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1998 September Report of the Auditor General of Canada

Chapter 16—Management of the Social Insurance Number

Main Points

Introduction

The Social Insurance Number Was Created in 1964

The Role of the Social Insurance Number Has Expanded Gradually

Roles and Responsibilities Are Dispersed

Focus of the Audit

Observations and Recommendations

Importance of the SIN

The SIN has become a de facto national identifier for income-related transactions, contrary to the government's intent
A common numerical identifier is important in the growing number of data matches

Integrity of Data in the Social Insurance Register

The Social Insurance Register: 33 million SINs issued
Significant gap between number of living SIN holders and size of the Canadian population
Existing sources of information are not fully exploited and more could be done to develop new sources
Millions of SINs are not certified for identity
Birth-related information is not easily validated with the issuing organizations
Valid SINs are held by thousands of individuals with no legal status in Canada

Processing and Control of the SIN

More rigour needed in the proof-of-identity program
Relying mainly on the birth certificate as the foundation of identity has major drawbacks

Investigations of Fraud and Abuse Related to the SIN

Minimal effort is dedicated to SIN investigations
SIN investigations could provide substantial results
The quality of SIN investigations needs to be improved
Existing performance indicators discourage SIN investigations
Penalties resulting from successful SIN investigations are minimal

Impacts on Other Users

Use of SIN as a de facto national identifier has caused numerous problems for other users

Legal and Policy Framework for Managing the SIN

Privacy of information is a key dimension of managing the SIN
Extensive use of personal information by HRDC attracts attention of privacy advocates and the Privacy Commissioner
Unregulated use of SIN in the private sector is a key vulnerability
Progress in clarifying the role and improving the management of the SIN is slow

Conclusion

About the Audit

Main Points

16.1 The Social Insurance Number (SIN) was implemented in 1964, to provide Unemployment Insurance, Canada Pension Plan and Quebec Pension Plan clients with a file number. In 1967, it also became a file identifier for Revenue Canada. From the outset, the SIN was the subject of intense parliamentary interest and debate. The controversy focussed largely on the implications of a potential expansion of its use to become a universal identifier. The history of the SIN has mainly reflected the tension between balancing the often competing objectives of maintaining individual privacy and improving administrative efficiency and effectiveness.

16.2 Human Resources Development Canada has been administering the SIN in accordance with the intent of its legal framework whereby the SIN is intended to be a file identifier (account number) for certain federal government programs. However, the public often perceives the SIN to be a personal identifier or even an identity card.

16.3 The use of the SIN outside the federal domain has evolved beyond the intent of the Treasury Board policy established in 1989, aimed at preventing it from becoming a national personal identifier. Our audit found that the SIN has become the common numerical identifier both inside and outside the federal government for a wide range of income-related transactions and benefits, among other uses.

16.4 Changes to the Income Tax Act and Regulations have increased the use of the SIN at the provincial/territorial level and in the private sector, as have the growing number of data exchanges, comparisons and matches among various tiers of social programs.

16.5 However, the SIN has a number of weaknesses. Some of them are well known. As the use of the SIN has become more widespread, these weaknesses have grown in importance. They include the following:

  • The information on SIN holders, particularly on births and deaths, is not always complete and accurate.
  • Existing SIN application procedures are insufficient to guard against fraud and abuse. Holders of 11.8 million SINs who registered prior to the introduction of the proof-of-identity program in 1976 have not been asked to provide proof-of-identity documentation. This exacerbates the risk of misrepresentation.
  • The provinces and financial institutions are required by the Income Tax Act and Regulations to collect SINs for tax purposes but cannot validate the SIN numbers provided by their clients.
  • SIN errors, abuse, and misuse affect many federal programs, provinces and the private sector. Collectively, the impact may be sizable.
  • Minimal effort is dedicated to investigations of SIN fraud and abuse, and penalties are minimal, with no real impact on deterrence.
  • Unregulated use in the private sector, except in Quebec, makes it vulnerable to abuse in terms of both privacy and fraud.
16.6 The effectiveness of certain administrative decisions as well as the integrity of social programs are greatly facilitated by the reliability of the information contained in the SIN data base. We believe it is time to review the current roles, objectives and uses of the SIN in light of its governmental and societal importance. The government needs to clearly state the level of integrity and privacy protection expected in the system.

16.7 There appear to be two options: improve the existing framework to catch up with the current reality of SIN usage or else devise an acceptable alternative solution to meet the needs of users, including governments and individuals. In any case, the privacy implications need to be recognized. In our view, it is essential that Parliament play a major role in debating these issues, increasing public awareness, and finding a satisfactory solution.

Introduction

The Social Insurance Number Was Created in 1964

16.8 When Prime Minister L. B. Pearson stood in the House of Commons in April 1964 to announce that the government intended to introduce the new Social Insurance Number (SIN), he may not have realized how deeply he was affecting the way Canadian social programs would be administered in the years to come. At the time, the need to introduce the SIN was twofold. First, the Unemployment Insurance registration system was running out of numerical combinations to identify its clients. Second, the new Canada and Quebec Pension Plans would require a national system to register and identify contributors and recipients.

16.9 In the early sixties, the Royal Commission on Government Organization (also known as the Glassco Commission) concluded that "a numbering system that could be used to identify individuals for all purposes would contribute significantly to improved efficiency, both in government and outside." In response, there were several interdepartmental discussions about using the SIN as a common identifier to achieve savings and avoid the confusion that could arise if various departments used their own numbering schemes. The first name contemplated for the new number was the Canada Account Number, reflecting an intention to use it in all financial transactions between the government and individual citizens.

16.10 However, political pressures influenced the government of the day to restrict the use of an identifying number instead of expanding it. Thus the Social Insurance Number was born, and it was presented in the House of Commons as an initiative restricted to Unemployment Insurance and the Canada and Quebec Pension Plans.

The Role of the Social Insurance Number Has Expanded Gradually

16.11 Despite the emphatic statements made in the House of Commons in 1964, the federal government proceeded in the following years to incrementally expand the scope of the SIN. In 1967, the Income Tax Act was amended to authorize the use of the SIN on tax returns - a critical extension. In 1976, the Income Tax Act was amended again to require that individuals cashing Canada Savings Bonds provide their SIN. Insurance companies and financial institutions then started collecting their clients' social insurance numbers for tax purposes.

16.12 As an array of data bases were created in the 1970s and 1980s to administer various government programs, the SIN was adopted instead of each time creating a new user number or client number. Today, over 20 federal statutes, regulations and programs authorize the use of the SIN (see Exhibit 16.1 for a detailed list). Its use expanded gradually to provincial social programs and, in the private sector, to the many companies that use the SIN to identify their employees and their clients. Some of these uses, which are unofficial, were not anticipated in the legislation and therefore are not explicitly or implicitly prohibited.

16.13 The increasing use of the SIN has growing implications for program integrity and privacy protection. It is used by many federal and provincial government departments as one of the key tools in managing the programs that require precise identification of payers, claimants or recipients. It is used as an identification number to verify benefit entitlement, to collect and add information to clients' files and to match and exchange data among programs. Generally, people must have a SIN to work and to collect Employment Insurance benefits, Canada Pension Plan payments, and tax refunds, benefits and credits.

