PACC Committee Meeting

STANDING COMMITTEE ON PUBLIC ACCOUNTS

COMITÉ PERMANENT DES COMPTES PUBLICS

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, June 12, 2001

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[English]

The Chair (Mr. John Williams (St. Albert, Canadian Alliance)): Good afternoon, everybody. Welcome to what is likely to be the last public accounts committee meeting before the House of Commons recesses for the summer.

I want to advise you that as the chair, I have to vacate the chair. I have to appear before another committee around four o'clock, and I would ask Madam Jennings, the vice-chair of the public accounts committee, to fill in when I depart.

Our order today, pursuant to Standing Order 108(3)(e), is consideration of chapter 34—audit observation on Canada Customs and Revenue Agency and Human Resources Development Canada—of the December 2000 report of the Auditor General of Canada.

Our witnesses today are from the Canada Customs and Revenue Agency: Mr. Guy Proulx, director general, revenue collections directorate, assessment and collections branch; and Mr. Harvey Beaulac, assistant commissioner, appeals branch. From Human Resources Development Canada we have John McWhinnie, assistant deputy minister of insurance; Gordon McFee, director, policy and legislation development; André Hurtubise, acting director general, investigation and control. And from the Office of the Auditor General of Canada we have Ms. Sheila Fraser, the Auditor General of Canada.

Ms. Fraser, this is the first time I personally have had the opportunity of congratulating you on your appointment before this committee. I understand that Madam Jennings recognized you the day the appointment was made public, but I would also like to offer my sincere congratulations. I think I speak on behalf of all the members of the public accounts committee that we look forward to working with you. We know you will serve Parliament well over your tenure as the Auditor General. So welcome.

Ms. Sheila Fraser (Auditor General of Canada): Thank you, Mr. Williams.

The Chair: We also have Jean Ste-Marie, Assistant Auditor General, and Mr. Neil Papineau, director of the audit operations.

We'll start off with the opening statement by the Auditor General.

Ms. Sheila Fraser: Thank you, Mr. Chairman, for your kind words and also for giving us the opportunity today to speak to you about our audit observation on suspected abuse and fraud in the employment insurance program.

As you mentioned, I have with me today Jean Ste-Marie, Assistant Auditor General, and Neil Papineau, the director who was 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 the situation for over twenty years and have not taken appropriate action to stop it.

[Translation]

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.

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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.

[English]

Our audit of how CCRA carried out insurability rulings and appeals determined many problems, such as 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 British Columbia 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 ruling and appeals process can be made more transparent; there should be 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; CCRA should disclose to HRDC any new or contradictory evidence from claimants and employers. HRDC will be adequately informed and therefore better able to make further representation to protect its interests.

Mr. Chairman, we believe that 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, and we will be pleased to answer your committee's questions. Thank you.

The Chair: Thank you, Ms. Fraser.

Now we'll turn to the Canada Customs and Revenue Agency for their opening statement.

Mr. Guy Proulx (Director General, Revenue Collections Directorate, Assessment and Collections Branch, Canada Customs and Revenue Agency): Mr. Chairman, members of the public accounts committee, I welcome the opportunity to come here this afternoon to speak to you about how the Canada Customs and Revenue Agency is responding to the findings and recommendations of the Auditor General concerning the audit on how we and HRDC are dealing with suspected fraud and abuse in the employment insurance program.

I would like to say at the outset that we appreciate the work carried out by the Auditor General with respect to suspected abuse and fraud in the lower mainland of British Columbia. In light of the Auditor General's observations, the CCRA has undertaken a series of initiatives with HRDC to improve the way we handle similar situations in the future. Before I discuss the initiatives we have undertaken, I would like to take a few moments to provide you with some background information.

Under the EI program, the CCRA is responsible for resolving any questions that are raised by HRDC, employers, or employees concerning whether or not a worker's employment is insurable. If it is determined that the employment is insurable, the worker may be eligible to receive EI benefits. These questions are addressed through the rulings process.

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In 1999-2000 the CCRA received approximately 82,000 requests for rulings. Of this total, HRDC requested approximately 27,000 rulings related to EI benefits. Of these 27,000, approximately 2,000, or 2.5%, originated from the investigation and control directorate of HRDC.

The sample of 250 rulings examined by the Auditor General represents less than 0.5% of the total number of rulings decisions issued by the CCRA.

It should also be noted that the number of the cases that were sampled by the Auditor General are pending before the Tax Court of Canada. The scope of the audit conducted by the Auditor General was restricted to the lower mainland of British Columbia. The audit did not examine the CCRA's overall handling of insurability rulings or appeals of these rulings. Therefore, as stated by the Auditor General, the findings cannot be applied nationally.

It is important to understand that the main objective of the insurability rulings program is to encourage voluntary compliance. In other words, the CCRA provides a service to HRDC and the public by providing them with information on insurability.

The EI Act sets out the instances when a ruling can be issued and the timeframes involved, and the administrative procedures and timeframes for appealing a ruling. In addition, the CCRA produces a number of guides and brochures that provide employees and employers with a clear explanation of the rulings and appeals processes. Based on the preceding, we feel the processes are transparent.

I would like to add that we gave you a little kit, through the clerk of the committee, with pamphlets and the information available on our programs and what is available to the general public.

Rulings officers carefully research, analyse, and weigh the evidence and facts of each particular case in order to make fair and equitable rulings on insurability. Similarly, the role of appeals officers is to provide a fair and impartial administrative review on insurability issues. Neither the rulings officer nor the appeals officer is performing an investigation or an enforcement function.

Rulings officers and appeals officers must maintain their independence and impartiality from HRDC. The separate and independent roles of the CCRA and HRDC are set out in the EI Act. The need to retain this independence was recently reinforced by the Tax Court of Canada in the case called Sharbells Fish Mart—Donna Lewis et al v. The Minister of National Revenue. It is still recent, and it occurred on the east coast.

Cases involving suspected abuse and fraud in the EI program are complex in nature. The CCRA received the first request for insurability rulings concerning the cases in question in 1996. Unfortunately, there were delays in completing the rulings because of the complexity of the requests. We agree with the Auditor General that there is room to improve rulings and appeals officers' expertise in handling these types of cases.

The CCRA has undertaken the following actions to address this point:

The position of complex case and technical review officer was created. We've undertaken staffing action across the country to fill these positions. These officers will receive specialized training to assist them in handling cases where abuse or fraud is suspected. A course is currently being developed that will provide officers with information about determining relevance of evidence.

Procedures are being clarified to ensure that information identified by the investigation and control officers of HRDC is appropriately considered in the ruling process. We have been working closely with our colleagues in HRDC to better define our respective roles. It is important that these roles are clearly understood by each organization.

The CCRA has been giving, and will continue to give, general information sessions to investigation and control officers at HRDC, so that they have a better understanding of the work done by rulings officers at the CCRA.

Furthermore, our two organizations are working together with the employment standards branch of British Columbia's Ministry of Labour to provide the public with information concerning our processes. Similar initiatives are also under way in other provinces.

Joint workshops are being held with representatives of CCRA and HRDC to discuss how complex cases will be handled by each organization in the future.

Finally, HRDC and CCRA have engaged Consulting and Audit Canada to determine, on an impartial basis, the standards for the delivery of the rulings and appeals aspect of the EI program.

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I would like to thank again the Office of the Auditor General for looking at the problems faced by CCRA and for the observations they have provided. We feel that steps we have taken to address the concerns raised by the Auditor General will ensure that the agency is well positioned to carry out its mandate under the EI program.

In closing, I can assure you that CCRA is committed to providing the best possible service to Canadians, and we welcome the public accounts contribution in this regard. I will be pleased to answer any questions the committee may have.

Thank you, Mrs. Chairman.

[Translation]

The Vice-Chair (Ms. Marlene Jennings (Notre-Dame-de- Grâce—Lachine, Lib.)): Thank you very much, Mr. Proulx.

