1989 Report of the Auditor General of Canada

Main Points

24.1 The Unemployment Insurance Program has evolved over the years into a compulsory and contributory socio-economic program as well as an insurance program. However the regular benefits paid relating to the insurance objectives and to the socio-economic aspects are not subject to separate disclosure to Parliament (paragraphs 24.12 to 24.17).

24.2 The Commission continues to detect a large number of overpayment cases each year. These represent 12 percent of all claims for benefits. Until recently, few initiatives had been undertaken for purposes of deterrence or prevention (24.26 to 24.30).

24.3 Because detection of infractions is late, penalties are weak, and overpayments are not recovered from money owed to claimants by other federal programs, there are few effective deterrents (24.31 to 24.41).

24.4 A lack of indicators to assess the performance, speed, and quality of counselling services and their effectiveness makes them difficult to manage (24.66 to 24.80).

24.5 Potential cost savings could be achieved by further reducing general administration and support services costs chargeable to the UI Account (24.84 to 24.92).

Introduction and Audit Scope

24.6 The Unemployment Insurance (UI) Program is a social insurance program intended to protect workers in Canada from loss of employment income. It provides temporary income support to unemployed workers while they seek employment or if they are unable to work because of sickness, disability, pregnancy or adoption of children.

24.7 In 1988, over 13 million workers and some 1.1 million employers contributed $11.8 billion to the Unemployment Insurance Account, in addition to the $2.7 billion contributed by the government. Approximately $10.8 billion in UI benefits were paid to nearly three million beneficiaries. Total administration costs charged to the UI Account amounted to $974 million (See Exhibit 24.4).

(Exhibit not available)

24.8 The Canada Employment and Immigration Commission administers the Unemployment Insurance Act, 1971. The Commission is highly decentralized, with some 470 Canada Employment Centres (CECs), 187 itinerant service units and employment offices in 100 post-secondary institutions, providing services in employment and unemployment insurance. National headquarters and a regional office in each province co-ordinate and support the activities of the CECs.

24.9 This chapter represents the second year of our value-for-money audit of the Unemployment Insurance Account. In our 1988 Report, Chapter 18, we reported the results of our audit on the following activities:

• UI claims processing;
• administration of the Records of Employment;
• placement services; and
• integration of employment and unemployment insurance services.

24.10 This year's chapter focusses on four activities, namely:

• investigation and control services;
• labour market information;
• counselling services; and
• general administration and support services.

24.11 The main objective of the audit was to determine whether these activities had been managed with due regard for economy and efficiency and whether the UI Act and its regulations had been complied with.

Information for Parliament

Benefits paid for insurance are not separately disclosed from those paid for socio-economic purposes

24.12 The primary purpose of the UI Program is to insure contributors against loss of income for a temporary period of unemployment, during which the claimant must actively seek employment and be available for work.

24.13 The UI Program has evolved over the years into a compulsory and contributory socio-economic program as well as an insurance program. Certain benefits such as those relating to maternity, adoption, illness, training, job creation, and fishing and those pertaining to the regional extended phase are often associated with the socio-economic aspects of the Program. The costs of these benefits are disclosed separately under current legislation, in the Commission's annual report and in Part III of the Main Estimates.

24.14 Much has been said or written about the use of the UI Program to meet socio-economic objectives other than the original insurance objective.

24.15 For example, since the 1971 unemployment insurance reform, seasonal workers receive the same protection as other contributors. These persons must meet the same conditions for eligibility as other claimants and must therefore actively seek "suitable employment" for a "reasonable period" following their loss of work. They must then seek and/or accept another job for which they are qualified, even if the job offers a lower rate of pay. According to CEIC data, benefits paid to seasonal workers are becoming an important part of the total regular benefits paid (30 to 40 percent or nearly $3.6 billion). These are not disclosed separately to Parliament.

24.16 We acknowledge that there is some difficulty in identifying the purpose of a benefit payment, and thus, in distinguishing between the portions related to insurance and to socio-economic aspects of the UI Program. However, separate disclosure of regular benefits paid to various groups of recipients is essential for those financing the program and for sound decision-making by regulators, legislators and parliamentarians.