16.14 It is critical to link the SIN with its rightful owner. When this linkage does not occur, payments of benefits, pensions and credits and collection of income tax could be in error.

16.15 Each SIN number entails collecting birth, name change and death data, along with citizenship status, which can act as an additional cross-check in determining identity and eligibility for programs. Accurate information in the SIN data base is important for both service and control.

16.16 The SIN has obvious potential as a tool for facilitating the joint delivery of services in income security programs, given its now widespread use as a client identifier in such programs. Both Human Resources Development Canada (HRDC) and the Treasury Board have considered using the SIN as one means to streamline service delivery.

16.17 The widespread use of the SIN considerably increases its potential for fraud and abuse, as well as the variety and extent of the illegal activities to which it gives rise. Exhibit 16.2 shows how diverse and pervasive abuses of SIN can be. The cost to the government and to society in general could be significant.

Roles and Responsibilities Are Dispersed

16.18 In the federal government, the roles and responsibilities for the SIN are dispersed. HRDC is the custodian of the SIN: it is responsible for issuing SINs, maintaining the Social Insurance Register (SIR), investigating suspected abuse, and making regulations if necessary. The Treasury Board is responsible for the policy and guidelines that govern the collection and use of the SIN at the federal level, including data matching. The Office of the Privacy Commissioner, an independent oversight agency, investigates complaints about the SIN, reviews compliance with the Privacy Act and reports to Parliament. The Department of Justice supports other departments in providing legal advice for SIN-related questions arising under the Privacy Act, and responds to general inquiries from the public on the private sector's use of the SIN.

Focus of the Audit

16.19 The objective of our audit was to assess the management and control of the SIN to determine if it is efficient and effective and has an appropriate basis in legislation. We examined the role and use of the SIN in managing social programs and revenue collection; the application process; the management of the SIR; and the investigation of fraud and abuse. In addition to examining activities at HRDC, we interviewed officials and reviewed relevant documentation at Revenue Canada, Citizenship and Immigration Canada, the Treasury Board Secretariat, Industry Canada, the Department of Justice, the Royal Canadian Mounted Police, the Office of the Privacy Commissioner, Elections Canada, the Canadian Passport Office and many provincial organizations. We performed extensive analyses of the SIN data base provided to our Office by HRDC. We also talked to privacy experts and other organizations with interests in the SIN.

16.20 Further details on the audit objectives, scope and criteria are presented at the end of the chapter, in the section entitled About the Audit .

Observations and Recommendations

Importance of the SIN

The SIN has become a de facto national identifier for income-related transactions, contrary to the government's intent
16.21 The federal government sought in 1988 to restrict use of the SIN in its programs by developing the current policy on the control and use of the SIN and data matching. This policy was developed in direct response to recommendations arising from the review of access to information and privacy legislation that was conducted in 1986 and 1987 by the Standing Committee on Justice and Solicitor General. The government clearly indicated that its intention was to prevent the use of the SIN as a national personal identifier in order to protect individual privacy. For instance, it limited the federal use of the SIN to the administration of tax, pension, social and benefits programs, along with programs authorized under a few federal statutes (such as the Employment Insurance Act ).

16.22 For example, the federal government stopped using the SIN on citizenship forms. It eventually deleted the SIN from many data bases and stopped using it to identify its own employees. It indicated that any new uses in the federal government would require parliamentary approval. However, it did not address the growing use in the private sector and by the provinces, territories and municipalities. Nor did it anticipate the impact that amendments to the Income Tax Act and Regulations would have as they began to require a SIN for more types of financial transactions and benefits.

16.23 In 1992, the Income Tax Regulations were amended to require that provinces include the SIN on T5007 tax slips issued to all recipients of social assistance and workers' compensation payments. This virtually guaranteed the dominance of the SIN as the common program identifier for provincial and municipal social programs. With similar programs at the federal level (Employment Insurance, Old Age Security and Canada Pension Plan), together they constitute a cluster of programs representing close to $100 billion in annual payments - 26 percent of all government expenditures in Canada.

16.24 The recently announced Canada Education Savings Grant will require that a new population (an estimated 1 million out of 7 million children) obtain a SIN in order to receive government grants, and to satisfy requirements of the Income Tax Act and Regulations. Today, almost any transaction related to an income support payment or loan, revenue collection, and an individual's personal finances has a SIN attached to it. The growing importance of the SIN has shown little sign of abating, despite government intentions to the contrary.

A common numerical identifier is important in the growing number of data matches
16.25 Data matching is defined by the Treasury Board as the comparing or linking of personal information obtained from different sources for the purpose of making decisions that could affect the individuals to whom the information pertains. Data comparisons for other purposes such as research are not considered to be ``data matches" under the Board's definition.

16.26 The growing use of data matching, comparison and exchange between and among jurisdictions in administering social programs has been greatly facilitated by the use of the SIN. Using a numerical identifier is often seen as the most practical and efficient way to match personal data, because of its uniqueness and universality. Other personal identifiers or any combination thereof could be used, such as date of birth, surname, name, gender and/or address. However, a recent study done by Elections Canada indicates that more than 10 percent of Canadians have the same family name and date of birth as at least one other Canadian. Also, people do not always report their names consistently, and names can be misspelled. Further, 16 percent of Canadians aged 18 or older move each year. Information can also be recorded in different file formats. All of these factors complicate data matching without a numerical identifier.

16.27 Most data matching in the federal government uses the SIN as the core personal identifier for matching information from two data bases. The Old Age Security (OAS) program showed the benefit of using the SIN. The difficulty of managing the files among programs such as the Canada Pension Plan (CPP), OAS, and International Agreements for OAS and of matching their data without a SIN led HRDC to launch an initiative to assign SINs to all beneficiaries. Provincial social services programs we visited also use the SIN extensively to validate client lists among their various jurisdictions. For them, having a common element like the SIN is important because of incompatibility among the different systems. Other identifiers such as health card numbers and driver's license numbers are unique, but are specific to each province. Thus, unlike the SIN, they cannot be used for interprovincial data matches or for matches between federal and provincial social programs such as Employment Insurance and social assistance.

16.28 Our review of current data matches at HRDC that use the SIN as a common identifier indicated that they achieve significant savings through avoidance of overpayments, recovery of overpayments and debts, and administrative efficiencies. For example, HRDC's Computer Post-Audit program matches employment insurance claims with records of employment information to identify persons who are collecting benefits but are not reporting or are underreporting their earnings. For fiscal year 1996-97, this data-matching activity alone generated about 570,000 investigations that identified overpayments of $102 million and resulted in penalties totalling $50 million.

Integrity of Data in the Social Insurance Register

The Social Insurance Register: 33 million SINs issued
16.29 The Social Insurance Register (SIR) is the register that records the personal information provided by individuals when they apply for a SIN. It contains all the SINs and key basic personal information such as dates and places of birth and death, and mother's and father's names. Certifying, registering, issuing and keeping track of millions of SINs is a complex task, undertaken on a very large scale. A total of more than 33 million SINs have been issued since 1964. National Services, a branch of HRDC that operates out of Bathurst, New Brunswick, manages the SIR and issues about one million cards (new and replacement) each year. Its annual operating costs are $7 million, $2 million of which is collected from applicants for replacement cards. The remaining $5 million in costs is divided among the original users of the SIN - Revenue Canada, CPP, the Quebec Pension Plan and the Employment Insurance Account - who share operational responsibility for the integrity of the data bank. Our audit work showed that the SIR is generally well protected and physically secure.

