what it tells us is we can do better. I’m hoping we will do better. The fact that we had the wherewithal to do what we did to get the country out of crisis was an incredible success to a large extent, but I think we could do better.
I thought that in choosing another program, there was an option for the government — I thought it was in the legislation or regulation — that they could audit a company just to verify that what they had claimed in regard to revenues from the government or support from the government was actually substantiated or spot-audited by the CRA. Am I wrong in remembering whether that was there?
Ms. Hogan: I’d hate to put Mélanie on the spot. I’m going to turn to her and see if she has something to offer. I do think the time frame for businesses is different than for individuals. That much I know. Mélanie will know the numbers.
Mélanie Cabana, Principal, Office of the Auditor General of Canada: You’re correct; the CRA can go and audit businesses to see if they were eligible or not. The timing differs depending on the type of business, but it’s between 36 and 48 months.
Senator Yussuff: I guess this is the integrity of a system with people collecting money to verify that they weren’t committing fraud. If we look at the volume of the people who got the CERB, to a large extent, a lot of them were low-income citizens in this country. I’m not trying to excuse anyone or justify their behaviour, but people who were struggling on the margins for the first time seemed to have gotten a slight leg up in their life. It’s quite possible they did, but not with an intention to commit fraud. The fact is that it led them to collect benefits they might not have been entitled to. As a society, I think we have done a terrible job trying to lift people out of poverty. There is a significant element there.
I guess it would be fair to say, when you look at the numbers, that this is a real possibility. Now, I’m not justifying whether it was right or wrong; people have to make that decision. But you’re right, we need to know: Did this happen? Then you have to decide whether you want to go after them because the cost of doing so might be far too great for the country versus what we’re going to get out of it.
Ms. Hogan: I would agree with you that at the beginning of the pandemic there was a lot of confusion, and we saw that play out in the first few months, where if an individual was self-employed, they were uncertain if it was gross income or net income that needed to exceed $5,000. There was a need for clarity. That’s why I think some people may have applied and honestly made a mistake. They thought they were eligible. I think we even saw where they might have applied through both Service Canada and the Canada Revenue Agency. There was a lot of uncertainty.
That’s why I do believe the government needs to take that two-pronged approach. The first is to identify those who are ineligible and then to make the decision. For compassionate reasons, there could be a decision by the government not to follow up with certain individuals or businesses, but that is only a decision you can make once you’ve identified who is ineligible for the payments they received.
Senator Yussuff: Thank you kindly. Thank you so much for all the hard work you do on behalf of Canadians.
Ms. Hogan: Thank you.
Senator Pate: Thank you again. I’ve heard very clearly your comments about the policy decisions not being yours. I don’t know if the process is still the same.
When I was in civil society, if there was an area that we may have had expertise, oftentimes the audit teams from the Office of the Auditor General would come and meet with groups to get ideas about different ways to get at information. That really was policy-driven. When I was there, it was around what the Correctional Service Canada was doing, for instance. Is that process still a part of it?
Out of that come what I would think of as obvious policy ideas maybe is the way to put it, or suggestions or areas that the government might wish to explore. I may have missed it. If I missed it in here, my apologies, because I was reading through quickly.
When I think about this in addition to what colleagues have said and what I asked earlier, the CRA was able to roll this out because of the foresight of a small group of bureaucrats 20 years ago — I’m not sure if it’s exactly 20 years ago, but some time ago — who pushed for things to be online. Every other system was too antiquated, and they couldn’t roll it out.
Federal-provincial-territorial information sharing has been a huge issue for a long time, and it strikes me there may be some policy areas.
When it comes to businesses and people who have fewer resources, we know that every loophole will be taken advantage of by the big corporations that have a phalanx of lawyers and lobbyists who can influence politicians. Yet the individual who may have inadvertently thought, “Oh, this is great; I can get this and it will help me get a bed for the kids and get some good food this month, get the braces on,” whatever it is, but feeling they were legitimately entitled to it — it strikes me those are policy implications that don’t require you to recommend it. I’m wondering if there is any room to do that in your position.
The reason I’m asking that is you were talking about being ready for the next crisis. It strikes me that’s one of the ways to be ready — to fully understand the policy implications, even if you’re not recommending certain areas.
I’m just curious as to whether the next step for you could be putting together suggestions of the plans that might be a better way to organize if there’s another crisis like this.
Mr. Hayes: I might start with the beginning of your question.
In terms of our audit processes, it is common for us to engage with the communities and specialists, experts in the areas that we are considering for audit. I wouldn’t say that it happens universally. In some cases, when we have an audit that has to be done very quickly, we deal with the consultation in a different way. It is part of our regular process to have advisers, as we call them. We choose those advisers to try to get a full picture of the area that we’re looking at.
In terms of the options that we can suggest for the future, I think one of the things I would point to you is that we’ve made it a major consideration for all of our audit work to focus in on Gender-based Analysis Plus as well as the Sustainable Development Goals because those are very broad and bring in a lot of considerations from the economic, social and environmental intersections.