24.17 Regular benefits paid should be the subject of separate disclosure to Parliament, indicating whether they are related to the insurance or the socio-economic objectives.

Commission's Comment: We disagree with this recommendation. Full disclosure is already made to Parliament on the various categories of benefits provided under the UI Act. The Act makes no distinction between benefits paid on the basis of insurance versus social objectives, nor does the Act distinguish between seasonal and continuous employment (and workers).

All UI benefits paid are based on the insurance aspect of the program in that they compensate for a loss of income from employment. It is recognized that UI benefits also have socio-economic effects which are inextricably interwoven with the insurance aspects. The Commission believes that it is not possible to objectively separate these aspects.

Investigation and Control Services

24.18 The Unemployment Insurance Act specifies the criteria for continuing eligibility for regular benefits: claimants must be available for work and must show proof that they are actively seeking employment. Moreover, they must declare all income earned during their benefit period.

24.19 The mandate of Investigation and Control Services (ICS) is to prevent, deter, and detect claim abuses and fraud in programs and services administered under the Unemployment Insurance Act and Regulations. It plays a vital role in the prevention and detection of inappropriate payments by ensuring that benefits are paid only to eligible recipients.

24.20 ICS carried out over one million investigations in 1988-89. From 401,299 investigations that resulted in an exclusion/disqualification, 352,841 cases of overpayment were identified -- 12 percent of the three million claims received. Of these, 173,065 cases involved intentional misrepresentation for which administrative penalties were imposed. Identified overpayments totalled $135 million and penalties imposed amounted to $26 million. Exhibit 24.1 shows the results for the last five years. Operating costs for these services totalled $40 million and involved 950 person-years for 1988-89.

(Exhibit not available)

24.21 In the pursuit of its mandate, ICS directs its operations nationally, regionally, and locally. National headquarters is responsible for program, policy and procedures, and for research and development. The regions review and supervise activities related to investigation and control while providing operational guidance at the local level. The CEC is responsible for the operation of investigation and control activities. Investigation and control officers at the local level are responsible for verifying or dispelling any suspicions of improper payments and uncovering facts establishing whether an offense has been committed.

24.22 This year, we examined investigation and control activities in 10 CECs in four provinces (New Brunswick, Quebec, Ontario and Manitoba).

24.23 The objective of ICS is to reduce UI fraud and abuse, in a cost effective manner, while being sensitive to claimants and employers.

Control measures difficult to apply

24.24 During our audit, cases were brought to our attention which illustrate the difficulty in applying controls to ensure continuing eligibility of claimants. Examples include seasonal workers and university students. These cases do not violate the provisions of the UI Act, but it is questionable whether they meet the conditions of availability for work and active job search requirements.

24.25 In our opinion, control measures are difficult to apply in the present context. To safeguard the integrity of the UI Account, sound management can be achieved only through an understanding of the respective roles, and the involvement and goodwill of employers, workers, claimants and CEIC personnel.

Few preventive and deterrent initiatives

24.26 In recent years, the Commission has undertaken initiatives that focussed primarily on the detection activity of ICS. Some of these initiatives involved the use of computer matching to detect undeclared earnings; others related to operational strategy such as the development of a fraud indicator system and a policy on voluntary disclosure by claimants.

24.27 There is some deterrent effect from the current improvement in efforts to detect instances of fraud and abuse. The Commission continues to detect many cases of overpayment each year, representing some 12 percent of the three million claims submitted for benefits. Our audit found that in at least one out of two cases of overpayment, another overpayment had been identified in the two preceding claims of that person. For these claimants, previous detection of undeclared earnings had not been an obvious deterrent. Until recently, few initiatives had been undertaken for purposes of deterrence or prevention.

24.28 The Commission completed a program evaluation of the UI controls during the past year; 90 percent of the employers and claimants surveyed perceived the Commission's control activities as ineffective. It was also noted that only one third of employers and claimants were aware of UI control activities.

