Canada Emergency Wage Subsidy
Opening Statement to the Standing Committee on Public Accounts
Canada Emergency Wage Subsidy
(Report 7—2021 Reports of the Auditor General of Canada)
22 April 2021
Karen Hogan, Chartered Professional AccountantCPA, Chartered AccountantCA
Auditor General of Canada
Madam Chair, thank you for this opportunity to discuss our report on the Canada Emergency Wage Subsidy, which was tabled in the House of Commons on March 25. Joining me today are Philippe Le Goff, who was the principal responsible for the audit, and Mathieu Lequain, who led the audit team.
As part of the response to the COVID‑19 pandemic, the federal government announced the Canada Emergency Wage Subsidy in March 2020. The subsidy was meant to help maintain the employer‑employee relationship during the pandemic and help position employers to resume normal operations when businesses can fully resume.
The Canada Emergency Wage Subsidy program, one of the largest initiatives the government has ever undertaken, is expected to cost approximately $97.6 billion by the end of the 2021–22 fiscal year.
This audit focused on whether the Department of Finance Canada provided analysis on the Canada Emergency Wage Subsidy program and whether the Canada Revenue Agency limited abuse by establishing appropriate controls in its administration of the program.
Overall, we found the Department of Finance Canada and the Canada Revenue Agency worked together within short timeframes to support the development and implementation of the Canada Emergency Wage Subsidy.
The Department of Finance Canada performed a partial analysis of the initial design of the subsidy program, and it later provided a sound and complete analysis to inform adjustments to the subsidy program made in July 2020. Although we were given access to all documents, we are unable to provide Parliament with details of these analyses because they were in secret and Cabinet documents.
The design and rollout of the subsidy highlighted pre-existing weaknesses in the Canada Revenue Agency’s systems, approaches, and data. These weaknesses need to be addressed to strengthen Canada’s tax system.
One of the weaknesses is related to the lack of up-to-date tax data. For example, we found that 28% of the subsidy applicants did not file a return for the goods and services tax or the harmonized sales tax for the 2019 calendar year. Given that goods and services taxGST and harmonized sales taxHST returns are important indicators of revenue, the lack of tax data means that the agency did not have all the relevant information for assessing the applications before issuing payments. This revenue information would have allowed the agency to validate the reasonableness of the revenue drop that was declared by applicants.
To prioritize issuing payments quickly, the Canada Revenue Agency chose to forgo certain controls that it could have used to validate the reasonableness of subsidy applications. For example, the agency decided that it would not ask for social insurance numbers of employees, although this information could have helped prevent the doubling up of applications for financial support.
The limitations of the agency’s information technology systems affected its ability to perform some pre-payment validations, as did the absence of complete and up-to-date tax information. As a result, the agency will have to perform more post-payment verification work, and we expect that the agency will have to rely mainly on costly comprehensive audits that will start in spring 2021. This post‑payment work will be the subject of a future audit from my office.
We made 3 recommendations to the Canada Revenue Agency and 1 recommendation to the Department of Finance Canada. The agency and the department agreed with the recommendations.
Madam Chair, this concludes my opening remarks. We would be pleased to answer any questions the committee may have. Thank you.