Significant gap between number of living SIN holders and size of the Canadian population
16.30 Stakeholders have raised concerns about the high number of living SIN holders in the SIR compared with the size of the Canadian population: a gap of about 3.8 million for those aged 20 or older, the age at which most Canadians have obtained a SIN (see Exhibit 16.3) . Various factors could account for the gap: the number of Canadians and non-Canadians who have left the country, deceased SIN holders whose deaths have not been reported to HRDC, and SINs based on fraudulent identities. Since the gap cannot be reconciled with any certainty, it represents a risk of increased error, abuse and misuse of the SIN that could allow inappropriate access to federal and provincial programs.

16.31 Our audit work included analytical testing of the 33 million records, provided to us by HRDC. We found that the number of unrecorded deaths is one of the biggest factors in the gap. From 1965 to 1990, only 1 million deaths were registered in the SIN data base, far below the 4.4 million deaths in the Canadian population for the same period. Since 1993, SIR has obtained information about deaths using additional data from other sources such as CPP, Revenue Canada and the Régie de l'assurance-maladie du Québec (RAMQ). During the period 1991 to 1997, over 2.6 million deaths were registered in the SIN data base, a dramatic improvement (see Exhibit 16.4) .

16.32 The collection of death data still needs to be improved, however. The number of living Canadians registered in the SIN data base in 1998 remains significantly higher than in Statistics Canada data. For example, the 1998 data base shows 771,000 persons aged 90 and older who have an active SIN, compared with the 127,000 individuals (less than one sixth) shown by Statistics Canada's data for this age group. More striking is the comparison of 311,000 people aged 100 years or older who are considered to be still alive, according to the SIR, with only 3,000 recorded in Statistics Canada census data.

16.33 Without additional efforts to record deaths, the gaps will continue to grow, along with the potential for confusion and inefficiency and the risk that the identities of deceased individuals could be used for fraudulent activities. While other federal programs collect death data, they do so only for their target population and the data are not always complete. For instance, about a third of the approximately 3,000 frauds detected by Income Security Programs at HRDC since 1985-86 pertained to cheques negotiated after the eligible recipient's death.

Existing sources of information are not fully exploited and more could be done to develop new sources
16.34 In 1996, Revenue Canada provided death update files to SIR three times. In 1997, it was agreed that this information would be sent only once a year. The comparison between SIR and RAMQ data demonstrated that similar comparisons with other provincial health insurance programs, which are not undertaken at present, could potentially reveal hundreds of thousands of unreported deaths. Vital statistics bureaus in the provinces, territories and foreign jurisdictions are other potential sources of information. However, as most of them do not use the SIN, sharing data would be difficult.

16.35 Even though CPP, Revenue Canada and SIR are sharing more data, the problem of reconciling the various sources remains. For example, Revenue Canada does not provide SIR with corrections it makes to its taxpayer files when it notes discrepancies in date of birth, name, etc. Revenue Canada informed us that the income tax system and the various credits and benefits administered by Revenue Canada rely heavily on an individual's SIN but less on such items as date of birth or name. As a result, non-critical variations in those parts of an individual's data record are accepted with less verification than would be required by SIR.

Millions of SINs are not certified for identity
16.36 In 1976 a proof-of-identity program began that required applicants for a SIN to provide identification documents. As of March 1998, the Social Insurance Register contained 16.8 million SIN entries that had not been supported with identification documents. This represents 51 percent of SINs issued. However, some of the uncertified records do not need to be validated - where the individual is deceased or the SIN has been cancelled, voided, or validated by other programs. This leaves approximately 11.8 million uncertified accounts in the SIR that, because of the potential for error, misuse and abuse, should cause major concerns to those who make significant use of the SIN, such as Revenue Canada and all income security programs.

Birth-related information is not easily validated with the issuing organizations
16.37 Accurate birth information is as important as death information to the integrity of the SIN data base. SIR does not generally confirm the validity of information shown on documents accepted for SIN applications with the organizations that issued them. For example, SIR does not validate information on birth certificates (existence, date and place of birth, parents' names, or whether the individual is deceased) with information in provincial and territorial vital statistics registries.

16.38 The urgent need to resolve this issue is highlighted by comparisons we made between OAS and SIR data bases and between CPP and SIR data bases. These comparisons were performed in 1998 and showed discrepancies of four to five percent in their birth data. The gap in the date of birth between SIR and OAS/CPP data bases is 22 months on average, with a maximum of 50 years. These discrepancies affect 166,000 OAS files and 98,000 CPP files.

16.39 The difficulty of validating birth-related data with vital statistics is well known and long-standing. HRDC is currently conducting a pilot project with the New Brunswick government that allows on-line verification of birth and name change information provided by SIN applicants. The SIN applicant's information is also verified on-line with the province's death registry to ensure that the individual has not been reported deceased. Extending this project to other provinces and territories could enhance the reliability of the SIN data base, although privacy implications would need to be assessed. As well, provinces, territories and the federal government may not yet be technologically compatible.

16.40 Applications based on Citizenship and Immigration Canada documentation for new SINs, replacement cards and status changes represent one third of SIR annual workload. SIR now has an on-line connection with Citizenship and Immigration Canada's information system. Data in the system can be accessed quickly to validate the information provided by applicants.

16.41 By validating the information on birth certificates and other documents with the organizations that issued them, SIR could eliminate errors in the information it registers on SIN holders. It could also reduce the risk of issuing SINs to impostors whose applications are supported by fraudulent or modified documents. Since the information contained in the SIR is considered personal, HRDC has a legal requirement to take all reasonable steps to ensure its reliability. Section 6(2) of the Privacy Act requires government institutions to ensure that personal information being used for an administrative purpose is as accurate, complete and up-to-date as possible. As noted earlier, HRDC has made some efforts in this direction. However, it does not have in place a comprehensive plan to ensure that SIR information meets this requirement.

16.42 Human Resources Development Canada, in co-ordination with its partners, should ensure where appropriate that available information from federal and provincial programs is used effectively to improve the integrity of the Social Insurance Register.

16.43 Human Resources Development Canada should develop a comprehensive plan with appropriate targets and time frames and clear statements of roles and responsibilities to bring the reliability and completeness of the data in the Social Insurance Register to an appropriate level.

Human Resources Development Canada's response: HRDC agrees with both recommendations. HRDC recognizes the importance of improving the integrity of the Social Insurance Register and will increase its efforts to work with other federal partners, the provinces and the territories to obtain the information required to achieve the desired level of integrity. HRDC will, in co-operation with its partners, develop an appropriate federal-provincial strategy and action plan. Even though they may want to provide personal information, the provinces and territories may need to amend their privacy legislation and may also have to make substantial system changes.