What we can do as we are going through and making recommendations in our report is to identify areas of gaps. It sometimes comes close to the policy line, but we try very hard not to cross that line. However, we do identify areas that can be improved, and we are always open with the departments to discuss how success can be achieved in responding to our recommendations.
Senator Pate: Thank you.
Senator Bovey: My questions were brought forward by my colleague, so I’m going to say, again, thank you. I found this very interesting. I really do appreciate the time you put into these audits and the 360-degree care that you give to them. I’m glad you approach this with caution because I know how many people were below the margins. I was one who was getting calls from people in the middle of the night wondering about committing suicide, and being able to say they get a cheque on this was amazing. That human dimension doesn’t feature in the numbers.
I do have one little question, though. With the business program and your comment that they didn’t collect the social insurance numbers of the employees, surely in the next couple of years, as people’s income tax comes in and the T4s are there, we’ll be able to get a sense of rough percentages of people who are still working for the same company or not. The way businesses have to report employee numbers will surely give a sense of whether the company is about the same size or larger or whatever.
I know it won’t be a specific audit, but surely there is one way that we will be able to get some information a year or two down the road from now.
Ms. Hogan: You’re right. When employers file their T4 summaries, they have all that information. Yes, there will be the ability to generate that. Again, that is information that needs to be gathered and assessed during the post-payment audit. You have to do the post-payment audit in order to be able to get to that step.
The one comment I might add is when we did look at whether or not certain businesses survived the pandemic, with a lot of data gathered by Statistics Canada, what we found is that some of the businesses did, and the business level is the same or higher, but it’s new businesses. Some of these businesses that received wage subsidies may not have made it through the pandemic and still be around.
Senator Bovey: I am reading that some of our downtowns are beginning to recover. I think the headline said, “Go slowly.” Thank you.
[Translation]
Senator Dagenais: Thank you, Ms. Hogan. First off, I’m glad to hear that you’ve had good cooperation from the departments, as the budget officer told us last week that he was having trouble, that some departments were refusing to share information with him on the basis of confidentiality. I hope that won’t happen to you.
That being said, I have a very simple question. Is the Canada Revenue Agency properly equipped and resourced to conduct the investigations and audits that will be required in light of the shortcomings you have raised? Does the agency have the ability to recover the millions to which some taxpayers were not entitled?
I’d like to add that what concerns me about the revenue agency is that it will be administering the dental plan. I hope you do an audit of the dental plan because you will have a lot of fun. The agency is already having a hard time recovering the money, so does it have the means and is it equipped to do that? Is it possible that it simply cannot do it?
Ms. Hogan: With respect to your first comment, we have very different powers and mandate than the Parliamentary Budget Officer. Our office has access to a lot of information to which many other government actors do not have access, and that is important to mention. However, yes, we have very good collaboration with all departments.
With respect to the Canada Revenue Agency’s resources, we really haven’t looked at that aspect. However, I can tell you that, if you look at the post-payment verifications the agency is doing, there’s a lot of effort that goes into that, so it’s definitely going to take resources. In an appearance before the House of Commons, the commissioner mentioned that he had enough resources, but I want to come back to the fact that I don’t think the efforts are rigorous enough.
At the outset, when the decision was made to limit pre-payment controls, I expected that a request or analysis would have been made for all the resources needed to conduct rigorous post-payment verifications.
Senator Dagenais: That’s a lot of effort for little result.
Ms. Hogan: Right now, if we look at the verifications that the Canada Revenue Agency has done, we see they have identified some payments, but the rate of errors or problem cases is very high. Ineligible payments were found in about two out of three files reviewed. Even though there were very few and it’s a very small amount of money, it’s still a very high margin of error that requires that a lot more effort be expended to carry out verifications of other businesses.
Senator Dagenais: Thank you very much, Ms. Hogan.
The Deputy Chair: I have a question about fairness. Is it possible to ensure that the Canada Revenue Agency makes the same effort with individuals as it does with businesses to recover overpayments?
Ms. Hogan: Are you asking me if I can analyze that it has —
The Deputy Chair: Are you able to evaluate that?
Ms. Hogan: I don’t know if we did that. I will ask my colleague Ms. Cabana to respond.
Ms. Cabana: We did not look at whether there was fairness between payments to businesses and individuals. We focused on the plans and whether they were rigorous enough to recover potential overpayments.
The Deputy Chair: I have another question for you, and it’s one that concerns us a lot. I think that the government has a responsibility, which involves the values of solidarity and fairness, to ensure that the most disadvantaged and the most vulnerable people have access to the various assistance programs. We know that between 10% and 12% of Canadians do not file their income tax returns. The programs we deploy, generally, require that we be able to refer to tax returns to distribute money to the most disadvantaged.
When you think about current programs, but also potentially about a future pandemic, do you have any recommendations for reducing that huge percentage? It’s often the people who are most in need, like the homeless or others, who don’t get anything. There is a program to help some volunteer organizations, but the government really needs to prioritize decreasing that huge percentage of taxpayers who don’t file income tax returns.
Ms. Hogan: The recommendations that were made in that audit were about the need to get pay information in real time. These are people who are working, and that would ensure that those who are in the workforce are filing a tax return.
