Opening Statement to the Standing Committee on Public Accounts

Canada Customs and Revenue Agency (CCRA) and Human Resources Development Canada (HRDC) - Dealing with Suspected Abuse and Fraud in the Employment Insurance Program
(Chapter 34 - December 2000 Report of the Auditor General)

Thank you, Mr. Chairman, for giving us the opportunity to speak today about our audit observation on suspected abuse and fraud in the Employment Insurance (EI) Program. I have with me today Jean Ste-Marie, Assistant Auditor General and Neil Papineau, Director responsible for this audit observation.

This matter came to our attention by way of a complaint alleging extensive abuse and fraud in the Employment Insurance Programs by several industries in British Columbia's lower mainland. Employers in several industries were issuing false Record of Employment forms to individuals so that these individuals could obtain EI benefits fraudulently. The complainant further alleged that HRDC and CCRA have been aware of this situation for over 20 years and have not taken appropriate action to stop it.

Record of Employment forms are very important documents used in all EI benefit claims to determine eligibility for Employment Insurance benefits. An insurability ruling, which includes determining the actual hours, earnings or employment that qualify under the Employment Insurance Act is a decision made by CCRA.

The scope of our work was limited to how HRDC and CCRA examined, investigated, and responded to suspected abuse and fraud of the EI Program in British Columbia. We inquired into suspected false EI benefit claims on questionable Record of Employment forms.

We determined that CCRA Rulings and Appeals in B.C. were following national administrative guidelines, and national training and policy manuals. However, none of these manuals provided guidance to rulings officers or appeals officers to deal with cases of suspected abuse or fraud.

HRDC investigates a Record of Employment form when it suspects abuse and fraud. Once HRDC has sufficient evidence to call into question the validity of the Record of Employment form, it ceases its investigation and forwards the matter with its evidence to CCRA for an insurability ruling decision. CCRA is then responsible for undertaking a sufficient review. The appeals process starts when the claimant or employer is not satisfied with the CCRA rulings decision. HRDC generally accepts CCRA ruling decisions as it rarely appeals.

The Employment Insurance Act addresses the roles of HRDC and CCRA on the insurability issue, but it is unclear on how rulings are to be made and appeals are to be decided. The process is not transparent. As a result of the manner in which HRDC and CCRA administer and enforce the Employment Insurance Act, no in-depth investigation is ever completed on cases where insurability is an issue.

Our audit in how CCRA carried out Insurability Rulings and Appeals determined many problems:

• untrained rulings and appeals officers;
• desk reviews were undertaken instead of field work;
• reviews were duplicated, allowing claimants to change their responses;
• insufficient time was spent to adequately review cases;
• HRDC was not given the opportunity to make a full representation;
• CCRA officers placed more weight on the latest evidence obtained; and
• files had insufficient evidence to substantiate the decisions.

We found substantial delays in the processing and completion of suspected abusive and fraudulent EI claims. These delays were averaging in excess of two years and most were unresolved at the time of our audit.

CCRA has never prosecuted employers or claimants who may have made deceptive statements. We also found that HRDC in B.C. has never prosecuted employers during the period we reviewed, though it had levied some administrative penalties.

Our review has confirmed that HRDC and CCRA officials have known for many years of these suspected abusive and fraudulent practices in British Columbia, and little was done to stop it.

In conclusion, Mr. Chairman, based on the findings of the audit, HRDC and CCRA should consider the following:

• review the legislative guidance and consider how the rulings and appeals process can be made more transparent;
• better communication between HRDC and CCRA;
• CCRA should include in training manuals specific sections dealing with suspected abuse and fraud;
• CCRA should improve the training to rulings and appeals officers to adequately deal with suspected abuse and fraud;
• CCRA should provide additional budgeted time and resources to rulings and appeals officers so that they have adequate time to undertake their reviews; and
• CCRA should disclose to HRDC any new or contradictory evidence from claimants and employers. HRDC will be adequately informed and be able to make further representation to protect its interest.

Mr. Chairman, this is an important matter and we are happy to see that this committee and the HRD Committee are dealing with it. This concludes my opening statement. We would be pleased to answer your Committee's questions.