BUSINESS
04/30/2013 10:13 EDT | Updated 06/30/2013 05:12 EDT

Employment Insurance Canada: Feds Need To Crack Down On Overpayments, Auditor General Says

CP
OTTAWA - Ottawa is overpaying employment insurance by at least $300 million a year, and fails to get millions of it back, the auditor general said Tuesday.

The Conservative government has taken a beating in recent months for what critics say is an overly aggressive approach to policing EI, including sending public servants door-to-door to check up on recipients and establishing goals for the number of cheats they want to track down.

In his spring report, Michael Ferguson said the government needs to do even more to make sure it prevents, finds and recovers overpayments so the program stays fair.

Human Resources and Skills Development — the department responsible for EI — identified $295 million in known overpayments in 2011-2012, with about $110 million lost to fraud.

Meanwhile, the auditor general found the federal government is currently owed $662 million in clawbacks from cases stretching back more than two years, but was doubtful two-thirds of it will ever be recovered.

"There are figures that indicate that if they can put more resources on the recovery, that those resources more than pay for themselves," Ferguson told a news conference Tuesday.

"So I think it's something that the department and the government need to consider is what is the right level of resourcing on that identification, completion of investigations and recovery aspect."

The department says it's planning an analysis of overpayments and their impact on the system by the start of next year and will have a plan by next summer.

"Service Canada has an obligation to find and stop inappropriate claims," said Alyson Queen, a spokesman for Human Resources Minister Diane Finley.

"We will continue to ensure that Canadians who have paid into the system can always access these benefits when they need them."

In 2011-2012, the government recovered $311 million in overpayments, interest and penalties and gathered a significant amount of information about how that money was returned, the report found.

It is important the department uses that data to understand which cases offer the highest potential for returns, Ferguson said.

"By improving its analysis and understanding of overpayments, Human Resources and Skills Development Canada could potentially identify more overpayments and improve on recoveries," he said in a news release.

In 2011–12, the department processed 2.9 million claims and paid out $16.1 billion in benefits.

While the government knows it overpaid $295 million, it also recognizes that it hasn't yet identified all the mistaken payments and estimates those could be worth as much as $578 million, the report found.

The failure to get money back can be pinned on several factors, including case backlogs, writeoffs and the expiry of the statute of limitation on collections.

About 36,000 high-risk cases, representing as much as $20 million, were set to expire by the end of the 2011-2012 fiscal year without ever being fully investigated because they've passed the six years available to the government to collect overpayments.

Ferguson's report, released on the annual tax-filing deadline, also found the taxman is struggling to keep up with Canadians who don't pay their taxes.

The amount of unpaid tax debt has climbed by $10 billion, to $29 billion, in the last seven years — despite redoubled efforts by the Canada Revenue Agency to track and collect the money.

The agency says the 2008 economic meltdown drove up the amount of unpaid tax arrears because of personal and corporate bankruptcies, among other factors.

Ferguson gives the agency a mixed review for its collection efforts, saying much-needed work has been done since a highly critical report in 2006 on the tax-debt problem.

But the agency is also slow to implement improvements, with its proposals from 2008 not scheduled to be implemented until next year.

The taxman is also facing a key deadline next March, when it will no longer be able to collect most tax debts older than 10 years. The deadline is the result of legislation passed in 2004.

Ferguson's report says the Canada Revenue Agency won't have a systematic solution to chasing those older tax debts until late in 2016, more than two years after the 10-year expiry date.

The agency has also recently come under fire from critics for not aggressively pursuing Canadians who dodge the taxman by hiding their money in secret overseas accounts.

Revenue Minister Gail Shea said the department is making progress.

In fiscal year 2011-12 alone, the CRA recovered $40 billion in tax debts and over the last five years, over 90 per cent of individuals and corporations paid their taxes on time and without any intervention.

"We expect CRA to aggressively pursue any debts from those that may be seeking to avoid paying their fair share," said Shea.

"At the same time, our government understands that some Canadians can face difficulties in meeting their tax obligations. That is why the CRA uses a fair and balanced approach when collecting tax payments from individuals and business owners."