PACC Committee Report

---

INTRODUCTION

OBSERVATIONS AND RECOMMENDATIONS

CONCLUSION

---

Pursuant to Standing Order 108(3)(e), the Standing Committee on Public Accounts has the honour to present its

SIXTEENTH REPORT

The Standing Committee on Public Accounts has considered Chapter 1 of the September 2002 Report of the Auditor General of Canada (Human Resources Development Canada — The Integrity of the Social Insurance Number), and the Committee has agreed to report the following:

INTRODUCTION

Created in 1964, the Social Insurance Number (SIN) was originally designed to be a file identifier for the Unemployment Insurance (UI) Program, the Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP). The SIN is used to identify and gather information on taxpayers and social program recipients, and to verify entitlement to certain types of pensions and benefits.

Human Resources Development Canada (HRDC), through the Canada Employment Insurance Commission (CEIC), administers the SIN Program. The Department issues SIN cards and also maintains the Social Insurance Register (SIR). The Treasury Board Secretariat is responsible for developing SIN policies and regulations. In 2001-2002, HRDC issued a total of 1.2 million new and replacement SIN cards at a cost of $16.7 million, and collected about $2 million from people applying for replacement cards.[1]

Because of its uniqueness and universality, the SIN lends itself easily to data matching, comparison and exchanges between databases. As a result, the SIN has become over the years a gateway to a multitude of federal, provincial and municipal social programs. It is also extensively used in the private sector as an identifier for commercial and financial transactions. It has become a de facto national identifier for income-related transactions. Today, over 20 federal statutes, regulations and programs authorize the use of the SIN.

Although it is used in many transactions, the SIN is subject to fraud and abuse because it lacks the necessary security features to provide proof of the holder’s identity. The federal government has recently taken steps to limit the use of the SIN in order to protect personal information and to enhance the integrity and security of various government social programs. For example, the federal government has limited the use of the SIN to certain pension, tax credit and social programs, along with programs authorized under a few federal statutes.[2] Moreover, the federal government has reaffirmed the policy stipulating that the SIN is an account number or identifier for access to authorized federal programs. In order to regulate and limit the use of the SIN in the private sector, the federal government has implemented the Personal Information Protection and Electronic Documents Act.[3] The Act seeks to protect private information by defining the principles that govern the collection, use and disclosure of personal information by the private sector. The government is also involved in efforts to raise public awareness on the proper use of the SIN.

In 1998, the Office of the Auditor General examined the management of the SIN and identified serious weaknesses in the protection of personal information, the issuance of SINs, the reliability and completeness of the SIR, and the investigation strategy designed to counter SIN-related fraud. In 2000, the Office conducted a follow-up audit and noted certain improvements in the administration of the SIN Program, as well as an increase in the number of investigations of SIN fraud. In 2002, a more in-depth follow-up audit was carried out covering the same management issues; it observed only limited progress on key items such as the issuance of SINs, the reliability and completeness of the SIR, and SIN-related fraud investigations.

Almost five years have elapsed since the tabling of the first Auditor General’s report on the management of the SIN, yet many of the issues identified in that first audit remain outstanding. The Public Accounts Committee is very concerned about the slow rate of progress in fixing the problems, and has thus decided to convene for another meeting. To that effect, it met on 17 February 2003 to consider the testimony of the following witnesses: Mrs. Maria Barrados (Assistant Auditor General), Mr. Peter Simioni (Principal), and Mrs. Suzanne Therrien (Director) represented the Office of the Auditor General of Canada. The Department of Human Resources Development was represented by Mrs. Maryantonett Flumian (Associate Deputy Minister), Mr. Charles Nixon (Acting Assistant Deputy Minister, Insurance), and Mr. Lu Fernandez (Acting Director, Investigation and Control Operations).

OBSERVATIONS AND RECOMMENDATIONS

In her opening statements, Mrs. Barrados stated that serious weaknesses persisted in the control and issuance of SINs and that not enough was being done to safeguard and strengthen its integrity. In the opinion of the Office of the Auditor General, the Department is not meeting the intent of the Employment Insurance Act and regulations concerning the issuance of SINs, as it requires the applicant to produce only a single document as proof of both identity and citizenship. Mrs. Barrados also expressed concerns about the reliability of some of the documents that HRDC accepts as proof of eligibility for a SIN card. The audit further noted the inadequate control over the 900‑series SIN cards issued to people who are not Canadians or permanent residents. HRDC did not take adequate steps to establish the identity of the applicants, nor did it require from them any explanation as to why they needed a SIN, even though it is required by regulation.