Our next witness is Mr. John McWhinnie, Assistant Deputy Minister, Human Resources Development Canada. Mr. McWhinnie.

Mr. John McWhinnie (Assistant Deputy Minister, Insurance, Human Resources Development Canada): Thank you, Madam Chair.

[English]

I appreciate the opportunity to speak to the members of the public accounts committee today.

As members know, the Auditor General's report last December cited the existence of EI abuse and fraud in British Columbia's lower mainland. The report, however, made careful note that its findings could not be applied nationally. The Auditor General acknowledged in the report that HRDC has the structure in place to prevent, detect, and deter fraud and abuse in the employment insurance program, and did not criticize the way we conduct investigations generally. However, the report did recommend that HRDC and CCRA need to work collaboratively in developing joint initiatives that adequately deal with suspected abuse and fraud in this specific situation, and that is what we were doing.

Our challenge is that HRDC and CCRA have separate and distinct obligations in administering the Employment Insurance Act. HRDC is responsible for investigating suspected cases of fraud and abuse and ensuring that EI benefits are paid to those who qualify: those employed in insurable employment. CCRA has a legal responsibility within EI legislation to determine the insurability of employment. The recent court decision referred by Mr. Proulx from Sharbells in July 2000 reminds us that the legally defined role of each of our agencies, HRDC and CCRA, must be carefully respected to protect the rights of citizens. Our goal is to develop effective solutions that respond to the issues and observations raised in the Auditor General's report while operating within this legal framework.

Up to now, this is what we've accomplished. A joint team of HRDC and CCRA staff has been working together with representatives from the British Columbia Ministry of Labour for several years. Our goal is to better coordinate interactions on the ground with all players. We are also in the process of developing a public information video to explain the rights and obligations under the EI Act for both individuals and employers.

Joint training and exchanges have been set up between HRDC and CCRA and information has been made more explicit. HRDC and CCRA have engaged Consulting and Audit Canada to determine, on an impartial basis, the efficiencies and standards for the delivery of the rulings and appeals aspects of the EI program. HRDC and CCRA personnel are taking the necessary steps to ensure that large-scale fraud cases are dealt with effectively. In fact, a national workshop is under way this very week with participants from HRDC and CCRA to verify procedural changes and implement a monitoring procedure. The Auditor General's report did point out that HRDC has already begun informing CCRA of any expected workloads involving large-scale fraud investigations.

We take the Auditor General's report very seriously. The investigation and control unit in employment insurance is actively engaged in responding to suspected cases of fraud and abuse in all parts of the country. When irregularities are confirmed, we take actions that can include establishing overpayments and imposing penalties when warranted. Yes, we have an obligation to regularly monitor the EI program and act against cases of abuse. Progressively, however, our goal must be one of education, prevention, and deterrence.

Madame la présidente, we are committed as a management team to work with our colleagues at CCRA, along with our provincial counterparts and the community. Over the long run, we must endeavour to stay true to the values that created the employment insurance program, remembering it is part of a larger vision to create a better quality of life for all of our citizens.

Thank you very much.

[Translation]

The Vice-Chair (Ms. Marlene Jennings): Thank you, Mr. McWhinnie.

Before we go to questions, I would simply like to state for the record that the Canada Customs and Revenue Agency has left an information package with the clerk. It describes the process for appealing EI program decisions and CPP rulings.

Now then, we'll proceed to the first round of questions. You have eight minutes, Mr. Peschisolido.

[English]

Mr. Joe Peschisolido (Richmond, Canadian Alliance): Madam Chair, thank you.

I would like to take this opportunity, Ms. Fraser, to congratulate you on your appointment. We have spoken many times here, but I haven't had the opportunity to officially do that. I am honoured to do that today.

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The audit results apply only to my home province of British Columbia. Are the procedures followed by CCRA and HRDC the same right across the country in dealing with suspected abuse and fraud in the program?

Ms. Sheila Fraser: Thank you, Mr. Peschisolido, for your kind remarks. I too look forward to working with the committee in the coming years.

It is correct to say that the specific cases we looked at were limited to British Columbia. However, the policies and the training manuals are national in scope and would be applied all across Canada. But the specific cases we looked at were limited to British Columbia.

Mr. Joe Peschisolido: Mr. Proulx talked about some steps they have taken at CCRA already to deal with the problems. He mentioned the creation of a position of the complex case and technical review officer in the report. You dealt with improved communications with HRDC. How helpful do you believe these measures are in terms of dealing with the problems we've been looking at today?

Ms. Sheila Fraser: Madam Chair, we were made aware of these action plans when we saw the statements yesterday and today. We have not analysed how these actions respond to all of our recommendations. We are pleased to see that both the agency and the department are taking action and have begun implementation of corrective actions. I would have preferred to have seen a more rigorous action plan with timelines, milestones, and also some provision for ongoing monitoring and review of case files. I would say, though, that as is our normal policy, we will be back in two years to see how effective the action plan has been and what measures have been taken by the department and the agency.

Mr. Joe Peschisolido: Do you believe that regulatory changes and perhaps even legislative changes would be appropriate?

Ms. Sheila Fraser: I believe there are many things that can be done without legislative changes. I think legislative change should be considered, if necessary. But I believe that there can be better cooperation between the agency and the department, which would overcome many of the issues we found in our audit.

Mr. Joe Peschisolido: Thank you.

[Translation]

Mr. Proulx, I'm delighted to be here to discuss these issues with you. The AG notes that at the time the audit was conducted, no guidelines were in place setting out the procedure for making rulings or for deciding appeals. Has the situation changed any?

Mr. Guy Proulx: As for having a procedure in place for making rulings or determining appeals, the CCRA has produced a manual which you will find in the information package. Information on the workings of the program is sufficiently clear and detailed to answer any questions stakeholders may have about the EI program. Although the CCRA could set out rules of procedures, we do not feel that this is necessary.

We surveyed our stakeholders several years ago and 80 per cent of our clients responded that they were familiar with the process and satisfied with the information that was available. Given that this is not a program used by the majority of Canadians, we feel that the information currently available is adequate.

Mr. Joe Peschisolido: Speaking of guidelines, the CCRA manual on policies and training procedures is silent on ways of dealing with suspected cases of abuse or fraud. Does the CCRA have any plans to revise these particular manuals to include this type of relevant information?

Mr. Guy Proulx: This is also part of our training component. We have create a senior officer position to deal with complex cases brought to our attention further to HRDC investigations. These manuals will be updated when policies and training manuals are updated and as our officers are recruited and trained to identify more complex cases. These cases are then passed on directly to senior officers who have been specially trained to handle these types of cases.

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Mr. Joe Peschisolido: The AG also recommends that CCRA reconsider the resources needed to deal adequately with suspected cases of abuse or fraud. Will this in fact be done?

Mr. Guy Proulx: Yes indeed. On average, completing an investigation takes about four and a half hours. However, in actual fact, it takes approximately nine hours on average to complete an investigation. It's a matter of perception. Head Office suggests that the standard amount of time normally devoted to an investigation is four and a half hours, whereas in reality, it's more like nine hours. Further to our discussions with HRDC officials, we have received additional funding in recognition of the complexity of the cases we handle and the hours spent on ensuring that cases are given the attention they deserve.

[English]

Mr. Joe Peschisolido: Madam Chair, I'll take this opportunity to welcome Minister McWhinnie to the committee.

The Auditor General was talking about a comprehensive plan for the CCRA and she was also implying that a comprehensive plan may be in order for HRDC as well. Has HRDC thought of implementing such a comprehensive plan?

Mr. John McWhinnie: In fact we have had for some time a very well-developed investigation control capability in the employment insurance program. This issue, though, is how we have worked together. We're already sitting down with CCRA and putting together how we could work better between each other. In these cases, when we get to a point in our investigation where it becomes insurability, we then hand it off to CCRA, under the appropriate authority of the act, to pick up the insurability.