Valid SINs are held by thousands of individuals with no legal status in Canada
16.44 The SIR issues temporary SINs (900 series) to non-permanent residents such as refugee claimants, seasonal workers and foreign students, based on immigration documents that eventually expire. A 900-series SIN can also be issued to any citizen of another country, even if he does not reside in Canada, for such reasons as opening a bank account or investing in Canada. If those SIN holders obtain permanent residency in Canada, they are entitled to change their 900-series SIN for a regular SIN. The observed tendency is for people to request the regular SIN quickly after gaining permanent residency, since it is perceived as more valuable. Since 1976, when the 900 series began, 1,242,000 temporary SINs have been issued. In 1998, some 680,000 temporary SINs remain active and 66 percent of these are over five years old, a long period of time for a number considered temporary. The number of temporary SINs issued is 470,000 higher than the 210,000 non-permanent residents reported by Statistics Canada in 1997. Since the SIN has no expiry date, this difference could include SIN holders who have left Canada. If SIR has not been formally advised of a departure, there is a risk that the 900-series SIN with no expiry date could be given, rented or sold to another individual.

16.45 Alternatively, the gap could represent SIN holders who are residing here illegally. For example, a 1994 Revenue Canada estimate showed that thousands of individuals who were using their SIN to work or obtain social assistance or tax credits had no legal status in Canada, according to Citizenship and Immigration Canada's records. Out of 80,000 individuals with a 900-series SIN who collected Goods and Services Tax (GST) credits in January 1993, Revenue Canada estimated (based on a sample of about 3,600) that 32 percent could have received benefits to which they were not entitled. Revenue Canada estimated that the potential loss on GST credits could be as high as $8.2 million. Revenue Canada also noted that the reported source of income of many of these individuals was social assistance. Therefore, losses by provincial and municipal governments could potentially have been substantial. We realize that this issue may be difficult to resolve because it could possibly involve reconciling mandates of departments involved as well as the confidentiality provisions of the Income Tax Act and the requirements of the Privacy Act .

16.46 Human Resources Development Canada, in conjunction with Revenue Canada and Citizenship and Immigration Canada, should address the risks associated with the issuance of temporary SINs that have no expiry date.

Human Resources Development Canada's response: Agreed. HRDC is establishing a working group mandated to address the risks associated with the issuing of temporary 900 series Social Insurance cards that have no expiry date. Citizenship and Immigration Canada and Revenue Canada have already indicated their willingness to participate.

Revenue Canada's response: Agreed. Revenue Canada will participate with Human Resources Development Canada and Citizenship and Immigration Canada, in a co-operative effort, to decrease the risks associated with the issuance and retention of temporary SINs, recognizing that there may be legislative constraints limiting the exchange of certain information in this exercise.

Citizenship and Immigration Canada's response: Agreed. Citizenship and Immigration Canada (CIC) has a number of working arrangements with Human Resources Development Canada and Revenue Canada (RC) to address issues of mutual concern, including the use of the SIN. CIC will renew its efforts, in conjunction with RC and HRDC, to address the risks associated with the lack of expiry date on temporary SINs.

Processing and Control of the SIN

More rigour needed in the proof-of-identity program
16.47 There are two ways of submitting an application for a SIN: in person at a local Human Resource Centre of Canada (HRCC) or by mail. The applications submitted to HRCCs are reviewed by agents who examine proof-of-identity documents, which are usually originals. The applications found to be in order are certified by agents and forwarded to National Services in Bathurst. Individuals can also mail SIN applications directly to Bathurst. There, direct mail applications are reviewed by SIR staff for accuracy and completeness, and the proof-of-identity documents (original or a certified copy) are examined. SIR operators review each application received from HRCCs and in the mail. If there are no internal inconsistencies or omissions, the application is accepted for processing.

16.48 Different kinds of documents are accepted as proof of identity, depending on the status of the person applying for a SIN card. Canadian citizens can provide a birth certificate issued in Canada or a citizenship card issued by Citizenship and Immigration Canada. Permanent residents must present their Record of Landing. Temporary residents must present immigration documents that authorize them to remain in Canada for a specified period of time.

16.49 Generally, the SIN application process asks for only one identity document and does not have other means to confirm identity. We compared SIN requirements with those of other HRDC programs as well as the Passport Office. We found that these other programs had additional controls to verify the identity of applicants (see Exhibit 16.5) .

16.50 In general, mailed applications represent a somewhat greater risk than in-person applications, because certified photocopies are accepted - which themselves could have been certified fraudulently - and applicants who raise suspicion cannot be questioned. At present, mailed applications represent only 10 percent of the applications processed in Bathurst, one of the smallest mail intake ratios of the programs shown in Exhibit 16.5 . We noted that the SIR compensates for the risks associated with mailed applications through its screening procedures as well as specialized tests and controls; this leads to a rejection rate of about 30 percent.

16.51 The risks associated with mailed applications remain significant, however. An HRDC investigation of SIN cards sent to mail drops in a region identified 37 suspect SIN applications. Further analysis showed that 10 of those were based on falsified documents and the individuals did not exist in a provincial vital statistics registry. In another case of fraud, an investigation revealed that a man had obtained 72 SIN cards using the identities of deceased children; those applications had been mailed directly to Bathurst.

16.52 About 20 percent of total SIN cards issued annually are to replace cards that owners have reported lost, stolen or broken. Controls on this activity need to be improved. If a certain number of replacement cards have been issued to an applicant within 12 months, a request for an additional card automatically triggers an investigation. But other warning signs, such as a number of cards mailed to the same address, are not used to monitor potential fraud.

16.53 In looking for best practices, we found that the Passport Office has a more comprehensive proof-of-identity program. It has compiled all the possible variations of birth certificates among the 12 provincial and territorial jurisdictions and makes this information available to its front-line clerks. For each application, it also requires one guarantor whose status can be checked. It maintains a list of potentially fraudulent users against which new applications are compared. It has selected a validity period of five years (compared with 10 years for similar documents in most other countries). The Passport Office also favours in-person applications over those mailed in (which represented only 10 percent of applications in 1997-98). Moreover, the Canadian passport contains several security features. However, the Passport Office shares the concerns about birth certificates and other primary documents discussed in the following paragraphs.

Relying mainly on the birth certificate as the foundation of identity has major drawbacks
16.54 One document is generally required to apply for a SIN. The document most fundamental to obtaining a SIN is the birth certificate, issued by the provinces and the territories. The birth certificate has the following limitations. It is:

  • easy to obtain - television programs, various books and even Internet sites provide instructions for obtaining birth certificates to create false or multiple identities;
  • relatively easy to forge or alter, especially for older certificates, given the current technology for colour duplication;
  • paper-based, so it deteriorates rapidly, making information harder to verify; and
  • not linked to the bearer through any special security features.
However, it is much more difficult to falsify the initial application to register a birth.

16.55 A research study prepared for the Federal/Provincial/Territorial Working Group on Common Client Identifiers and released in the spring of 1997 noted that those weaknesses are shared by a number of Canadian identity documents considered acceptable for obtaining a SIN. The noted weaknesses are most problematic in birth certificates, however, as they are often used to obtain other identification that is considered more secure because it carries a photograph (driver's licenses and health cards, for example). Widespread reliance on documents issued by various agencies creates an interdependence (A relies on B who relies on C who relies on A). This makes all parties more vulnerable. For example, with a SIN and a birth certificate, the bearer has access to a number of social programs. We noted that a birth certificate with a SIN is also acceptable for OAS applications. The HRDC Income Security Programs Branch, which is responsible for OAS, has not assessed the reliability of this document.

