Canada Emergency Wage Subsidy; Canada Emergency Response Benefit

Opening Statement to the Standing Committee on Finance

Canada Emergency Wage Subsidy

(Report 7—2021 Reports of the Auditor General of Canada)

Canada Emergency Response Benefit

(Report 6—2021 Reports of the Auditor General of Canada)

13 December 2021

Karen Hogan, Fellow Chartered Professional AccountantFCPA, Fellow Chartered AccountantFCA
Auditor General of Canada

Mr. Chair, I wish to acknowledge that the lands on which we are gathered are part of the traditional unceded territory of the Anishinaabeg People.

Thank you for this opportunity to contribute the committee’s study of Bill C‑2, An Act to provide further support in response to COVID‑19. I’m happy to discuss our audit reports including the Canada Emergency Wage Subsidy and the Canada Emergency Response Benefit, which were tabled in the House of Commons on March 25. Joining me today is Philippe Le Goff, who was the principal responsible for the CEWS audit.

Our audit of the Canada Emergency Wage Subsidy program focused on whether the Department of Finance Canada provided analysis on the 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 design and rollout of the subsidy highlighted pre-existing weaknesses in the Canada Revenue Agency’s systems, approaches, and data. One of the weaknesses is related to the lack of up-to-date tax data, which meant 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 decided to not implement 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.

Let’s turn now to our report on the Canada Emergency Response Benefit. This audit focused on the analysis carried out by Employment and Social Development Canada, and the Department of Finance in the design of Benefit. It also examined whether Employment and Social Development Canada and the Canada Revenue Agency designed mechanisms so that the benefit would support eligible workers who suffered a loss of income for reasons related to the COVID‑19 pandemic.

Working within a short time frame, Employment and Social Development Canada and the Department of Finance Canada supported the design of the benefit to quickly deliver support to workers who lost income because of the COVID‑19 pandemic.

The department and the agency made an early decision to focus on post-payment controls to simplify the process and expedite issuing benefit payments. The department and the agency introduced additional controls once the benefit was rolled out.

Based on our audit work on the original design of the programs, both will need to rely heavily on post payment verification, which will be time consuming and costly.

The post-payment work on these 2 programs was expected to be the subject of an audit from my office to begin early in 2022. However, we have been informed by the agency that it has deferred or delayed its work and that it is highly unlikely that a significant amount of post-payment work will be completed by 2023. Given that there will be very little for us to audit, we have postponed our work.

Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions the committee may have. Thank you.