This particular audit pointed to some of the deficiencies of how we need to address that a little better. We have jointly put together a plan with CCRA, as a result of this. So we have been working collectively before, but we are also much more focused with particular respect to the observations of this audit in terms of putting together a plan. So it's a joint plan from the outset.

The Vice-Chair (Ms. Marlene Jennings): Thank you, Mr. Peschisolido.

[Translation]

You have eight minutes, Mr. Desrochers.

Mr. Odina Desrochers (Lotbinière—L'Érable, BQ): Thank you, Madam Chair.

I'd also like to start by congratulating Sheila Fraser on being appointed Auditor General. I'm doubly pleased by this announcement because Ms. Fraser hails from one of the loveliest parts of Canada and Quebec, namely Quebec City. I knew her when she was working with Quebec 2002. She was always very conscientious and professional. I believe you're an asset to the Canadian government and you will no doubt be up to the challenge at hand. Congratulations, both personally and on behalf of my party.

My question is for Mr. Proulx who spoke of the amount of time devoted to an investigation. You mentioned four and a half hours and nine hours as the amount of time required to conduct and investigation. Do you have any information on the response time, that is on the time it takes you to get back to a person awaiting a ruling?

Mr. Guy Proulx: Yes, we have agreements in place with HRDC whereby we make every effort to respect certain standards. When benefits are at issue, we try to respond within a certain period of time, that is we try to meet with claimants within 15 or 30 days. Increasingly, we are meeting our targets. Rarely do we exceed the 30-day time limit in the majority of cases involving benefits - and that's 95 per cent of our cases. Currently, there is no limit on the amount of time devoted to each file. There are national averages... Last year, we investigated 82,000 cases and it worked out to about four and a half hours per case. Some investigations take only two hours, while others may require 25 hours. The important thing is to take the time to do a proper investigation. While the national average may well be four and a half hours, when specific cases, such as suspected fraud, are involved, employees are not pressured into completing their work within the standard number of hours.

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Mr. Odina Desrochers: You stated that you have put in place a process to increase transparency in communications between HRDC and your agency. In concrete terms, what does this mean?

Mr. Guy Proulx: It means that we hold meetings and are aware of each other's role in the process. By officers on site, we mean the people who handle claimant files that have been transferred over to us from HRDC. Quite often, the process employed to determine insurability is not well known. We work to open the lines of communication between the two departments, both at the local and head office levels and to improve communication and activity coordination.

Mr. Odina Desrochers: Do you contact the claimant?

Mr. Guy Proulx: Yes.

Mr. Odina Desrochers: You contact this person as well?

Mr. Guy Proulx: Yes, we do. We get in touch with the claimant and inquire as to the nature of the duties associated with the job. If you look at the guide, you will see that we base ourselves on four specific criteria. Based on the information gathered from the claimant and his employer, we rule on the person's insurability.

Mr. Odina Desrochers: You have to understand that we're often left with the impression that the two departments are playing ping pong. I just wish the game took less time.

Mr. Guy Proulx: HRDC does manage nevertheless to settle the majority of cases. When cases are passed on to us, we investigate, bearing in mind the complex nature of the case and our overall objectives. We try to resolve matters within 15 or 30 days, depending on whether or not benefits are involved.

Mr. Odina Desrochers: Can the claimant appeal a CCRA ruling?

Mr. Guy Proulx: I'll let Mr. Beaulac answer that question.

Mr. Harvey Beaulac (Deputy Commissioner, Appeals Directorate, Canada Customs and Revenue Agency): When a claimant is dissatisfied with a ruling that has been delivered, he can appeal within 90 days of receiving notice from the department. We then commit to an impartial, independent and open review within a reasonable period of time. That's our goal. Sometimes, though, it's difficult to follow through.

Within CCRA, I oversee the appeals process, including insurability, taxation, PST and customs issues. Ours is an impartial unit that has nothing to do directly with Mr. Proulx's ruling.

Mr. Odina Desrochers: While the appeal process is under way, the claimant does not receive any EI benefits.

Mr. Harvey Beaulac: That depends on the case. Sometimes, the claimant is receiving benefits. The problem is the amount. Each case is different, Mr. Desrochers.

Mr. Odina Desrochers: Is the 90-day period there to allow for cases of suspected fraud, insufficient information or where the claimant's insurability is being investigated further?

Mr. Harvey Beaulac: The claimant has 90 days to file a notice of appeal. When the claimant receives notice of the department's ruling, he can file a notice of appeal the next day. However, he has a total of 90 days to appeal.

Mr. Odina Desrochers: Thank you, Madam Chair.

The Vice-Chair (Ms. Marlene Jennings): You still have two minutes.

Mr. Odina Desrochers: I have the answers I was searching for.

The Vice-Chair (Ms. Marlene Jennings): Then, we'll go to Mr. Mac Harb. You have eight minutes, sir.

[English]

Mr. Mac Harb (Ottawa Centre, Lib.): Thank you very much. I too want to welcome the new Auditor General and congratulate her.

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Madam Chair, it strikes me that we have a situation where we have an isolated case limited to British Columbia. As the Auditor General has stated, and officials from both Human Resources Development Canada and Revenue Canada have stated, this is an isolated case. My thought is that with 250 rulings out of the total amount, which is less than 0.5% of the total picture, it strikes me that these guys are doing a fairly good job overall.

In my previous life as a municipal politician we had similar problems here in the city of Ottawa, where we had people who claimed social assistance and they were working some odd jobs here and there. At the time, the decision was made that if it's really less than 5%, it's fairly good. Otherwise, if you want to eradicate it totally, you would have to hire fairly well a whole army of investigators and law enforcement officers, police, RCMP, and administrators in order to chase the problem completely out of existence.

To that extent, wouldn't you agree, Madam Fraser, that we do at some point in time have to strike a balance between what is an acceptable level of deficiencies in the system? At what point in time will we say we have a really major problem, a national problem?

Also, while you are at it, I want you to give us your reaction to the commitment of both the officials from Revenue Canada and from Human Resources Development Canada in terms of your action plan to work with the authorities in British Columbia in order to address this specific isolated problem brought out in your report. Could you tell us whether you think that will really deal with the issue you have raised?

Ms. Sheila Fraser: Yes, Madam Chair, I agree fully with Mr. Harb that there has to be a balance between controls and efficiency. Unfortunately, I don't think this is the case in this audit.

When we talk about the statistics, our audit dealt with the treatment of files that had been identified as being suspicious. Those are only the 2,000 files per year, and we looked at 250 files. So we did a fairly extensive examination of the files that are being questioned.

We're not questioning the handling of the other 85,000 files. We were looking at the procedures where cases of suspected fraud had been identified by HRDC and had been referred to the revenue agency for investigation. The revenue agency is supposed to investigate these, and that's where we found weaknesses in the procedures.

I agree that the cases we looked at were limited to B.C., but the training, the policies, the lack of guidance is national in scope. While we can't comment, because we have not done audit work in other provinces, I would presume that lack of guidance must have some effect elsewhere in Canada. Because we do not have specific audit cases, we obviously can't deal with it.

The other point I would like to bring up is that these cases were known for 20 years. I don't think this is a normal situation. I agree that in any system there is going to be fraud, but if there have been reports of fraud in certain industries for 20 years, I would have expected somebody to have done something about it. So that's where I come off on that one.

On the action plan, as I had mentioned earlier, we have not had the opportunity to look in detail at the action plan. I am pleased to see that actions are being taken and that both the agency and the department appear to be addressing this seriously. As I mentioned, we will be following up in two years to see the effects the actions have taken.

I would have liked to have seen perhaps a more detailed action plan, which may exist. The only information we have is what was presented in the opening statement. The detailed action plans with dates and milestones might be something the committee could be interested in asking for.

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Mr. Mac Harb: In light of this, I would like to hear from Mr. McWhinnie. The Auditor General is painting a very gloomy picture here. Is that the case, in your view?