Since 1998, HRDC has made some improvements to the Social Insurance Register, the database for all SIN records. Nonetheless, some problems persist in the area of the reliability and completeness of information contained in the SIR. There is still a large discrepancy between the number of registered SIN holders and the adult population as enumerated by the Statistics Canada Census. HRDC has yet to provide an adequate explanation as to why the number of usable SINs issued for adults 20 years and older should exceed by five million the census figure for the same age group.

Mrs. Barrados then commented on the departmental action plan to correct shortcomings in the management and integrity of the SIN. While it is a step in the right direction, HRDC’s action plan needs to provide more information on key items such as cost of implementation, funding levels, timetable for implementation and completion, how the Department intends to comply with the intent of the Employment Insurance Act and its regulations in determining the identity and citizenship of SIN applicants, and what are the plans to assess the reliability and validity of documents that support the SIN application.

HRDC’s witness, Mrs. Maryantonett Flumian, told the Committee that the Government of Canada had agreed to the Auditor General’s recommendations and has implemented further measures to protect the integrity of the SIN. HRDC has prepared an action plan focusing on four points: public awareness; strengthening the SIN application process; improving the integrity of the SIR; and building on partnerships.

Since October 2002, the Department has taken a number of steps to improve the security and integrity of the SIN. To reduce the possibility of fraud and abuse, HRDC has deactivated 3.2 million dormant SINs. If any one of these deactivated SIN cards is used to apply for an Employment Insurance (EI) claim, a departmental investigation will be triggered. By June 2003, HRDC will extend the coverage of dormant SIN investigations by including other programs such as Income Security, Canada Student Loans or Canada Education Savings Grants. HRDC is also partnering with Canada Customs and Revenue Agency (CCRA) to develop policies and practices to intervene when inactive SINs are used to file income tax returns or to access other CCRA programs. The Department has also initiated a regulatory amendment to allow the introduction of an expiry date on all 900-series SIN cards. (This series is issued to people who are not Canadian citizens or permanent residents.) According to the action plan, as of April 2003, all new 900-series cards will carry an expiry date. All existing 900-series cardholders will be granted a grace period of one year to replace their SIN cards with one that has an expiry date. As of April 2004, existing 900-series SIN cardholders who have not obtained new cards with expiry dates will have their cards deactivated. Finally, the Department is assessing the current state of completeness and accuracy of the SIR.

Human Resources Development Canada Action Plan

The Committee repeatedly expressed concerns about the rate of implementation of HRDC’s action plan. Moreover, although the action plan describes many measures already implemented or planned to address outstanding issues regarding the administration of the SIN Program, it provides no information on the costs associated with these initiatives.

Nor is the implementation timetable very clear. The implementation and completion of each initiative is dependent on HRDC’s ability to secure suitable funding and, in some cases, its capacity to ensure the participation of other government departments. Many initiatives are still in the discussion phase or currently under negotiation. It remains unclear how HRDC intends to secure the participation of other departments in fulfilling the plan.

The Committee is also concerned that if HRDC does not manage to secure funding for the outstanding elements of the action plan or ensure the collaboration of its partners, the complete and successful implementation of the plan remains doubtful. Also, without a clear timetable for implementation, the plan’s progress cannot be properly measured. This prompts the Committee to make the following recommendations:

RECOMMENDATION No. 1

That Human Resources Development Canada immediately prepare a new action plan that includes information on the total cost of implementing the plan, together with a cost breakdown for each individual initiative. That this new action plan be tabled in Parliament no later than 30 September 2003.

RECOMMENDATION No. 2

That Human Resources Development Canada immediately prepare a new action plan that includes a timeframe for implementation together with benchmarks to measure the plan’s progress. That this new action plan be tabled in Parliament no later than 30 September 2003.

RECOMMENDATION No. 3

That Human Resources Development Canada provide regular semi-annual reports on the status of its action plan, incorporating indicators that measure progress in implementing the elements of the plan and whether these elements are on time and on budget. That the Department provide the semi-annual reports to the Public Accounts Committee starting 30 September 2003.

Compliance with the Employment Insurance Act

The Committee’s attention was drawn by Mrs. Barrados’ observation to the effect that the Department was not meeting the intent of the Employment Insurance Act because obtaining a SIN card requires an applicant to produce only a single piece of documentation to support both proof of identity and citizenship. In the opinion of the Office of the Auditor General, a single document is insufficient to verify both the identity and the citizenship of the SIN. This raises questions about the integrity and security of the majority of SIN cards issued since 1998.