24.29 No strategy has been implemented for raising public awareness of the probability of detection and the resulting penalties. Results of investigations are not systematically communicated to the public or advertised. Furthermore, we have noticed almost no reference to Investigation and Control Services in the public areas of local CECs we visited in the past two years. Such visibility could have a significant deterrent effect.

24.30 The Commission should:

• continue to emphasize and develop preventive measures; and
• increase the visibility of its investigation and control function in CECs and to the public.

Commission's Comment: We agree with these recommendations. A key to deter and prevent abuse is a reliable detection program coupled with effective information dissemination so that potential abusers are aware that such abuse will be detected.

The Commission is continually developing new detection programs and refining existing ones. In addition, the Commission on 1 September 1989, has implemented an information strategy which will address the need for greater visibility of its investigation and control function through regular messages to claimants, press releases and the introduction of a control emphasis in all brochures. The Commission is in the process of enhancing the visibility of Investigation and Control in local offices. The Commission believes that the combination of these approaches constitutes an effective prevention program.

Overpayments are not detected, on average, until one year after infractions are committed

24.31 Of the one million investigations done annually by ICS, over 75 percent originated from the results of cross-matching computer files. There are mainly three sources used for cross-matching with benefits paid to identify whether the claimants declared their earnings or employment while receiving UI. These are:

• the Record of Employment (ROE) sent by employers directly to the Commission;
• reports from employers upon hiring personnel; and
• computer pay lists supplied by employers to the Commission.

24.32 Providing the last two sources is optional for employers. The number of employers submitting this information has been relatively stable since 1984 (72,000 for report on hiring and 118 major employers for wage reports). Treasury Board agreed in November 1987 that departments and agencies for which it is the employer will participate in the report on hiring program. Full implementation is expected in 1989-90.

24.33 We examined these detection systems to determine whether they were reliable and whether any serious delays existed in detecting overpayments, which could impact on their timely collection.

24.34 A sample of 227 completed investigations revealed that overpayments were detected by these systems, on average, one year after the infractions were committed by claimants. Furthermore, for 20 percent of investigations originating from computer matching of ROEs, it would have been possible to detect an overpayment some 10 weeks earlier, when the claimant filed a new claim. Such earlier detection would reduce the delay in recovering overpayments.

24.35 The Commission should detect any previous overpayments at the time claimants file a subsequent claim.

Commission's Comment: The Commission agrees but, at the present time, such an initiative based on available (manual) systems would delay benefit payments to all new claimants. However, the Commission will undertake to study the technological feasibility of instituting a computerized means of implementing the recommendation which would be cost effective and which would not reduce service to claimants.

Low and inconsistent application of penalties

24.36 The UI Act permits a penalty up to a maximum of 300 percent of the weekly benefit rate (average rate for 1988, $203). We noted that the level of penalty ranged from 25 percent to 75 percent, but was normally 50 percent of the weekly benefit rate. However, in one province it was only 40 percent. Furthermore, at the time of our audit the level of penalty established was no different for first-time and repeat offenders. This leads to weak and inconsistent application of penalties.

24.37 The Commission's program evaluation had also concluded that 75 percent of employers and claimants believed that deterrence could be improved by imposing heavier penalties or by implementing stricter controls.

24.38 The Commission should ensure that penalties are applied on a consistent basis, taking into account whether the claimant is a first-time or repeat offender.

Commission's Comment: We agree with this recommendation. A new penalty policy for claimants has been implemented on 1 September, 1989, under which the schedule of penalties per offence is as follows:

• 100 percent of the weekly benefit rate for first-time offenders;
• 200 percent of the weekly benefit rate for second-time offenders; and,
• 300 percent of the weekly benefit rate for all other offenders, i.e. the maximum penalty amount permitted by the Unemployment Insurance Act.

No interest charged on overdue accounts and failure to recover overpayments in other federal programs

24.39 The benefit overpayments and penalties receivable represented $140 million at 31 December 1988. We noted that the UI Act does not allow the Commission to charge interest on overdue accounts, a practice which would encourage reimbursement.

24.40 Although the Commission recovers overpayments from its own programs and from salaries paid to federal government employees, the opportunity exists to also recover overpayments from money owed to claimants by other federal government programs (i.e. Revenue Taxation) before the account is written off. We noted that over $27.4 million in overpayments has been written off in the last five years.