Mr. John McWhinnie: I'm hoping Mr. Proulx will take the question. Let me start; he may want to join in.

As indicated throughout this, this is a fairly specific geographical area and a very specific issue we've been looking at. And it is something that has gone on for a number of years. To say that nothing has been done would not be true. Over the years we've made a number of forays into dealing with some of these types of issues.

We have the capacity within HRDC to administer penalties and establish overpayments, and we have done that at different periods and with limiting degrees of success, I might add. It has been a particularly difficult problem to deal with.

More of a concerted effort took place around 1997, when we put in place our compliance team, which we made reference to—the CCRA, the British Columbia Ministry of Labour, and ourselves—to jointly try to manage this. And we had been putting some of these actions in place somewhat around the same time the Auditor General looked at that.

It's true; it's been longstanding. There have been a number of approaches to it, but it's been in the last four to five years that we've really put a concerted effort around that. We can start pointing to some results we're seeing in terms of making progress on this. Certainly the observations from the Auditor General have been very helpful in helping us work together on this.

Mr. Mac Harb: Mr. Proulx.

Mr. Guy Proulx: The issue of fraud cases is hard to prove. It's not always easy to prove fraud. We have here a case of alleged and suspected cases of fraud. When those cases occur, even on the tax side within Revenue Canada or CCRA, we do not come up with a lot of prosecutions for fraud and fraudulent activities, because it's a very time-consuming, long, drawn-out process to prove fraud; especially if there is collusion, it gets even tougher.

That doesn't mean we can't detect it. It does not mean we cannot spend better time and effort to target our activities and our compliance focus with the people from HRDC through better training, better treatment, better identification of these cases, and give them the attention they deserve. The Auditor General's observations lead us to believe we can do more.

When it gets to twenty years in the making, a lot of that is perception, and sometimes it's very difficult to change perceptions. Even if we were successful in proving fraud and abuse, it would go a long way. It's very difficult. We have our challenges, between HRDC and us, to work together to give them the attention they deserve.

On our volume, the question then became to have the people with the right skills to go in and work these things.

I think we're on the right track—to give them the attention they deserve.

The Vice-Chair (Ms. Marlene Jennings): Thank you, Mr. Proulx.

We're now on the second round. Mr. Peschisolido, you have four minutes.

Mr. Joe Peschisolido: I'd like to return to Mr. McWhinnie. Mr. Proulx just mentioned that it's fairly tough to deal with fraud cases, to deal with the empirical evidence to find fraud. Do you believe that some regulatory or legislative changes would make it easier for you to detect fraud in the system? If yes, what would they be?

Mr. John McWhinnie: I'm not sure that would be what we need. We have fairly strong capabilities under the EI legislation, particularly with our own investigation and control activity.

The difficulty Mr. Proulx is referring to is when you have alleged fraud or you have third-party complaints to be able to go in with the right skills and get the right kind of information without seeming to be too harassing of the client. You have to be able to get the appropriate kind of investigation started, get the information, and then be able to go on and prove it, and treat the clients in a fair way throughout the process.

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We do have quite a strong capability legislatively within our program, and in fact in these particular cases alone over the last four years we've recouped over a million dollars in overpayments and penalties that we've assessed, both against claimants and against employers. So we do have that capacity without even going to prosecution. That's meant to be a deterrent.

I think we're starting to see some of the results of that now in reduced claim load.

Mr. Joe Peschisolido: My final question, Madam Chair, is to Mr. Proulx.

The Auditor General stated that the CCRA's ruling officers “seldom leave their offices to visit business premises, examine original business records or meet claimants or employers” when they're investigating a suspect claim. Why is this the case, and has it been changed?

Mr. Guy Proulx: I'd like to also reverse that: that sometimes they do, and sometimes they don't.

Mr. Joe Peschisolido: Good.

Mr. Guy Proulx: If most of the time they don't, that's likely because in the rulings we do in many cases we don't need to. There would be an extra cost to go to the client's premises.

In the cases of suspected fraud and abuse, we have now empowered our more senior officers, the ones who handle the more complex cases, to go out and do a little bit of an auditing and bookkeeping review to make sure that the record of employment, the ROE statement that gives rise to these things, is in fact anchored in reality and it's not fraudulent and not just paperwork coming out to generate the claim machine. We do plan to have them go out whenever there's a demonstrated need to do so.

The number of hours has been added, and our friends at HRDC are content. We're doing this pretty well under contract for them, so they have agreed to finance some of these extra costs associated with this more complex workload.

So I do think we have the right spin for the future, and we have recognized that we would like maybe to have done more roadwork in the past, but we are committed to doing the appropriate amount of roadwork and field work in the future.

Mr. Joe Peschisolido: So there aren't any unofficial or quasi-official rules of operations where people don't leave...it's case by case.

Mr. Guy Proulx: It's pretty well case by case. I think if we subjected our people to go and do roadwork for.... First of all, we're not present everywhere where there's an employer or a case, so it would be exorbitant in terms of cost for the nation.

I think the question is to go and do the roadwork or the field work when we need to, and I think that becomes a question of judgment. It becomes an issue of what is sensitive, what is more complex? Through proper training, we hope it will be the same as we do in the tax world. Quite often we just ask for paperwork, and we're able to mail and telephone to do most of our work, for most of the clients, because not everybody is subject to a fraudulent suspicion. If we treated all our workload as fraudulent potential, I think it would be very different in terms of resource base and activity.

Mr. Joe Peschisolido: Thank you.

The Vice-Chair (Ms. Marlene Jennings): Thank you, Mr. Peschisolido.

Mr. Shepherd, four minutes.

Mr. Alex Shepherd (Durham, Lib.): Thank you.

I'd also like to add my words to your welcome as the official Auditor General.

I want to try to put some meat on the bone here. The record of employment I'm well familiar with. The nature of the fraud is that people claiming they had employment in fact didn't and therefore accessed the employment insurance system. Is that the gist of it?

Ms. Sheila Fraser: I'd perhaps ask Mr. Papineau, who did the actual audit, to give you examples, but it would be, I presume, hours, types of employment, things—

Mr. Alex Shepherd: I didn't want to belabour that.

Ms. Sheila Fraser: All right.

Mr. Alex Shepherd: I just wanted to get that clear in my mind. What we're saying is it's one industry and four employers, essentially. Do you have an estimate of the amount of fraud, of total dollars the taxpayers of this country are out here?

Mr. Neil Papineau (Director, Audit Operations, Office of the Auditor General of Canada): We're talking about more than one industry. The files we looked at dealt with one industry, but the allegations dealt with a number of industries. We looked at one industry.

The understanding we've been given from HRDC officials and CCRA officials was that it was happening in these other industries. So it's not confined to one industry. The files we looked at were recent files; they were current files that had been processed, so we could look at those files and see how they were handled within HRDC and CCRA.

Mr. Alex Shepherd: Do we know how much money?

• 1625

Mr. Neil Papineau: How much fraud there is?

Mr. Alex Shepherd: Yes, the dollar value of it.

Mr. Neil Papineau: No, I can't put a dollar value on that. All I know is that for the industry we looked at, the EI paid out annually for this one industry in the lower mainland of B.C. is $37 million a year in EI benefits. But there's no way I can put a dollar value as to what the estimated fraud is in that.

Mr. Alex Shepherd: These employers are still in business?

Mr. Neil Papineau: I really don't know if they're still in business.

Mr. Alex Shepherd: You might know that.

Mr. Guy Proulx: I'm going to turn to the back of the room to see if I get a nod from one of my colleagues.

Some are and some aren't. Just to qualify this, some of them are in a seasonal business as well. Maybe then to the question I'd like to add the concept that sometimes you can have a valid record of employment even though there's some fraud around it. Sometimes the fraudulent activity is about the number of hours, the number of months, the number of weeks, the actual remuneration paid.

So you could still have a valid record of employment, a modified one from what the employer has issued. We would modify it, but we would still say that the people worked and they're eligible to collect EI, but maybe a lower amount of EI, or a lower level of benefits, would come out of this.

