Guy Parent's office discovered, in the course of investigating an individual complaint, that half of the country's 1,800 veterans who'd been assessed with a 98 per cent disability had never been informed they were eligible for federal payments outside of the veterans system.
In each of the cases, the most severely injured were entitled to an allowance for "exceptional incapacity" under the Pension Act.
Federal bureaucrats were forced by Parent to notify the hundreds of soldiers who'd been left out.
A study carried out last year by the former ombudsman, retired colonel Pat Stogran, found that the very same category of veterans were the ones most penalized by 2006 reforms to the system.
An independent audit found that the lowest ranking soldiers, with the worst wounds and disability, received less under the system. The Conservative government moved to fix that with legislation that passed in the spring of last year.
Stogran said it goes without saying that those soldiers could've had used the money and the department failed in its obligation. But he said he wonders if any there was any redress for the lost benefits.
"The culture of the department was not about serving veterans and it's still not. It's rotten," he said Thursday.
Stogran criticized Parent for not bringing the matter to public attention prior to the annual report, which was tabled in Parliament on Thursday.
The current ombudsman was not immediately available for comment.
It was not the only failure to communicate uncovered by the ombudsman in the past year, according to the report.
In the case of the spouse or common law partner of a veteran who'd passed away, the department did not give them a heads-up that their pensions would be scaled back.
Survivors continue to receive the veteran's pension for a year, but face a dramatic reduction after that.
Parent says the fact the department gave survivors no warning created "confusion and financial hardship."
Another bone of contention was the fact that when Veterans Affairs denied medication and treatment requests, it almost never explained why.
"This makes it very difficult for veterans to gather the necessary documents that might result in a successful appeal," the report said.
A spokeswoman for Veterans Affairs Minister Steven Blaney did not address each of the criticisms in Parent's report, but suggested that the department was on top of the issues.
"Our government is already addressing issues raised in the report through service improvements, enhancements to the New Veterans Charter and other initiatives," said Codi Taylor.
Parent also renewed his criticism of the department over its contention that there will be fewer veterans to deal with in the coming years because the overall population of Second World War and Korean soldiers is declining.
Bureaucrats are using that assumption to justify a planned $226 million budget cut next year. Parent challenged the notion before a House of Commons committee a few weeks ago, saying he believes the number of peacekeeping soldiers and Afghanistan troops who will need help in the future will create more, not less work.
He said "the complexity of modern cases might be enough to increase the Department’s workload even if there was a decline in the number of clients."
Parent's report calls the planned reduction "premature" and warned that it could even compromise progress that has been made.
The ombudsman also said that the recently amended New Veteran's Charter should be reviewed in two years, not five years the way the Harper government had planned.