24.41 The Commission should pursue further opportunities to recoup overpayments from other amounts owing to the claimant by the government in other programs.

Commission's Comment: Under the legislation for set-offs, the approval of other federal departments is required. We are working with the Office of the Comptroller General to pursue further agreements.

Incompleteness of information on Record of Employment leads to unnecessary investigations

24.42 Approximately 50 percent of the completed investigations that originated from the cross-matching of computer files did not end in identifying overpayments. However, it had still been necessary in all cases to confirm the number of applicable weeks to earnings reported on Records of Employment (ROE) and/or reasons for voluntarily leaving employment. If employers were requested to provide this information on their ROEs, the number of investigations could be reduced significantly, thus reducing the time and effort required of both the Commission and the employers. Compliance with such a requirement would be easier under the new computerized ROE system.

24.43 The management of the Canada Employment Centres we visited advocated that all the necessary information be required initially on the ROEs to avoid having to ask the employer for the information referred to above. We noted that one employer enters on all ROEs the pay dates corresponding to each week of insurable earnings, to minimize the Commission's requests for additional information. We support such an initiative.

24.44 The Commission should ensure that the new computerized Record of Employment provides all the information required for control purposes.

Commission's Comment: We agree in principle, and will pursue the intent with the private sector.

Shortcomings in the sharing of responsibilities

24.45 Activities related to benefit control, including various interview programs, are shared by the Insurance Services and the ICS. Insurance officers are responsible for decisions on overpayments, non-entitlements, disqualifications and penalties, but only upon the recommendation of investigation and control staff.

24.46 Our audit found shortcomings in the sharing of these responsibilities and decision processes, which weaken accountability and affect the timeliness of decisions. First, there are delays of approximately one month in recording decisions once investigations have been completed. Second, in five to ten percent of cases, representing approximately $10 million, insurance officers overturn their own decisions without consulting further with investigation and control staff. Moreover, these cases are not being reported to management.

24.47 The Commission should clarify responsibilities for the decision process between Insurance Services and Investigation and Control Services to ensure timely recording and reporting of decisions to management.

Commission's Comment: We agree with this recommendation. Pilot projects are presently under development to speed up the decision making and recording process. The Commission will continue to maintain the impartiality inherent in a separation of duties between the investigation officer and the adjudication officer. Moreover, steps will be taken to make management aware that 5 to 10 percent of insurance officer decisions are changed based on new facts being presented by claimants.

National Employment Services

Introduction

24.48 In our 1988 Report (paragraph 18.50 to 18.107), we examined the placement services offered at Canada Employment Centres. In this year's audit of National Employment Services we focus on Labour Market Information and Labour Market Adjustment Services. Together these activities account for $165 million, of which 88 percent is recovered from the UI Account (see Exhibit 24.2).

(Exhibit not available)

24.49 The mandate for National Employment Services under the Unemployment Insurance Act is to "assist workers to find suitable employment and employers to find suitable workers".

24.50 In 1988-89, NES was subject to a comprehensive internal program evaluation. In response to this evaluation and to the concerns raised in our 1988 Report, the Commission is redefining the mandate of the Employment and Insurance Program in order to strengthen interrelationships between the Employment and the Insurance activities. The practice of decentralizing decision making and delegating as much authority as possible to local managers continued.

Labour Market Information (LMI)

24.51 We audited 11 CEC offices in five provinces, focussing on analyses of local labour market information and the way the information was linked to the local planning strategy, which is the key planning tool for a CEC manager. The manager is responsible for ensuring that:

• local labour market information is used to establish needs and priorities in communities; and
• CEC interventions are strategically planned and controlled to ensure their responsiveness to both Commission and local priorities and needs.

24.52 The analyst is responsible for collecting, organizing, analyzing, and disseminating local labour market information. The timely provision of this information is essential to the operation of placement services, to the insurance program, and to the selection of training programs offered.