Questions were also raised about the integrity and security of the source documents used in the SIN application process. There were concerns that the Department may not have all the tools to verify and ensure the authenticity of the applicants’ identity and citizenship. In response, Mrs. Flumian told the Committee that HRDC created in February 2003 an interdepartmental working group that will examine issues surrounding the identification documents used in the SIN application process. It is expected that the working group will complete its task and submit its recommendations by the end of September 2003. In light of the above, the Committee proposes the following recommendations:

RECOMMENDATION No. 4

That Human Resources Development Canada modify the SIN application process to ensure that it complies fully with the intent of the Employment Insurance Act and Regulations by requiring at least two separate and distinct source documents to verify proof of identity and citizenship of the SIN applicant.

RECOMMENDATION No. 5

That Human Resources Development Canada require the interdepartmental working group on the SIN application process to submit a copy of its final report containing its recommendations to the Public Accounts Committee by 30 September 2003.

Social Insurance Register

Concerns were also expressed about the reliability and completeness of information contained in the SIR, the database of all SIN records. According to the follow‑up audit, HRDC has made some progress in improving the quality of the SIR by seeking to secure data exchanges and comparisons with existing federal databases (CPP and Old Age Security) and with provincial vital statistics agencies. According to HRDC, however, lack of funding hampered the initial implementation of its action plan.[4] There is also the question of delays associated with negotiating data exchange agreements with the provinces, a process that is further complicated by the fact that some provinces are themselves modernizing their antiquated data systems.

HRDC’s action plan indicates that the Department has carried out a number of initiatives to improve the completeness and accuracy of the SIR. Since 1999, HRDC has been reviewing and correcting the SIR for inaccuracies, and has been investigating doubtful records. In January 2003, HRDC approached Statistics Canada for assistance and participation in a baseline study of the SIR. Once the study is completed, HRDC will set goals for the completeness and reliability of data contained in the SIR, and it will then establish a final implementation plan. As of yet, no deadline has been set for the study’s completion.

The Committee recognizes HRDC’s efforts to address the outstanding issues regarding the SIR; but progress has been much too slow. The federal government cannot afford to wait too long for final resolution, since the security and integrity of major social program; pensions and other entitlements are at stake. Thus the Committee makes the following recommendations:

RECOMMENDATION No. 6

That Human Resources Development Canada, in collaboration with Statistics Canada, complete without further delay the baseline study of the Social Insurance Registry and table a summary report containing the conclusions of the study, together with a copy of the final action plan, to be tabled in Parliament and the Public Accounts Committee no later than 30 September 2003.

RECOMMENDATION No. 7

That Human Resources Development Canada seek to secure formal data exchange agreements with other federal departments and agencies, as well with provincial and territorial vital statistics agencies, in order to strengthen the completeness and reliability of the Social Insurance Register. That the Department provide to the Public Accounts Committee a status report on the progress of these agreements by 30 September 2003.

Performance Reporting to Parliament

The Committee is very concerned about the lack of progress regarding reporting on the SIN Program activities, objectives and results in the Department’s accountability documents, such as reports on plans and priorities (RPPs) and departmental performance reports (DPRs). The Committee had already raised the same concerns in its 1999 report on the management of the SIN, and had recommended that HRDC incorporate in its DPR a regular report on activities related to the SIN.[5] The Committee has noted that HRDC’s accountability documents still contain very little information on the activities and results achieved in the SIN program. To ensure the transparency and accountability of government, parliamentarians require complete and timely information on a department’s objectives and its success in attaining its goals. The Committee thus makes the following recommendations:

RECOMMENDATION No. 8

That Human Resources Development Canada review its reporting systems, practices and policies to ensure that its reports on plans and priorities contain clear objectives (planned results) for the Social Insurance Number Program, with activities related to those objectives, and establish performance targets. That the Department begin reporting such information under the new format for the fiscal year commencing 1 April 2004.

RECOMMENDATION No. 9

That Human Resources Development Canada review its monitoring systems, practices and policies to ensure that its departmental performance reports contain information on the Social Insurance Number Program, including program results achieved compared with performance expectations. That the Department begin reporting performance information under the new format for the current fiscal year ending 31 March 2004.

CONCLUSION

The Committee is very concerned about the slow rate of progress in improving the management and strengthening the integrity of the Social Insurance Number. Almost five years have passed since the tabling of the first Auditor General’s Report, and yet many issues remain unresolved. Acknowledging the initiatives already implemented and recognizing the considerable challenges facing HRDC in improving the management of the SIN, the Committee strongly urges the Department to speed up the implementation of its action plan. Delay is no longer acceptable given that the security and integrity of many government social programs, involving hundreds of millions of dollars in entitlements and pension benefits, are at considerable risk.

Pursuant to Standing Order 109, the Committee requests that the government table a comprehensive response to this Report.

A copy of the relevant Minutes of Proceedings (Meeting Nos. 14, 32 and 34) is tabled.

Respectfully submitted,




JOHN WILLIAMS, M.P.
Chair