Mr. Alex Shepherd: Having said that, I'm quite familiar with the power of CCRA. If somebody put on a record of employment that there were more wages than in fact were paid, why don't you just reassess those individuals for the wages?

Mr. Guy Proulx: We would. The T-4s would be issued by the employer.

Mr. Alex Shepherd: Yes, but they would be false. One of them is false. They would issue a T-4 for less than the amount that's on the record of employment.

Mr. Guy Proulx: Not necessarily.

Mr. Alex Shepherd: That could be a possibility.

Mr. Guy Proulx: That's right.

Mr. Alex Shepherd: Have you reassessed any of them?

Mr. Guy Proulx: For employers in this particular case?

Mr. Alex Shepherd: Employees.

Mr. Guy Proulx: Employees. The employees in this case would end up having a T-4 that balances with the ROE, and they would be taxed on it, because we would have source deductions for the amount.

So the question is I think some of those cases are people may work ten days versus ten weeks. But whatever is declared on the ROE matches with the T-4. We do have the source deductions coming in.

Mr. Alex Shepherd: In other words, they didn't lie about the actual amount of remuneration, just how it was spread out on the number of hours.

Mr. Guy Proulx: Or they could lie about the amount of remuneration and still remit all sorts of deductions on it and still expect people to tax them on it.

Mr. Alex Shepherd: People generally wouldn't want to tax on money they didn't receive unless the EI benefits.... I see what you're getting at.

Mr. Guy Proulx: Unless the EI benefit kicks in after the employment.

Mr. Alex Shepherd: They never receive it. How is it that this goes on for 20 years? And why is it that you just can't be bothered to reassess those people?

Mr. Guy Proulx: I think we are reassessing those people. In terms of the question about 20 years, there are allegations and perceptions that this has been going on for 20 years. How long this has really been going on and how many cases it really involves becomes the issue.

Of the cases we detected, some of them are in court right now. So it's not as if nothing has been done. Some of them are in court, in the justice system.

Mr. Alex Shepherd: What about the broader scheme of things, these employers? If they cheat on their EI they're probably cheating on their taxes too.

The Chair: Thank you very much, Mr. Shepherd. I appreciate that.

Now we'll turn to Ms. Leung please, four minutes.

Ms. Sophia Leung (Vancouver Kingsway, Lib.): Thank you, Madam Chair.

Ms. Fraser, I also want to congratulate you on your appointment. I understand you made history; you're the first woman to be the Auditor General. Great.

In your presentation you made some recommendations, six points. You emphasized a lot of training for the officers. I would like to turn to your other colleagues, but I also want to know if you are intending to do some work with other provinces, and not just single out B.C. I'm from B.C., so I'm very curious about why you're not studying other provinces. That's one question.

Ms. Sheila Fraser: Thank you, Ms. Leung, for your kind remarks.

The reason we did the audit in B.C. was because we received an allegation, and we responded to it. I'm not sure we will necessarily look at audits in other provinces. When we go back to do our follow-up work in two years we'll look at the actions that have been taken by the department and the agency, and the kind of monitoring they're doing. If we judge that sufficient, we will not conduct other audits in other provinces.

• 1630

Ms. Sophia Leung: Thank you.

Mr. Proulx, Madam Fraser mentioned training for the officers. Have you implemented that? You did mention you had done some, but can you be more specific? What have you done?

Mr. Guy Proulx: We have a plan of action. Even though we didn't present it to the committee, we have timelines and all these wonderful things. We just didn't present it here today.

One of our biggest challenges was to create a more senior complex officer level. In the days of civil servants, when we were looking at ACS, UCS, and job classification, we were successful in creating the more senior positions. We have undertaken action to staff the levels and have given training courses, with some in development or in the design stage right now. We are looking at working with the RCMP, the Department of Justice, and HRDC on rules of evidence, fraud, suspected cases of abuses, and so on.

So we do have officers who are promoted or hired to conduct these more complex workloads. They are being trained to face the workload that will be coming at them and to take the more proactive measures we expect of them to basically address, with our HRDC colleagues, these cases of fraud and abuse.

Ms. Sophia Leung: Thank you.

Mr. McWhinnie, here it says you work with the B.C. labour ministry. What have you done so far in that area, and what's the result? Have you reviewed...? Can you tell us a little bit more about that?

Mr. John McWhinnie: In the particular industry in question, there have been issues around labour standards. I think the B.C. Ministry of Labour has been concerned around the rights of the workers. I think that's really where they're coming from.

It has been very much to our advantage to work with them and CCRA. What we have is a compliance team to go out and help communicate with and educate all of the people in these types of industries as to their rights and obligations, and our expectations, to help deter these kinds of things from happening. We've been partnering with them for about four years. In fact, we won an award, presented by the B.C. government, for working together—three levels of government doing these teams.

Ms. Sophia Leung: Thank you.

The Chair: Thank you very much, Ms. Leung.

Mr. Finlay, please, four minutes.

Mr. John Finlay (Oxford, Lib.): Thank you, Mr. Chairman.

Welcome, Madam Auditor General, and congratulations.

This has been very interesting so far this afternoon. I suppose I'm being suspicious, but in one of the documents here, the one from Mr. McWhinnie, it says:

However, the Report did recommend that HRDC and CCRA need to work collaboratively in developing joint initiatives that adequately deal with suspected abuse and fraud in this specific situation.

I take that as being the lower mainland of B.C. Is that the specific situation we're talking about?

This is a long-standing complaint, as we've heard, and it was made by someone—you don't have to tell us who, of course—who suspected something. Can you tell us whether it was within a particular industry or whether it covered a particular region? Was there anything specifically identifiable about it? Was it a seasonal industry, perhaps?

Mr. John McWhinnie: As the Auditor General has already said, the complaint referred to a number of industries, but particularly in the B.C. lower mainland.

Mr. John Finlay: I had a little trouble, in my own mind, separating the distinct obligations the two agencies have in administering the Employment Insurance Act. Apparently, the HRDC is responsible for investigating suspected cases of fraud and abuse and ensuring that EI benefits are paid to those who qualify—those employed in insurable employment—and the CCRA has the legal responsibility within EI legislation to determine the insurability of employment.

That sounds to me like a circular kind of situation where, if HRDC accepts the documentation, they're employed in insurable employment. What would not be insurable employment?

• 1635

Mr. Guy Proulx: The issue is one of dealing with employers and trying to have a single window. If you're an employer you also have to withhold both CPP and taxes. The way it's organized, when it comes to dealing with the employers for payroll-type issues, whether you have an employee or a self-employed person, if someone is not clear on whether they have an employee or are in an employment status, they can come to the agency. We have the mandate, under the EI Act, transferred to us from HRDC, to determine these things. Most of the time, when you're in insurable employment, you're also in CPP-equivalent status, and you're an employee. The employer will have to withhold and remit the amounts of taxes, CPP and EI, including his share of CPP and EI, for the portion that the employee withholds.

So it's more a question of how many stakeholders deal with that employer for that purpose. You're either an employee or you're not. We already have a workforce that deals with the employer situation.

Mr. John Finlay: Thank you.

To the Auditor General, you say in item 7 in your report:

The Employment Insurance Act addresses the roles of HRDC and CCRA on the insurability issue

—that's what I had asked about before—

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.

Would you explain that to me, please?

Ms. Sheila Fraser: Sure, Mr. Finlay, I'd be glad to, and I'll ask Mr. Papineau to give you the details.

Mr. Neil Papineau: With respect to the latter point you made about the division, about how it split off, when HRDC does their investigations on records of employment they can only go so far as to when they realize it's an insurability issue. Are earnings in question? Are hours in question? Is the type of employment in question? If that is the case, they must pass it over to CCRA. It is CCRA's decision to determine the actual hours, the actual earnings earned, and whether or not the employment qualifies for EI. So it falls to CCRA to make that decision.