24.53 In an efficient labour market, jobs to be filled are matched as soon as possible to workers qualified to fill them. A CEC should be able to quickly inform its worker clients about relevant job openings and its employer clients about the availability of suitable workers. As CECs have "revitalized" and developed a self-service labour exchange, the availability of appropriate and easily accessible information has become increasingly critical to the success of the service.

24.54 CEIC plays an increasingly important role in long-term labour market adjustments. CECs administer programs and services designed to help workers increase their employability and to help employers adjust to changing technologies and conditions of international competition. This is especially important in the wake of the adjustments required as a result of the free-trade agreement.

24.55 As CEIC delegates more responsibility to CEC managers for decisions on funding Canadian Jobs Strategy projects or training programs, the need increases for relevant analysis of local labour market information. We examined the degree to which such information is incorporated into the local planning strategy. However, we did not examine whether this led to appropriate funding decisions on local Canadian Jobs Strategy training projects.

Preference for data collection over analysis

24.56 Most CECs have information that could help CEIC in the short term to meet its labour exchange role in the local labour market and to serve the control and investigation needs of the Insurance Program.

24.57 Only a few CECs use longer-term or structural analyses of occupational and unemployment trends and consult with providers and users of local labour market information to identify present and eventual gaps between supply and demand. In other CECs, we observed a preference for data collection over analysis to support local planning strategies.

24.58 We observed insufficient linkages of labour market information to local planning strategies, making it difficult for CEC managers to set priorities among possible local training projects. This could result in the wasteful allocation of training resources.

24.59 The Commission should ensure that appropriate emphasis is placed on analysis of local labour market information.

Commission's Comment: The Commission will give greater emphasis to the analysis of local labour market information (LMI) to support the development of local planning strategies and the effective delivery of programs and services. During the 1990-91 fiscal year, additional resources and computer support will be allocated to this activity. The Commission will also review and update the training programs for analysts and will be addressing the training needs of CEC managers during the next two years.

Differences in regional implementation may impact on the economy and efficiency of the LMI activity

24.60 Within an overall national policy for local labour market information, each region has adopted its own approach to implementation. We found that the activity could function adequately with relatively few resources; however, we observed considerable variations in the development of the local LMI function. For instance:

• In the five regions visited, there were four different software packages for processing and reporting local labour market information. The fifth region had not yet provided computers or specially designed regional software to most labour market information analysts.
• In Toronto, two district level analysts served the entire metropolitan area, while in Montreal there were eight analysts at the local level alone.

24.61 As a result of a decentralized approach to implementation, the CECs we visited had no standards for timeliness, pertinence, reliability, and accessibility of the labour market information produced. CEIC does not know whether such differences in regional implementation impact on the cost-effectiveness of these activities.

24.62 The Commission should:

• monitor the achievements of CECs that have developed an adequate labour market information function;
• encourage other CECs to emulate successful approaches; and
• develop and monitor standards to ensure uniformity and quality of local labour market information analysis.

Commission's Comment: Field tests will be undertaken in the fall of 1989 to examine new methods of presenting labour market information (LMI). A performance monitoring system will be tested concurrently in the same sites. Test results will serve to determine the feasibility of establishing national standards for the type and quality of labour market information products and for the analysis required in their production. Analysis of test results will be completed by 31 March 1990.

The Commission will continue to encourage and support networking activities among its local analysts and their Regional LMI Coordinators so that expertise and innovative ideas may be shared. The feasibility of establishing a national clearing house for information on LMI products and analytical techniques will be studied prior to 31 March 1990.

Counselling Services to Workers

Introduction

24.63 Labour Market Adjustment Services offers a variety of programs and services at CECs to workers and employers. One of its objectives is to reduce the duration of unemployment and to increase the employability of new entrants and those returning to the labour force. Our audit focussed on counselling services to workers and followed up on our 1983 and 1988 recommendations to implement performance measures.

24.64 The major service is employment counselling for workers who are identified as not "job-ready". About 1,800 CEC counsellors reported that they spent about half their time (nearly 877 person-years) on counselling workers in 1988-89.

24.65 Depending on the situation and the geographic region, counselling services to workers offer:

• referrals to training programs in the Canadian Jobs Strategy;
• assistance in becoming job-ready so that they can search for work independently;
• referrals to language training; and
• marketing of those with special difficulties.