16.56 For the SIN, the extent to which the identity document is validated depends on the ability of HRDC clerks and agents to recognize fraudulent or falsified documents. The large number of documents accepted by the Department in support of SIN applications makes this task even more difficult. There are up to 37 types of documents that can be accepted and, moreover, among the 12 provincial and territorial jurisdictions there are several variations of birth certificates. Design changes in documents, lack of photographs, the mobility of individuals who may be carrying identification produced in many different jurisdictions, all make it increasingly difficult for program staff who review documents to identify forgeries or altered information. As well, the reliability of these documents is not given a rating and so the Department's approach is not tailored according to the quality of identity documents provided by issuing organizations.

16.57 In provincial programs, the SIN plays a key role in establishing the identity of a person applying for services, either through examination of the presented SIN card or by data matching using the number. The SIN card is accepted as original proof of identity in five of the eight provincial programs we reviewed.

16.58 The SIN card was not designed to identify the bearer. Thus, the SIN card has no security features that are unique to the bearer (photograph, description, or other characteristics such as fingerprints and retinal scan) and that could serve to prevent and deter falsification and improper use of the card (see Exhibit 16.6 for some of these security features).

16.59 Human Resources Development Canada should:

  • update the proof-of-identity program, not reviewed thoroughly since its inception in 1976, to make it more rigorous and more compatible with the other programs it supports;
  • assess the reliability of identity documents used to support applications for a Social Insurance Number and its other programs such as Canada Pension Plan and Old Age Security, and implement corrective measures where necessary; and
  • investigate the feasibility of either upgrading the security features on the Social Insurance card or dispelling perceptions that it is an official proof of identity.
Human Resources Development Canada's response: Agreed. HRDC will review the process for SIN applications with a view to strengthening the proof of identity required of applicants. In addition, HRDC agrees to review proof-of-identity requirements in respect of applicants for HRDC benefit programs. HRDC emphasizes that the Social Insurance card is not and was never intended to be an identity document. However, HRDC recognizes that the card might nonetheless be used in this way and agrees to study what might be required to ensure proper usage of the card in light of government policy concerning the use of the SIN.

Investigations of Fraud and Abuse Related to the SIN

Minimal effort is dedicated to SIN investigations
16.60 The previously noted weaknesses make the SIN vulnerable to abuse. Section 141(1) of the Employment Insurance Act makes it an offense to:

  • knowingly apply for more than one SIN;
  • use someone else's number to deceive or defraud;
  • loan or sell a SIN or a SIN card to deceive or defraud Employment Insurance; and
  • manufacture or duplicate a SIN card.
16.61 It is worth noting that this section of the Employment Insurance Act goes beyond the Employment Insurance program itself and covers illegal use of the SIN to defraud other programs (such as revenue collection, social assistance, etc.), other individuals or companies. It is also an offense under section 102 of the Canada Pension Plan Act to knowingly furnish any false or misleading information in applying for a SIN.

16.62 Since HRDC is responsible for controlling the SIN, it is vital that it conduct proactive and effective investigations in order to prevent, detect and deter abuses that could potentially cost taxpayers many millions of dollars and cause hardship.

16.63 Identity theft - the illegal use of a person's identity information, including the SIN - is a growing phenomenon in North America. For instance, an American government agency's investigations of financial crimes involving identity fraud estimated that actual losses to the victimized individuals and institutions totalled US$745 million in fiscal year 1997. Other costs of identity theft can also be very high, though not easily quantifiable. Individual victims can suffer injury to their reputation and must undergo the process of clearing their credit rating. In the interim, these individuals may be unable to keep or find a job, obtain a home mortgage or secure a loan.

16.64 The Investigation and Control Directorate of the Employment Insurance Program is responsible for investigating suspected attempts to defraud the Program. Abuse of the SIN is only one of the forms of fraud this Directorate investigates. In 1996-97, it conducted 958,000 investigations that resulted in total savings of $564 million. However, the savings from investigations that HRDC specifically attributed to the abuse of the SIN represent only a minute fraction of that amount. SIN-related savings for programs other than Employment Insurance are not included and SIN investigations are not always classified as SIN-related. Moreover, the already small number of investigations continues to decline. As shown in Exhibit 16.7 , there were 2,730 investigations of SIN abuse in 1997-98, a decline of 52 percent from 1993-94.

16.65 The Income Security Programs Branch conducted even fewer SIN-related investigations than the Employment Insurance investigators. Given the generally recognized higher risk of fraud represented by mail-in applications (explained in paragraph 16.50) , certain income security programs may be very vulnerable to fraud. Indeed, a pilot project jointly conducted by the Investigation and Control Directorate and the Income Security Programs Branch shows that there is considerable room for a more proactive approach to detecting these frauds.

SIN investigations could provide substantial results
16.66 There are many types of SIN abuses that lead to investigations. SIN abuses are reported by Revenue Canada, Employment Insurance, Canada Pension Plan, Old Age Security and by provinces. Others are reported by financial institutions (banks, credit bureaus), major retail stores and public utilities. In one province, we noted a higher proportion of cases connected to abuse of provincial social services. Many abuses involve someone using a legitimate SIN of another individual to work or to pay less income tax. The legitimate taxpayer may subsequently be reassessed and asked to pay the taxes on this impostor's undeclared income. In such cases, the legitimate taxpayer is advised to contact HRDC and request an investigation. We estimate that income-tax-related investigations represent 17 percent of the SIN investigation workload. As a result of those investigations, in the last five years Revenue Canada has made 1,132 corrections to tax records that represent income totalling $36 million.

16.67 Some investigations have produced impressive results that demonstrate the significance and potentially high materiality of SIN-related fraud. Such investigations often involve a large number of stolen, invalid or fraudulently obtained SINs and frequently represent large sums of money for the government and individuals. Exhibit 16.8 summarizes some of these investigations, reported to us by departments. It includes investigations conducted by Revenue Canada that also illustrate the potential for recovering funds through investigation of SIN frauds.

16.68 Our field visits to some provincial departments demonstrated that abuse and fraud using multiple identities is also present and can be detected. Some of these organizations have special investigation activities to address issues of abuse and fraud. Results clearly demonstrate that theft of identity occurs.

The quality of SIN investigations needs to be improved
16.69 Our review of investigation files revealed several weaknesses in the quality of the investigations conducted. For instance, we estimate that fewer than one percent of investigations ultimately generate a strong enough case to lay charges. In one region, investigators were instructed to stop SIN investigations related to income tax at the point where the hardships caused to the legitimate taxpayers had been contained, and to make only limited efforts to identify the perpetrators. We also noted little effort to identify root causes in investigation reports. Only five percent of the investigation files we reviewed contained references to lessons learned and possible corrective action to prevent a recurrence of the activities.