Now, it's stated that no investigation is completed. HRDC stops their investigation and passes it over to CCRA. CCRA does not do an investigation. Therefore, there is no investigation done.

Rulings officers and appeals officers are not investigators. They are not auditors. They are making a determination. They don't have the skills to do an investigation. Therefore, each case dies there. There's never an investigation done on insurability because CCRA doesn't go any further. Their rulings officers and appeals officers do not do investigations.

The Chair: Thank you, Mr. Finlay.

Following up on that point, Mr. Papineau, the rulings and appeals officers are not investigative officers, and yet they are charged with the responsibility of doing the investigations, which they do not do, and out of that comes a report. Is that right?

Mr. Neil Papineau: They are not identified as investigators or auditors. They are not skilled or trained as investigators or auditors. They're trained to do a ruling, to do an interpretation on whatever evidence is put before them.

The Chair: And they really don't get into the investigation, per se, going out into the field and checking the validity of the information?

Mr. Neil Papineau: Occasionally they will go out into the field, but their skills are not such that they can interpret the evidence in front of them, or interpret the facts being presented to them in oral testimony by various parties. They haven't been trained to interpret those facts when suspected abuse is involved.

The Chair: A significant amount of training would be required, in your opinion.

Mr. Neil Papineau: That's correct.

The Chair: Okay.

Mr. Beaulac, you have a point.

Mr. Harvey Beaulac: I just want to clarify a point, Mr. Chairman.

There's a distinction between an investigation and an examination. I think the rulings officer and the appeals officer will perform examinations and reviews. The investigation per se falls under the purview of HRDC, but that's not to say we don't do an investigation, don't look at the facts, and don't look at the records. We do, but it's called a review or an examination.

So maybe it's just semantics, but there is a distinction between an examination and an investigation.

• 1640

The Chair: I think we'll call it semantics.

Mr. Finlay, a last point.

Mr. John Finlay: Mr. Chairman, it strikes me that it's HRDC that suspects some abuse, does some investigation, and then has to hand it over to CCRA to tell them whether it's insurable employment or not. Nobody investigates. If they don't agree, then I suppose it just sits there. Do we call in the RCMP then? What happens next? Or do we not do anything?

The Chair: We're going to get Mr. McWhinnie to talk about it.

Mr. John McWhinnie: Yes, perhaps I can take a crack at this.

We start the investigation, if we have a third-party referral, and start looking into things. When we get to a point where the question of insurability, as has been described here I think quite clearly, is at issue, we have an obligation...because we contract that, and for a lot of valid reasons. They deal with employers for a variety of things—CPP, tax, and so on. They do a ruling.

We can carry on our investigation in aspects other than insurability and wait for that ruling to come back. Then we carry on with our investigation. We are the investigative side. We get a rulings determination from them. In terms of the observations from the Auditor General, or the passing back and forth, or the time lines, or how we coordinate that whole process better, I think we've demonstrated that we've made some significant progress on how we do that. And the investigation is clearly on the HRDC side.

The Chair: I'm confused.

Mr. McWhinnie, you do the investigation at HRDC. You find that it may be a problem. You hand it over to CCRA, because they are the ones who are charged with insurability numbers and so on. They do their own investigation. They accept your papers and your notes and so on, but they do a bit of an investigation themselves. They really don't tell you what they have done, they just say, “This is our decision”.

So HRDC does the investigation and then CCRA does the examination, issues a ruling, and doesn't tell HRDC on what basis they've issued the ruling.

Mr. Papineau, am I right on this?

Mr. Neil Papineau: At the time I was doing the audit, that is the way they were doing it. HRDC investigators were frustrated by the fact that they didn't know the basis for the ruling.

The Chair: Okay.

Mr. Harb.

Mr. Mac Harb: I see it a little differently. I'm hearing two completely different things here. From Ms. Fraser's side, she's talking about fraud, which is a very strong statement. You've determined the outcome already.

Ms. Sheila Fraser: No, all we've talked about is suspected or alleged fraud.

Mr. Mac Harb: That's very important. I think it's important for the record that representatives from both HRDC and CCRA state that these are suspected. Because if that is the case, then how can we turn around and say that for the past 20 years we had those repeating problems? Is it that we've been suspecting for 20 years? According to HRDC and CCRA, this problem has been going on for the past four to five years. And I can see why, as a government member—I can give you millions of reasons why—we have had problems over the past four to five years, or six years for that matter.

So I wanted to determine, is it just an allegation of a problem or is it a specific problem? If it's a specific problem, then we would have to assume that these cases, as both Mr. Proulx and Mr. McWhinnie have indicated, have already gone through the courts, which have determined that in fact there has been a problem.

The Chair: Mrs. Fraser.

Ms. Sheila Fraser: Mr. Chairman, in all of our discussions, if ever I used the word “fraud” and not “alleged” or “suspected” with it, that was an error on my part. As Mr. Harb is indicating, fraud can only be determined by a court. You have to prove intent, and you need a very high standard of proof to prove that fraud has been committed.

I would just like to make the point, though, that there have been allegations that this has been going on for a very long time. Obviously, if it had been proved 20 years ago, it maybe wouldn't have gone on for 20 years.

So you're right, these are allegations. The issue is, with such a high level of proof, with the way investigations or examinations are being conducted, that level of proof is never attained. So it's very difficult—

The Chair: Sorry, I didn't quite get that. You said with the high level of proof—

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Ms. Sheila Fraser: With the high level of proof required to prove fraud and with the way the department and the agency are conducting the investigations—

The Chair: Which were superficial examinations.

Ms. Sheila Fraser: Well, with the examinations that are not investigations, with people who are not trained to investigate cases of suspected fraud, with lack of documentation, it becomes very difficult then to make a case in court of fraud.

I would ask Mr. Papineau to correct me if I'm wrong, but I do not believe that any of these cases have gone to the courts.

The agency may correct me. Have any of these gone to court? Are we aware of any that have gone to court?

The Chair: Mr. Beaulac has an answer.

Mr. Harvey Beaulac: Yes, there are 32 cases before the Tax Court of Canada. Hearings have not been scheduled yet.

The Chair: Mr. Beaulac, is that all subsequent to the Auditor General's investigation, or were these cases referred prior to?

Mr. Harvey Beaulac: These are cases.... They've been objected to and they've not been satisfied with their rulings. They are civil cases; they're not criminal cases.

Ms. Sheila Fraser: These are not cases of fraud.

The Chair: My question was were these cases initiated prior to the Auditor General's report or after the Auditor General's report?

Mr. Harvey Beaulac: These would have been cases they would have reviewed and which have subsequently gone to court.

The Chair: Mrs. Fraser.

Ms. Sheila Fraser: May I just make a clarification that the cases being referred to are in civil court, not in criminal court, so we would not be dealing with the issue of fraud.

The Chair: Okay.

Mr. Harb.

Mr. Mac Harb: I wanted to apologize if I have misheard the Auditor General. I thought the word “fraud” was used. I apologize if—

The Chair: It was definitely used, but....

Mr. Mac Harb: I have a final comment, Mr. Chair.

I think the problem is well in hand. From what I have heard here, there is an action plan in place. They have a comprehensive action plan. The Auditor General made her comment and it's well received. I think the system is working, in essence.

I wanted to say that, as Mr. McWhinnie has stated, sometimes administratively you can take measures that will deter problems rather than going through the costly system of proceeding to court, then appeal and appeal and go in some cases to the Supreme Court of Canada, and at the end of the day we may not end up receiving the benefit we wanted to receive out of that. I'm quite pleased with what I have heard, Mr. Chair.

The Chair: My apologies, I don't know how to pronounce your last name.

Mr. André Hurtubise (Acting Director General, Investigation and Control, Department of Human Resources Development): Hurtubise.

The Chair: Mr. Hurtubise would like to say something.

Mr. André Hurtubise: Thank you, Mr. Chairman.