Counselling services are more accessible in some CECs than others

24.66 Counselling serves as a screen or gateway to other CEIC programs. Access is determined by a short interview to determine the client's service needs. About 20 percent of workers who are interviewed receive a referral to counselling. Most other workers are referred to the self-service job information centre.

24.67 CEIC operational guidelines state that, wherever possible, there should be a maximum of 10 working days (two weeks) between the interview to determine the service needs and the initial counselling interview. The average wait at the 10 CECs we visited was 9.5 days, but at two of them the average wait was about one month. A delay in the case of someone receiving unemployment insurance could increase the costs to the UI Fund by prolonging the period during which benefits are being paid. As noted in paragraph 77, the CEIC did not measure, or report to senior management, the timeliness of counselling service.

24.68 In the CECs we visited, management expected a counsellor's full day to range from five to nine counselling interviews, or the equivalent time in contacts with clients. CEIC's program evaluation of counselling observed that "working with five or more clients represents a full day's work".

24.69 However, counsellors in the CECs we visited averaged less than four interviews per day. At the typical scheduled length of 45 minutes per interview, this is three hours of actual counselling per day. Even with an allowance for time spent on documenting files, conducting sessions on creative job search techniques, learning about local labour market and training opportunities, liaising with other local institutions and marketing clients to employers, it would appear from the information available that many counsellors have time to conduct more interviews. However, the structure of the time reporting system does not give management precise information about counsellors' overall productivity.

24.70 Another reason for the apparently low volume of interviews is that some clients do not attend their appointments. Although most counsellors schedule at least five interviews per day, we found that 25 percent of counselling appointments were cancelled and not rescheduled, or the client failed to report. In most CECs this extra time was spent only occasionally with "walk-in" clients.

24.71 Since individual counselling is expensive, it may not always be the most appropriate way to help workers enter or return to the work force. CEIC has developed alternatives and supplements to individual counselling, including group information sessions, job finding clubs, sessions on creative job search techniques, and group counselling. CEIC has not assessed the cost effectiveness of most of these alternatives.

24.72 We found only one CEC that offered a job finding club, one offering group counselling, and three offering sessions on creative job search techniques. There was no obvious rationale as to why some CECs and not others offered alternatives to individual counselling.

24.73 The Commission should assess the cost effectiveness of alternatives to individual counselling and, where warranted, ensure that Canada Employment Centres offer them.

Commission's Comment: The Commission regards cost as only one factor in deciding to implement group approaches to employment counselling. The Commission is encouraging CECs to implement alternatives to individual counselling such as Group Employment Counselling, Job Search Strategies Sessions and Job Finding Clubs. It is also examining the extent to which the delivery of specific employment counselling group services could be delivered by external contractors in a cost effective manner.

Cost effectiveness indicators will be developed for group and individual counselling methods. These will be based on outcomes information obtained through follow-up. These measures will be tested during 1990-91 and if assessed as being useful in managing the performance of the service will be adapted in 1991-92.

Counsellors do not report UI claimants to Insurance Services when they fail to report for an interview

24.74 In our 1988 Report (paragraph 18.110), we stated that CEIC did not have an effective system for dealing with UI claimants who failed to report to an employer for a job interview. This year we are concerned about UI claimants who do not attend scheduled appointments with counsellors.

24.75 In most CECs visited, Employment Services did not provide information to Insurance Services on claimants who failed to report to counselling interviews without good cause. The Commission's employment manual sets out policies regarding the provision of claimant information to Insurance Services. Since claimants may not be fulfilling conditions of entitlement to UI benefits, it is important that Employment Services communicate these cases to Insurance Services in order to preserve the integrity of the UI Program.

24.76 The Commission should ensure that counsellors adhere to CEIC policy and inform Insurance Services when UI claimants fail to report, without good cause, for an interview.

Commission's Comment: By 31 March 1990, the Commission will revise its guidelines on the referral to Insurance Services of claimants who fail to report, without good cause, for counselling interviews. New performance measures are being proposed for 1990-91 which will capture the number of referrals from Employment Services to Insurance Services.