A lot of benefits currently available in this country are tied to a tax return, and the government is encouraging taxpayers to file to qualify for benefits.
I think that recommendation is really the important one. The Canada Revenue Agency has already taken steps to have the possibility to get a real pay system. It mentioned that this takes a lot of effort, but that it’s something it is undertaking and considering.
The Deputy Chair: These people do not have a pay. Having the coordinates in real time would solve one problem, but not the problem of the very poor.
Senator Gignac: The former governor of the Bank of Canada Stephen Poloz told us that you can’t really blame a firefighter for using too much water to put out a fire. In this case, we’re talking about billions of dollars, which is a lot, but in the context of the program, it’s understandable that there may have been some overpayment.
You have contacts internationally, and other countries have done different things. I understand it’s not necessarily in the scope of the report, but have you considered other methods, with your counterparts in other countries — because each country did different things, but everyone was dealing with the pandemic?
I understand that Canada did much better than other countries and did so faster, but are there things that could be followed up on, so that we don’t make mistakes in the future — things that you intend to address in an annual conference soon? Are there any plans to learn about other countries’ best business practices through your counterparts?
Ms. Hogan: Yes, I often talk with many of my counterparts. We’ve seen in the U.K. that there’s a real-time system and the government has had the possibility to adjust programs.
Some countries have put restrictions on certain programs. We look at what other countries are doing, but the decision and approach taken is a prerogative of each government.
In the United States, the Government Accountability Office — which is the equivalent of my office in the United States — recently submitted a report on its programs related to COVID-19, and there were a lot of payments made to ineligible people.
The same problems are occurring in different countries around the world, but they are less prevalent in countries that have a real-time information system. For that reason, this is a key recommendation that would serve us well should another crisis occur in the future.
Senator Gignac: Thank you.
The Deputy Chair: Do the senators have any other questions?
Senator Dagenais: I would like to ask another question.
The government said that urgent action was needed; perhaps that is why mistakes were made, but along the way, could they not have been corrected, as it still lasted two years? I imagine that, after a year and a half, the situation must have been less urgent. Wouldn’t it have been possible to correct the situation at that time?
Ms. Hogan: Your comment is exactly in line with one of my comments. I understand very well that, at the beginning of the pandemic, there was a lot of uncertainty and urgency to deploy these programs, to design them and implement them very quickly.
I would have liked to have seen adjustments to the wage subsidy programs. The program has been extended a number of times. I released a report in 2021 on this program and I would have hoped that the government would have put more controls in place or asked for more information from taxpayers when the chaos period was over and it was time to provide a little more information. However, that decision was not made and that is why post-payment verifications are important.
Senator Dagenais: Thank you very much, Ms. Hogan.
[English]
Senator Loffreda: I was just reading, so maybe to elaborate a little bit on it, we are looking at the COVID-19 restrictions, the payments that were made. From May 2021 to July 2021, the stringency index fell by 44% — I’m looking at some graphs here — while the number of benefit recipients decreased by only 17%. This showed that individuals did not return to work. I’m looking at exhibit 10.8 of the report in 2020 and early 2021, variations in the number of beneficiaries of the CERB and the CRB, which were fairly consistent with changes in the stringency index.
I want to know your expertise in a sense, because we have shortages. We have inflation. Inflation is always excess liquidity and a lack of resources. We have a little bit of both at this point because the savings rate during COVID spiked up, the lockdowns and what have you, and the scarce resources. Many small businesses can’t find workers.
I know sometimes it’s out of policy and it’s not within your range, but I know that, as an auditor, you see a global perspective and you see so many numbers and policies that your recommendations are much appreciated by myself and my colleagues, I am certain.
What factors may explain that recipients did not return to the labour market as restrictions were lifted? What are some of those factors? Knowing the factors, perhaps we can correct some of those issues.
Ms. Hogan: The graphs you’re talking about are looking at whether or not the income replacement was a disincentive to returning to the workforce.
Senator Loffreda: Yes, exactly.
Ms. Hogan: What we saw is that that’s what happened in, really, the lower income brackets. If you look at the wages being split into a quintile, in five different buckets, that lowest income bracket could replace their income by staying on the Canada Recovery Benefit to the tune of 119%. That is just one element.
The health restrictions — there may have been many individuals who had compromised health or individuals in their homes and they didn’t want to return.
There might have been issues around child care or education. There are so many factors, which is why we couldn’t look at all of those elements. We could just focus in on the programs which were to replace income and encourage individuals to stay home and stay safe.
It is an issue that should be studied more broadly, but our audit focused on that one component, which was the income replacement component.
Senator Loffreda: Thank you.
[Translation]
The Deputy Chair: Ms. Hogan, I want to thank you and your team very much for taking the time to appear before the committee. It is always greatly appreciated by all senators. It really gives us a very relevant perspective on the financial issues we are concerned about. We hope to see you again soon.
I would also like to thank all of my colleagues for their cooperation; we have been very good about keeping to our rules on the time allocated to each of us.
I would also like to inform you that our next meeting will be on Tuesday, March 7, 2023, at 9:00 a.m. In the meantime, rest well during the break and come back refreshed.
(The committee adjourned.)