Question Period Note: POST PAYMENT COMPLIANCE PROGRAMS FOR CEWS

What is the Canada Revenue Agency doing from a compliance perspective during the COVID-19 pandemic?

• The Canada Emergency Wage Subsidy (CEWS) was launched quickly with the goal of helping employers impacted by the COVID-19 pandemic keep workers on their payroll, bring back previously laid-off employees and help ease their businesses back into normal operations.

• The Canada Revenue Agency (Agency) was provided with, and followed, clear legislative direction regarding the wage subsidy and its eligibility criteria.

• In an effort to mitigate non-compliance and ensure the integrity of the CEWS program, the Agency developed a comprehensive compliance program including:

• Up-front verification to help ensure the subsidy was provided to eligible applicants.

• Pre-payment manual reviews of a significant number of applications that had been flagged through electronic or manual risk assessment.

• Post-payment audits to confirm eligibility against the claimants’ books and records were conducted to further evaluate the level of compliance.

• Numerous additional controls, such as tracking IP addresses, identifying duplicate Business Numbers or Registered Payroll accounts, and identifying duplicate or changed direct deposit information, among others.

Supplementary
- To deliver the CEWS program, the Agency established regular governance oversight to enhance internal cooperation, exchange of information and progress on the subsidy program.

Redacted – 21(1)

The Auditor General also concluded that, as a result, the Agency will have to “rely primarily on comprehensive and costly audits that will begin in spring 2021.” Of note, the Agency began its audits in August 2020, which are still ongoing.

Excerpts from the report:
7.45 We found that, to deliver the subsidy, Canada Revenue Agency officials did a large amount of work that would have taken much longer under normal circumstances. The agency developed a risk register and established many committees to facilitate the exchange of information between the numerous branches involved in delivering the subsidy. The agency collaborated with the Department of Finance Canada to develop the legislation and analyzed potential problems related to the subsidy. It also implemented information technology solutions that helped it deliver the subsidy payments rapidly. In addition, agency officials published frequently asked questions on its website to help employers understand this evolving subsidy program. The agency also conducted outreach activities.

7.69 We concluded that even though the Department of Finance Canada performed a partial analysis of the initial design of the Canada Emergency Wage Subsidy program, it subsequently performed a sound and complete analysis to inform the changes to the program. We also concluded that although the Canada Revenue Agency delivered the subsidy payments rapidly, it chose not to establish tighter controls, and it lacked the sub-annual and up-to date earnings and tax information it needed to efficiently assess applications. Therefore, it will have to rely mainly on costly comprehensive audits that will start in spring 2021.

7.64 Recommendation — The Canada Revenue Agency should strengthen the integrity of the Canada Emergency Wage Subsidy program by using business intelligence information as soon as it is available in order to conduct targeted audits.

The agency’s response — Agreed. Timeliness of compliance actions is important; the Canada Revenue Agency made timeliness one of its key strategic objectives for compliance programs. In relation to the Canada Emergency Wage Subsidy, the agency initiated post-payment audits (Phase 1) in August 2020 for this emergency program launched in April 2020. These audits were selected on the basis of the results of pre-payment reviews conducted by technical officers and a random sample from the remaining subsidy-receiving population. Starting subsidy audits before the end of the taxation year is an innovative approach that provides taxpayers with earlier certainty and allows for better stewardship. In relation to further applying business intelligence, the agency will use Phase 1 audit results to inform and enhance the risk-assessment process for targeted Phase 2 post-payment audits starting in 2021. The agency is continuously investing in improving its risk-assessment systems and business intelligence to better focus its resources on the highest-risk cases of noncompliance at a national level in a timely manner. This action plan will be completed by 1 April 2021.

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