Senior management still lacks regular information on the performance of counselling

24.77 In our 1983 Report (paragraph 8.113), we observed that CEIC attached more importance to the counselling process than to the results and that there was no monitoring of cost and quality of service. In the follow-up chapter (paragraph 14.225) of our 1985 Report, we reported that a project to measure the effectiveness of services to individuals had begun. As of June 1989, little progress has been made.

24.78 In 1988-89, the Commission implemented surveys at the local level to measure the quality of service to workers, but results have not been rolled up to regional or national headquarters. Although we commend CEIC for its commitment to improving quality of service, we found that these surveys do not measure such factors as speed and effectiveness of individual assistance, as originally intended, but only client satisfaction with the overall services provided at the CECs. We believe it is an elaborate and unnecessarily costly means of seeking client feedback, considering its limited usefulness to CEC managers.

24.79 Recently, some productivity indicators were selected for use in 1989-1990. However, there is still no follow-up on counselling cases to obtain useful performance information on the quality or effectiveness of counselling services. We believe that follow-up would also improve the counselling process by demonstrating to clients CEIC's interest in whether they have followed through on plans agreed to with counsellors. According to the Commission, approximately 33 percent of counselling cases were referred to Canadian Jobs Strategy (Human Resource Development) training programs. Follow-up is done under these programs, but results are not segregated to provide feedback on cases referred by counselling services.

24.80 The Commission should:

• fully implement performance measures for counselling services;
• institute follow-up to the counselling process;
• link to follow-up results of other CEIC programs, where applicable, in order to minimize duplication; and
• adopt less costly means of seeking feedback on client satisfaction with service and ensure that results are reported to management.

Commission's Comment: A working group will be established to research and develop recommendations for performance measures related to employment counselling, including outcome measures through client follow-up. Testing of proposed measures will begin in April 1990 with implementation of approved measures in fiscal year 1991-92.

Immediate steps will be taken to study the potential application of the Canadian Jobs Strategy follow-up survey in providing the required follow-up data to establish the relationship between employment counselling, success in CJS programs and subsequent employment.

The Commission's approach to surveying quality of service contains only one question dealing with client satisfaction. The Commission is taking action to improve the cost-effectiveness of the current system through improvements to the computer support system and to the analysis of results. These improvements will be introduced prior to 31 March 1990.

The Commission regards the current survey instrument as a local management tool and does not intend to consolidate local office results for use at the regional or national levels.

Some outreach projects are poorly linked to CEC activities

24.81 Through some 300 contracts with public and private non-profit agencies, National Employment Services provide additional counselling and placement services to specific underserved target groups and remote localities. The cost is projected at $24 million for 1988-89. A typical program might offer counselling to women in an urban area; another might serve natives on a reserve; others might focus on assisting handicapped persons. Most Outreach projects have been in operation more than five years; about 25 percent have been active for more than ten years. According to CEIC, about 800 full-time employees offered 270,000 counselling interviews in 1988-89. This compares with 460,000 counselling interviews at CECs.

24.82 From our audit of nine of these projects we concluded that Outreach projects are not usually linked to the local planning strategies of CECs, because decisions on the selection of projects are made at the regional level. Services offered by CECs, particularly since revitalization of Employment Services, sometimes overlap with Outreach projects as well as with services offered by provincial and/or local organizations.

24.83 The Commission should ensure that planning and selection of individual Outreach projects are better linked to the local planning strategies of CECs.

Commission's Comment: Regions and CECs have been directed to regard Outreach as an integral component of the local planning strategy. The provision of Outreach services must be linked through the local planning strategy to Canadian Jobs Strategy programs as many Outreach clients are prime candidates for such program assistance. CECs are responsible to ensure co-ordination and co-operation with Outreach projects so that projects can fulfill their contractual obligations.

At the national level, the Commission is examining ways to further integrate Outreach and the Canadian Jobs Strategy.