Existing performance indicators discourage SIN investigations
16.70 Since 1992, HRDC has implemented a results-based approach to its investigations. They are now assessed using a performance indicator that focusses on total savings generated by investigations. It is based on the dollar value of overpayments, penalties and prosecutions and the value of prevented mispayments. The Treasury Board Secretariat has accepted the indicator as a reasonable and realistic measure of investigative performance and it is now used to determine resource allocations.

16.71 However, because of the pervasive use of the SIN, this type of fraud also affects other federal departments, provincial, territorial and municipal social services and the private sector. As shown in Exhibit 16.2 , Employment Insurance frauds represent only one of many ways the SIN can be used to commit frauds of various kinds. The savings to other programs that are generated through SIN investigations are not attributed by HRDC to Employment Insurance investigators. The Department told us that it had not yet put forward a business case to the Treasury Board for changing the indicators to reflect savings to other programs. Furthermore, when a SIN investigation has a high dollar value or involves a complex scam, the Department often codes it as major fraud or a "third-party denunciation" and the savings generated are not credited to SIN investigations. The end result of the performance measurement model currently used by the Department is that Employment Insurance investigators give SIN investigations very low priority. This, more than anything else, explains the steady decline in the number of SIN investigations and the unsatisfactory quality of those that are conducted.

16.72 The decline in the number and quality of SIN investigations can also affect the integrity of the SIN data base. A proactive and effective investigation function is necessary to minimize fraudulent activities. Major weaknesses in the system that come to light through investigations need to be recognized and corrected to prevent their recurrence.

16.73 Human Resources Development Canada should redesign its performance indicators for investigations of abuse of the Social Insurance Number to recognize their importance to not only the Employment Insurance program but also other federal, provincial, territorial and municipal programs.

Human Resources Development Canada's response: Agreed. HRDC recognizes the importance of detecting and preventing fraudulent use of the SIN. The value of SIN investigations needs to be defined, particularly in relation to the additional resources required to devote to this increased activity. HRDC will review its performance indicators accordingly.

Penalties resulting from successful SIN investigations are minimal
16.74 The Employment Insurance Act states that the penalty for committing any offenses related to the SIN is a fine of up to $1,000 and/or imprisonment for up to one year. Charges under the Criminal Code can also be pressed. As we have noted, however, very few perpetrators are caught, and even then the Department rarely brings criminal charges. In the files we reviewed, the only case in which charges were laid ended in a fine of $200.

16.75 Such low fines do not appear to warrant the considerable time and effort that prosecution entails, and their deterrent effect is doubtful. Thus, there is effectively no penalty for activities that could cause considerable damage to social programs, tax collection, commercial activities and the privacy and security of individual Canadians. Administrative penalties such as those applied in cases of Employment Insurance abuse would provide more flexibility, be less costly to administer, deter potential abusers and better protect Canadians from illegal use of the SIN.

16.76 Human Resources Development Canada should explore the possibility of applying administrative penalties for offences related to the use of Social Insurance Numbers.

Human Resources Development Canada's response: HRDC agrees to explore the application of administrative penalties in cases involving fraudulent use of the SIN. This will take into account the requirements for change in the Employment Insurance legislation and the legal and administrative issues associated with implementing and enforcing the legislation, including recovery mechanisms.

Impacts on Other Users

Use of SIN as a de facto national identifier has caused numerous problems for other users
16.77 Finding misuse and abuse in any system can be compared to "looking for a needle in a haystack". The way the SIN is managed or not managed has repercussions throughout the income security and revenue collection systems. While the visible impact on any one program may be minimal, the collective impact can be significant. Examples we encountered during our work illustrate this.

16.78 Revenue Canada relies on the master file provided by SIR to validate the identity of new tax filers. In the event that identity cannot be validated by SIR, Revenue Canada told us it requests identification documentation from the individual. Revenue Canada also has internal controls that can compensate for errors and catch them after the fact. However, they still leave Revenue Canada vulnerable to inaccurate information found on the SIR data bases due to, among other things, SIN applications that are fraudulent from the outset.

16.79 In the last few years, a range of cases detected by Revenue Canada investigations revealed a variety of SIN frauds that involved benefit programs of several other departments, both provincial and federal. These fraud cases allowed the perpetrators to fraudulently gain millions of dollars in benefits. Among the many factors that made these frauds possible was the inability to readily verify birth and death data. In some cases, SIN numbers had been stolen from company files.

16.80 As discussed in paragraphs 16.44 and 16.45 , the lack of an expiry date on temporary SINs causes problems for Citizenship and Immigration Canada and Revenue Canada and allows abuse and misuse.

16.81 In the tax year 1993, Revenue Canada received 73,000 tax returns on which the SINs could not be linked to identified taxpayers. It has managed to reduce this number substantially. However, in 1994 (the last year for which Revenue Canada could readily provide up-to-date information on this matter) it still had about 47,000 taxpayers on its books who did not match with the SIR and who represented more than $72 million in income.

16.82 The provinces do ask that applicants for benefits provide a SIN. However, an applicant can refuse to do so and still receive benefits. The Income Tax Act and Regulations require that every province that pays social assistance and workers' compensation to an individual obtain that individual's SIN for use on the T5007 slip, which reports these payments. Although the rate of provincial compliance with that requirement is relatively high, according to Revenue Canada (96 percent of applicants provide SINs), the 110,000 SINs representing the remaining 4 percent translate into $500 million in social assistance and workers' compensation payments for tax year 1996. The slips without a SIN have only a name and an address. There is no birth date, so matching is very difficult.

16.83 Provinces, who are among the main users, do not yet have official access to the SIR although HRDC states, based on advice from the Department of Justice, that it is now possible. They do not receive information on the five million SIN flags in the system (deceased, fraudulent, cancelled, etc.); this causes problems for the integrity of their data bases. A test by HRDC comparing data in the SIR with provincial data for two medium-sized cities and one province showed inaccuracies in both the SIR and the related data for up to 10 percent of the social assistance population. We noted that where the agency using the SIN has no way of verifying its legitimacy, a knowledgeable applicant can create a number that will work in the system. The financial institutions - who are required by law to collect the SIN for income-related transactions - are likely to face the same problems.

16.84 HRDC has been working within the existing legal framework of the Employment Insurance Act to try to provide access to the SIR for users other than those officially authorized, especially the provinces (see paragraph 16.103 for further explanation). We noted that the provinces have their own privacy legislation that regulates their governments' use of personal information.

Legal and Policy Framework for Managing the SIN

Privacy of information is a key dimension of managing the SIN
16.85 Privacy issues revolve around the rights of individuals to exercise control over their personal information. We have thus far dealt with issues related more to the reliability and integrity of the SIN. It is important to make a distinction between security and privacy; a perfectly secure and fraud-proof system could nonetheless be highly intrusive.

16.86 The right to information privacy can be defined as the right of individuals to determine when, how and to what extent they will share personal information about themselves with others. This generally implies that personal information will be used only for the primary purpose intended and with the consent of the individual where not provided for by law. The individual has the right to review the information for accuracy.

16.87 The goals of administrative efficiency and service delivery must be balanced against the often competing objective of maintaining individual privacy. The history of the SIN has reflected this tension.