I would just like to clarify the issue of EI and fraud and follow on Mr. Harb's remark. The EI legislation allows for the adjudication of overpayments and also for the determination of fraud when it's appropriate to do so, and we have done so in many of these cases. When we obtain the results from our colleagues at CCRA, in a number of these cases we follow up and continue our investigation. When apparent and when necessary to do so, we find a determination of fraud and we impose penalties.

The EI Act allows us to impose administrative penalties, which is a monetary fine against either individuals or employers, and we have done so. So far, in four large cases we've imposed over $225,000 in employer penalties. So we have taken action in these areas.

Also, I have one quick remark about the courts. We have in the past gone to the courts with some of these large cases and have not received the types of results that we feel the citizens would find appropriate. They have not been treated with much seriousness. Also, the administrative nightmare of going through the courts with a large case like this is just an enormous burden for all parties. Therefore, we find better administrative value and much higher deterrent value, with these high penalties, to do it administratively. We have done so and we continue to do so.

The Chair: Have you been able to collect all these penalties?

Mr. André Hurtubise: Our overpayment collection area, which is run by our finance and administration branch, collects approximately 95% to 96% of all outstanding overpayments and penalties throughout the country. That's a national figure.

The Chair: I'm talking about the ones you identified—two or three large employers and large abuses and you applied about $250,000 in penalties. Were you able to collect these penalties?

Mr. André Hurtubise: Some have been collected, some are outstanding. This is fairly recent, of course, since all this has happened, so not all of it has been collected, no.

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The Chair: You mentioned, Mr. Hurtubise, that it was a bit of a burden on these people you have found guilty of abusing the process. I'm not going to use “fraud”, because of Mr. Harb, but abusing the process to the point that perhaps you could have been gone to court for fraud, but you say it's too much of a hassle for everybody involved. Surely you would want to protect the taxpayers' money and send a clear signal to employers, but you can't do this with these administrative remedies that are totally protected by the Privacy Act. Nobody knows what's going on. So how can you send a signal if you find a large employer abusing the process systematically and continuously and you say it's too much of a hassle to slap him down?

Mr. André Hurtubise: It's a good point, Mr. Chairman. This is exactly why we have resorted to administrative penalties, because there has not been what has been deemed sufficient reaction by the courts in the past on these types of cases.

The Chair: I would think that guilt is guilt, and the court would be governed accordingly.

Mr. André Hurtubise: I can give you one specific example of a case in B.C., similar circumstances. The employer was found guilty, and the penalty that was given was electronic surveillance: the person was given a bracelet. That was the extent of the....

The Chair: Was that a small employer, or a large one? I'm not sure how you can put a bracelet on a corporate employer.

Mr. André Hurtubise: No, it was one individual. It's an example of the low level of importance placed upon these by the courts.

The Chair: I think in the cases of these “large abuses”, which are likely done in a corporate environment—and the Auditor General can speak afterwards—it would be appropriate for you to protect the taxpayers' funds by sending a clear signal to the community that we do not tolerate deliberate abuse of the process, and if it is significant and identifiable and plainly illegal, you would prosecute.

Mr. André Hurtubise: And we do so on many occasions. We conduct 200 to 300 prosecutions per year nationally.

The Chair: Okay. I'm getting a mixed signal here. Somebody said there was no prosecution.

Mr. Papineau.

Mr. Neil Papineau: We have to clarify: prosecution on what? HRDC does prosecutions where people are collecting EI and are working at the same time. In many cases they would prosecute those people. Here we're talking about insurability, where CCRA is making the determination. So HRDC cannot proceed unless CCRA makes the determination. So let's clarify what kinds of prosecutions they are referring to.

The Chair: Okay, so let's swing the question right back to CCRA, who are doing this examination. If you feel that a specific large employer is consistently abusing the process, why don't you send in a real investigative team to determine if fraud has been committed, and if so prosecute under the criminal court, not the civil court?

Mr. Guy Proulx: We deal with employers in a variety of ways, shapes, and forms. What we do for HRDC on the record of employment also at the end of the year catches up to the T-4 and the other employer-related duties they do. It's the same workforce. It's the same department that does these things.

I brought some statistics here.

The Chair: I'm talking here about.... Presumably you've identified two or three large employers. Correct me if I'm wrong, Mrs. Fraser, but if this is a systemic problem within a specific industry in British Columbia, it seems to me you would have been able to identify that there are a specific number of employers who appear to be showing up for these investigations on an ongoing basis. Let's target these number of specific employers in that specific industry and find out if they are deliberately abusing the process. If they are, then why aren't we prosecuting in criminal court?

Mr. Guy Proulx: When we have to issue a ruling, the question always becomes whether the people worked or not, or whether this is a scheme or not. That's what HRDC refers to us. When we look at it, we determine if the people have worked, the number of hours worked. Whatever was presented to HRDC as original evidence is transferred over to us to ask if this is insurable employment.

• 1655

As Mr. Beaulac said before, we do not do a forensic accounting examination on the employers at that point in time. We try to determine to the best of our abilities, with the level of staff we have to do the workload, whether these people were in insurable employment situations. When we tell the people and refer the situation back to HRDC, HRDC can and does have the authority to go and do a forensic accounting and take them for an investigation and do the....

The Chair: This seems to be bureaucracy gone wild. It starts with HRDC, and it goes to CCRA. CCRA says it doesn't look good, and you go back to HRDC. And you don't send back the information you have.

HRDC, doing initial examinations, says it doesn't look so good, something may be funny here—CCRA, what do you think? You conduct an examination, not a forensic investigation—which is fine, as I wouldn't expect it in every case. You gather new evidence. Also, you're prepared to accept new testimony from the applicant, who can change his tune, and you say that's fine; he changed it. Now he's aware of the rules, and if they didn't accept his last answer he'll give them a new answer. I would think that quite often the first answer is likely the most accurate answer and the second one is more “I'll tell what I need to so that I can get the benefits” answer. But that doesn't make its way to HRDC.

There seem to be these major silos, and nobody talks turkey between the two and the abuse goes on.

What do you think, Mrs. Fraser?

Ms. Sheila Fraser: Mr. Chair, I think you have actually described the situation pretty well.

In order to determine cases of abuse there has to be a much closer working relationship between the revenue agency and HRDC. HRDC cannot continue on an investigation or charge in these cases unless the revenue agency has determined that the insurability was not there. Because we're talking about cases of suspected abuse and fraud, the people who are doing the investigations and the examinations have to have special training and have to be able to know how to do this kind of work. It's not the average run-of-the-mill cases they would be dealing with.

Now, I'm pleased to note that both the department and the agency have indicated that they will be doing or have started doing training of their officers. I believe they mentioned they have a special level of officers who will be dealing with these complex cases. Hopefully that will enable them to deal with this more efficiently.

The Chair: I'm looking at paragraph 34.31 of your report. You say:

We were informed that rulings officers are not trained as officers or investigators. Nor do they use the expertise of investigators or forensic accounting specialists, who are available through CCRA special investigation units.

So you actually do have the expertise on hand, Mr. Proulx, but you don't call them in.

Mr. Harvey Beaulac: Mr. Chairman, it's a question of mandate. In the collaboration between HRDC and CCRA, the responsibility given to CCRA is to determine questions of insurability and also to collect on the premiums in the regular program. Now, the enforcement aspect of the CPP-EI does not fall under the purview of CCRA; it rests with HRDC. We are called upon to provide rulings and appeals on insurability decisions. That's our mandate. The special investigations units within CCRA have a mandate to prosecute GST, tax, and those programs, because that's their mandate.

The Chair: But when you send out an auditor to an employer, you automatically do EI and CPP at the same time.

Mr. Harvey Beaulac: We do. Mr. Proulx indicated a while ago that when we go out and visit an employer we will look at all aspects. We will look at the remittances. Sometimes enforcement actions are taken on the CPP-EI premiums part, on the remittance part. Those are part of the global aspect.