General Administration and Support Services Costs

Definition

24.84 Section 117 of the Unemployment Insurance Act specifies that the cost of administering the Act shall be charged to the Unemployment Insurance Account and financed by employer and employee premiums. Since the Canada Employment and Immigration Commission (CEIC) and the Department are administering other programs (Immigration and Human Resource Development Programs), the operating costs are separately identified so that general administration and support services charges, commonly called overhead costs, can be allocated to the UI Account.

24.85 Overhead costs are generally defined as costs that are incurred in support of programs or services but are not readily identifiable with program outputs or services rendered. The administration costs of the UI Account include operating costs, which are directly related to delivering the Insurance and the National Employment Services activities, as well as overhead costs which cannot be directly associated with the delivery of these activities.

24.86 In examining the allocation of overhead costs to the UI Account, we noted that CEIC has not defined them clearly, including the identification of the specific administrative services and costs that comprise them. Without a clear definition, it is difficult for CEIC to assess and monitor actual overhead costs chargeable to the UI Account and to compare the overhead costs of individual regions.

24.87 Thus, in our analysis of overhead costs we included the costs of Corporate and Special Services and Program Management and Joint Services for CEIC, but excluded overhead costs for the Insurance and National Employment Services activities of regional offices and at headquarters. The major components, representing $375 million and 5,502 person-years, are as follows:

• Corporate and Special Services ($222 million and 3,033 person-years forecast for 1988-89):

- Finance;

- Administration;

- Personnel;

- Strategic Policy and Planning;

- Public Affairs;

- Internal Audit; and

- Rental of office space (only the portion related to general administration and support services).

• Program Management and Joint Services ($153 million and 2,469 person-years forecast for 1988-89):

- Line management (at regional headquarters, district offices and local offices);

- Support services (at district and local offices);

- Program management (at national and regional headquarters, including management personnel and their immediate staff); and

- General office reception (at local offices).

General administration and support services represent 31 percent of the total administrative costs of the UI Account

24.88 For 1988-89, the overhead costs chargeable to the UI Account amounted to $301 million or 31 percent of the total cost ($974 million). The overhead costs are charged to the UI Account on a pro-rata basis according to a formula approved by the Treasury Board. Exhibit 24.3 shows the breakdown of these costs and person-years by key activities.

(Exhibit not available)

24.89 We compared the overhead cost per UI claim for the last six years. The total cost per claim remained relatively constant during that period. The overhead portion of the cost per claim decreased slightly but was still important ($93 per claim) when compared to the cost of delivering the Insurance Services ($137 per claim) and the National Employment Services ($71 per claim) for a total of $301 in 1988-89.

Potential savings could be achieved

24.90 We compared the full costs of general administration and support services per UI claim, by region, including National Headquarters (NHQ) costs. The overhead costs varied from $83 to $145 as follows:

		Overhead costs per claim
	Number of UI claims (1988)	Regional	NHQ	Total
Newfoundland	$ 141,690	$ 52	$ 32	$ 84
Nova Scotia	132,680	66	41	107
New Brunswick	129,650	89	56	145
Prince Edward Island	27,970	80	50	130
Quebec	968,060	51	32	83
Ontario	932,480	55	34	89
Manitoba	120,140	85	53	138
Saskatchewan	96,220	82	50	132
Alberta & NWT	268,230	60	37	97
British Columbia & Yukon	413,690	51	32	83
Total	$ 3,230,840	$ 57	$ 36	$ 93

24.91 As indicated in the above table, the variation in overhead cost per claim is 75 percent. In the absence of any established targets, such a variation indicates the need for further investigation to determine where potential savings could be achieved.

24.92 Employment and Immigration Canada should:

• clearly define overhead costs and their components and ensure their consistent reporting by each region; and
• establish a reasonable target for overhead costs with a view to controlling and further reducing costs.

Employment and Immigration Canada's Response: The EIC reporting system (EIIS) produces detailed information reports on all activities, responsibility centres and objects of expenditure within the Commission. This provides Senior Management with the facility to assess costs and identify areas for potential savings. EIC does not see the advantage in grouping such costs into a composite overhead definition. EIC will continue to review the various components of what the Auditor General refers to as overhead with a view towards further cost reduction wherever possible.