16.88 The use or abuse of the SIN in violation of privacy has been a concern among Canadians, in particular the fear that it will be used as a universal identifier to create a national data base. Over the years, several hundred inquiries and complaints received by the Office of the Privacy Commissioner have been related to the inappropriate use or disclosure of SIN-related information.

Extensive use of personal information by HRDC attracts attention of privacy advocates and the Privacy Commissioner
16.89 Apart from being the custodian of the SIR, HRDC is one of the most important federal departments involved in the collection and use of personal information. It also has large internal data banks on nearly all Canadians that link personal information and are used for management of programs, evaluation and research.

16.90 HRDC has over 250 agreements with many partners that deal with the receipt or exchange of personal information. These agreements are reached pursuant to a specific provision in HRDC's or the other partners' legislation that authorizes such exchanges of information. At the end of 1997, HRDC classified 20 such exchanges as data matches, 13 of which were with Revenue Canada.

16.91 HRDC has a structure in place for administering the Privacy Act and the Treasury Board policy on data matching and control of the SIN. There are privacy co-ordinators in each regional office. HRDC officials informed us that all their data-sharing agreements are reviewed by their in-house legal counsel to ensure compliance with the Privacy Act . Our review of information obtained from the Privacy Commissioner revealed that of the 36 notifications of proposed new data matches received since 1989, 50 percent came from HRDC. We noted that there is ongoing dialogue between HRDC and the Privacy Commissioner on privacy issues.

16.92 The Office of the Privacy Commissioner, an independent oversight agency reporting directly to Parliament, recently completed a study for the purpose of examining HRDC's formal strategies for the collection, retention, use and disclosure of personal information. The study was not a compliance review under section 37 of the Privacy Act ; although it did contain recommendations, it did not specifically look for unreported data-matching activities.

16.93 The Privacy Commissioner's study concluded that, overall, HRDC employees demonstrated a good level of privacy awareness. It highlighted areas where the Department was doing well and identified privacy issues to pursue. In particular, the study noted that the Commissioner's Office will be working on a consultative and ongoing basis with HRDC's officials to provide input on such privacy issues as the Common Client Identifier project and access to the Social Insurance Register information. Any issues that the Privacy Commissioner considers significant will be dealt with directly by his Office. We did not seek to duplicate his work.

16.94 We found that assessing compliance with data-matching policy and guidelines is a contentious area, given the various forms of data matching possible. Current responsibilities and controls over data matching need to be revisited with a view to ensuring adequate protection of personal information (see Exhibit 16.9 for further explanation).

Unregulated use of SIN in the private sector is a key vulnerability
16.95 The use of the SIN is not regulated in the private sector except in Quebec, where private sector use of personal information is regulated by legislation. Unregulated and pervasive use of the SIN in the private sector is seen as a key flaw by privacy advocates because the SIN can be used to violate privacy and to steal identity.

16.96 Industry Canada and the Department of Justice have started to address the issue of regulating privacy in the federally regulated areas of the private sector. Legislation is expected this fall. However, even if the proposed legislation did address misuse or abuse of the SIN, it would not address the provincially regulated areas of the private sector.

16.97 Certain areas of the private sector have begun to adopt voluntary privacy codes, generally based on the Canadian Standards Association Model Code for the Protection of Personal Information. In a report released in January 1998, Industry Canada and the Department of Justice said that the current "patchwork" of laws, regulations and privacy codes was not adequate given, among other things, the federal government's increasing exchange of personal information with the private sector. Private businesses are more and more involved in the delivery of government services through the contracting out or privatization of some government functions.

16.98 During our audit we asked various government stakeholders, including the Department of Justice and Industry Canada, to provide us with any studies they had done in the past 15 years on the impact and extent of the use of the SIN in the private sector. No such studies were available. Access to this kind of assessment would be invaluable in determining the potential restrictions of the SIN in the federally regulated private sector, which could then be considered in the upcoming federal privacy legislation.

16.99 The government should seriously consider conducting an assessment of the impact and extent of private sector use of the Social Insurance Number, and use the upcoming privacy legislation as an opportunity to address long-standing concerns about related privacy issues.

Industry Canada's response: Industry Canada has consulted with the Department of Justice in the preparation of this response to the recommendation regarding the use of the SIN by the private sector. We have noted the Auditor General's interest in the use of the SIN by the business community, and share his views that further study of the extent of that use would be valuable. We will be examining ways to obtain more accurate information in this regard, in concert with other interested government departments. We also note the reference to the legislation that Industry Canada and the Department of Justice will be introducing shortly to protect personal information in the private sector. We believe that this legislation will address the issue of unnecessary collection and misuse of personal information, including the SIN, and we will study the recommendation for further specific protection of the SIN in the context of our ongoing work on this legislation.

Progress in clarifying the role and improving the management of the SIN is slow
16.100 HRDC and other players have made several attempts to improve the management of the SIN. In 1990, the Evaluation section of HRDC issued a report and made a number of recommendations aimed at improving the application process and the reliability of the data base. An Interdepartmental Task Force on the Integrity of the Social Insurance Register was formed in 1994. Its initial mandate was to deal with residency issues related to Goods and Services Tax Credit and Child Tax Benefit payments, the transfer of Revenue Canada's death data to the SIR and the exchange of information on SINs found to have been used for fraudulent purposes. In 1994, staff responsible for the SIR issued a report entitled "Modernization of the SIN: The Key to Social Security Reform".

16.101 The response to these events, although difficult to attribute to any one of them specifically, was a number of system improvements and new data-sharing activities. They also led to better co-ordination and the use of common guidelines between Revenue Canada and HRDC on handling victims of identity theft and communicating information on false or problem SINs in the system.

16.102 Phase II of the Interdepartmental Task Force to address more fundamental issues was never undertaken and its activities were suspended sometime in 1995. The reasons for not proceeding further with this specific initiative were never stated officially.

16.103 As discussed in paragraphs 16.83 and 16.84 , HRDC has been working within the existing legal framework of the Employment Insurance Act to try to provide access to the SIR for users other than those officially authorized, especially the provinces. A revised policy on the new uses of the SIR arising from advice given by the Department of Justice was recently approved by the Employment Insurance Commission. This policy states that SIR information can be shared with federal, provincial, territorial and municipal government agencies involved in providing financial assistance, whether in the form of welfare assistance, training benefits or grants or workers' compensation payments. HRDC told us it plans to facilitate access through written agreements with the provinces, similar to the labour market agreement process.

16.104 We note that the revised policy approved by the Commission, which grants greater access to the SIR, supports its continued use by other jurisdictions. This seems to be inconsistent with the Treasury Board policy aimed at preventing expanded use of the SIN. The Office of the Privacy Commissioner states that it is working closely with HRDC officials to provide input on the privacy issues related to expanded access to the SIR.

16.105 In 1996, HRDC and provincial and territorial social service departments began an initiative aimed at delivering social services more efficiently and effectively through the use of a common client identifier (CCI). The core options considered, apart from the status quo, for use as a CCI by the Federal/Provincial/Territorial Working Group were the following:

  • use of the current SIN for all federal/provincial/territorial income security clients, with the current configuration and administration of the SIN;
  • modernization of the SIN with digitized personal and security information, linking the card to the holder; and
  • establishment of a new client identifier to replace the SIN.
While the research raised a number of key issues associated with each, it appeared to favour using the SIN, even with its apparent weaknesses.

16.106 It quickly became evident that this initiative would need considerable support to overcome the political sensitivities associated with privacy issues. In July 1997, HRDC wrote officially to the Treasury Board stressing the need for a government-wide privacy framework, particularly given the growing momentum toward use of a common client identifier.

16.107 At the time of our audit, HRDC had not completed the subsequent business case for the Common Client Identifier project, so we are not able to comment on its conclusions.

16.108 A recent research study (January 1998) done on behalf of HRDC and the Federal/Provincial/Territorial Working Group on Common Client Identifiers examined the experiences and lessons learned in the introduction and use of a CCI in seven other jurisdictions. All of the jurisdictions studied have considered or are now implementing a CCI. In a few of these countries, identification numbers have proliferated in much the same way as in Canada. Exhibit 16.10 highlights some of the experiences and lessons learned. The study concluded that using an existing number with which the public is comfortable has found better acceptance; successful experiences with a CCI have used an existing number rather than introducing a new identifier. Smaller-scale application of a CCI, aimed at specific clusters of programs such as income security programs and using an existing identification number, was one approach used by other jurisdictions.

16.109 The effectiveness of certain administrative decisions as well as the integrity of social programs are greatly facilitated by the reliability of the information contained in the SIN data base. We believe it is time to review the current roles, objectives and uses of the SIN in light of its governmental and societal importance. The government needs to clearly state the level of integrity and privacy protection expected in the system.

16.110 There appear to be two options: improve the existing framework to catch up with the current reality of SIN usage or else devise an acceptable alternative solution to meet the needs of users, including governments and individuals. In any case, the privacy implications need to be recognized.

Conclusion

16.111 Our audit objective was to determine whether the management and control of the SIN is efficient and effective and has an appropriate basis in the legislation. Our audit findings highlighted the numerous problems associated with the use of the SIN as well as its inherent unreliability. There is a critical gap between the framework for the SIN and the role it now plays in Canadian society. The SIN was originally conceived as a file numbering system to identify individuals collecting Unemployment Insurance and CPP benefits, not as a means to accurately identify individuals across the national income security and tax collection systems. Given the pervasiveness of the SIN, the proof-of-identity procedures are flawed, the information in the SIN data base is not always complete and accurate, there is minimal protection for individuals whose numbers are misused, and the penalties for misuse are weak and difficult to apply. As well, there is little privacy protection for owners of a SIN, particularly in the private sector. These fundamental issues remain unresolved.

16.112 We have determined that major improvements are possible and need to be made. We noted that initiatives to achieve such improvements have been hampered by perceived political sensitivities over impacts on privacy and by a lack of leadership.

16.113 The implications of legitimizing the use of the SIN as a common client identifier for income security and revenue collection programs in Canada need to be fully debated and compared with alternatives.

16.114 In our view, it is essential that Parliament play a major role in debating these issues, increasing public awareness and finding a satisfactory solution.

Joint comments of Human Resources Development Canada, Department of Justice and Treasury Board Secretariat: The federal government remains strongly committed to the principles governing the protection of privacy. The Treasury Board Secretariat, Department of Justice and Human Resources Development Canada work together in their respective roles and responsibilities regarding the SIN. HRDC is dedicated to diligent stewardship of the SIN and is in general agreement with the observations and findings arising out of the audit concerning its responsibilities related to the issuance of social insurance numbers, maintenance of the Social Insurance Register, and investigation of suspected abuse. The recommendations will provide additional support to work already under way in many of these areas with other federal government departments and provincial and territorial partners.

In this chapter, the Auditor General has noted the expanded use of the SIN and access to the SIR by governments for operational effectiveness and efficiency purposes. The use of the SIN within the federal domain is regulated by specific legislation. As the chapter indicates, HRDC's administration of the SIN is in accordance with the intent of its legal framework whereby the SIN is intended to be a file identifier (account number) for certain federal government programs.

As the chapter also notes, the provinces have their own privacy legislation that regulates their governments' use of personal information.

The Auditor General is concerned with private sector use of the SIN and the perception this may create that the SIN is becoming a national identity number. The chapter also refers to the fact that the government will be introducing legislation in the near future to protect personal information in the private sector. We believe that this legislation will address the issue of unnecessary collection and misuse of personal information, including the SIN.

Should there be any future changes to the legislative framework authorizing new or different uses of the SIN, Treasury Board Secretariat, Department of Justice and HRDC will work with interested stakeholders to ensure that associated policies are revised and that they meet operational requirements.


About the Audit

Objectives

The objective of our audit was to assess the management and control of the SIN to determine if it is efficient and effective and has an appropriate basis in legislation. More specifically, we sought to:

  • examine the role and uses of the SIN;
  • examine and assess the SIN application process and the management of the Social Insurance Register;
  • assess the investigations of fraud and abuse related to the SIN; and
  • assess its basis in legislation.

Scope

Our audit covered:

  • the role and use of the SIN in the management of various Canadian social programs;
  • the application process and management of the Social Insurance Register;
  • the proof-of-identity program for the SIN;
  • the investigations of fraud and abuse related to the SIN;
  • the efforts made to improve the SIN; and
  • the legislation, policies and guidelines related to the SIN.
We interviewed officials and reviewed documentation at HRDC headquarters and in other federal departments and agencies who are users of the SIN (Revenue Canada and Citizenship and Immigration Canada), those who have responsibilities with respect to the SIN (Treasury Board Secretariat, Department of Justice and Office of the Privacy Commissioner) and those who have relevant experience (Royal Canadian Mounted Police, Industry Canada, Passport Office and Elections Canada). We also interviewed officials in three provinces whose departments and agencies are users or stakeholders of the SIN (such as social services, workers' compensation boards, health services, motor vehicle bureaus, etc.). We visited nine Human Resource Centres of Canada in Ontario, Quebec, Alberta and British Columbia and the Social Insurance Register in Bathurst, New Brunswick. We analyzed planning documents, minutes of meetings, internal studies, performance reports and other related documents.

Criteria

  • The SIN application process should be controlled in order to prevent, at a reasonable cost, the issuance of SINs to individuals who are making fraudulent applications.
  • The SIN central register should be managed in a way that ensures the reliability, integrity and confidentiality of personal data; its operations should be managed in an efficient and effective manner.
  • The use of the SIN and the SIN card in government programs should be well controlled to reduce abuse, fraud and inappropriate access to the personal data.
  • Investigations should detect and prosecute instances of fraud and abuse in a timely, cost-effective manner. The sanctions imposed should have a deterrent effect.
  • The SIN should be a reliable tool to control social programs.

Quantitative Information

The quantitative information in this chapter has been drawn from various sources indicated in the text. Unless otherwise indicated, the information has been examined for reasonableness but not audited.

Audit Team

Assistant Auditor General: David Rattray
Principal: Theresa Duk
Directors: Maurice Laplante and Gaëtan Poitras

Martin Dompierre
Yves Genest
Marc Larose
Yvon Roy

For information, please contact Theresa Duk or David Rattray.