• 1700

With regard to insurability, our mandate falls to determining the ruling and the level of appeal subsequent to that. Mr. McWhinnie can correct me if I'm wrong.

The Chair: I'm going to try to clear this up before I go to Mr. Murphy.

At the CCRA you do in-depth investigations for tax and GST. You also take a look at EI and CPP when your field officers go out and talk to employers. But now you're saying that you really don't have much responsibility for EI and CPP, which rests with HRDC, who don't have field officers to go out and do the investigation. It seems to me that this is something else that's fallen down through the crack here.

Mr. John McWhinnie: Maybe we're getting a bit hung up on this insurability ruling issue.

The Chair: No, I'm not hung up on that, I'm hung up on who's going to do the investigation.

Mr. John McWhinnie: No, but let's be clear. Back before 1971, insurability rulings were done within the EI program. Because of the capacity of CCRA to do source deductions on CPP, tax, and EI, it made much more sense, in their dealings with the employers, to do insurability rulings. That's all we're really contracting with them to do. The investigation capacity under EI rests with HRDC. We have a very well-established investigation control capacity right across the country with investigation control officers and every one of our local officers.

This issue before us today is maybe where we've had a little bit of difficulty in that union, passing back and forth to get those rulings in a timely manner, and being able to apply them to the particular suspected fraud we're dealing with. Those are the observations the Auditor General made when he was there. There's no expectation that they would take over the investigation. That's still our responsibility.

The Chair: I'm still confused, but maybe Mr. Murphy can shed some light on this—or go into any other aspect he wants to talk about.

Mr. Shawn Murphy (Hillsborough, Lib.): Thank you, Mr. Chairman.

First of all, I want to pass on my congratulations to you, Madam Fraser, on your appointment, and wish you all the best as this country's Auditor General.

I would address my question to you, Mrs. Fraser, on something I'd like to approach from another angle, if I could, without getting into the details. Something that's bothered me for a long time, in my previous career and here as a parliamentarian, is the public and institutional acceptance of this type of behaviour.

We have a situation where it appears to me from the evidence—I don't know the exact number—that approximately $37 million was diverted through a scheme, and no one's been prosecuted in the situation. But if a young fellow 17 years old goes out and steals $200 from a service station, he's in jail for six months.

Now, not to deal with this specific case, this goes on in the whole GST and PST industry. In the construction industry, if you ask a carpenter or a contractor to fix your steps, he gives you two prices, one price for a cheque and the other for cash, where he'll take off $100 or $150. It seems to me this whole area has been accepted by the public, and it's been condoned, to a certain extent, by the government. You don't have the prosecutions that I would think...and I think it has to be combined with a public education focus.

You've been involved in audit, and you've seen probably a lot of this in your tenure as assistant auditor and in your previous life as an accountant. These allegations and these facts are nothing new to you. Do you have any thoughts on this systemic underground economy? People call it an underground economy, but I call it theft. When a person is not paying his GST, that is basically stealing from the taxpayers of Canada, and if these people were getting money from the EI system through filing false returns, to me that's akin to stealing.

Do you have any thoughts or advice, from a philosophical point of view, for us as parliamentarians and lawmakers on what can be done in Canada to perhaps change public opinion and, more importantly, to catch some of the revenue this country is currently missing?

• 1705

Ms. Sheila Fraser: Thank you, Mr. Murphy, for your good wishes.

I'd first like to clarify something. First of all, the figure of $37 million was the total amount of employment insurance payments made, and most of those, I would presume, are legitimate payments to those people. But I would agree fully with you that the integrity of our tax system is critical to the ongoing well-being of our country.

You may recall that about two years ago the Office of the Auditor General did an audit on the underground economy and the work Revenue Canada was doing in that regard. Having talked with auditors general in other countries, I think we're actually quite fortunate here that we do have a system where people are basically fairly honest, and do respect the system, but we can't take that for granted and we can't allow cases of abuse to continue. You can't just depend on the goodwill of people to be honest. You need to have deterrents. When you find cases of abuse, action has to be taken.

I agree fully with you that public education is very important in all of this, and awareness of how important these systems are to us. As well, when people consistently abuse, there must be some consequences.

The Chair: A short supplementary, Mr. Murphy. No?

Mr. Harb.

Mr. Mac Harb: I guess I'm a bit puzzled here. When the Auditor General made her comment on this whole case, it was based, from my perspective, on the whole notion that there's something wrong here, and that you guys in both departments, human resources and revenue, aren't doing anything about it.

Mr. Chairman, I had raised the issue of the use of the word “fraud”. When I reviewed the presentation of the Auditor General, the word was used ten times.

In particular, I would ask Mrs. Fraser to go to point 5 in her presentation, where it says:

However, none of these manuals provided guidance to rulings officers or appeal officers to deal with cases of suspected abuse or fraud.

This is a pretty strong statement, that in your opinion fraud does exist.

In point 11 you talk about “suspected abusive and fraudulent practices in British Columbia”, and in point 12 you say this:

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;

In my view, then, the whole premise of the issue here, and the case you're stating very strongly, is that there is a problem there. From what I have heard personally—and I could be misinterpreting what I've heard, from both HRDC and CCRA—is these are alleged problems, exceptionally difficult to prove; they have taken administrative measures through educators and other administrative measures; and they are dealing with the issue.

I guess the question I wanted to put before the committee, and before the Auditor General, is whether, in light of that, the Auditor General would state that she is satisfied with what she heard. As well, what are the kinds of things we should do as a committee to ensure that the system works?

The Chair: Before we go to Mrs. Fraser, I think it's fair to point out, Mr. Harb, that there's a difference between a manual training people to identify fraud and a manual training people to deal with fraud. As the Auditor General pointed out, there unfortunately are people who, given the opportunity, will commit fraud. So the manuals and the training manuals deal with potential fraud and how to deal with it, and then of course there were the allegations.

We'll see what Mrs. Fraser has to say.

Ms. Sheila Fraser: Thank you, Mr. Chair.

In our text—and if the committee would like, in the future we can clarify that—the word “suspected” was to carry to both words, to both abuse and fraud. We did not repeat suspected abuse and suspected fraud. If you like, in the future we can be clearer on that.

• 1710

When we report to Parliament, we believe it is on issues of significant concern that Parliament should be informed. In this case we felt there were sufficient weaknesses in the procedures, in the training, and in the cooperation between the department and the agency that Parliament, and this committee in particular, should be informed of them.

You mentioned action plans. At the time we did our audit, those action plans did not exist. I learned of them today, actually. So I would presume that they are fairly recent. We are pleased to see that the department and the agency are responding to them.

You asked what the committee could do. I would perhaps suggest that the committee might want to obtain copies of the detailed action plans. As I mentioned earlier, we will be reviewing this in two years, and we will see the progress that has been made.

But we do believe this is a serious issue. There are gaps in the procedures, in the way these investigations are being done. If there are cases of abuse, and if there are cases of fraud, I'm not sure they would be sufficiently dealt with.

The Chair: Then perhaps we can get these action plans submitted to the committee. Mr. Proulx, thank you.

Mr. Mac Harb: I'm done, Mr. Chair; I'm happy.

The Chair: Mr. Shepherd.

Mr. Alex Shepherd: I would like to continue along my original line of questioning. The thing that's illusory to me in all of this is that if, at CCRA, you have an incident where you believe or suspect defalcation, if I can use that word.... And historically, as I found in my role many years ago as auditor, people who are willing to do that are willing to do all kinds of things. If somebody is willing to defalcate in terms of a record of employment, then it seems to me they're also willing to cheat significantly on their income tax.

You do have the propensity within the department to deal with that. That is your job. That's why you have a special investigations unit. Did you ever call a special investigations unit to investigate any of these claims?

Mr. Guy Proulx: I don't believe we did as part of the record of employment statement, or ROE, because investigation of wrongdoing and potential fraud on the record of employment is HRDC's issue. We do, within the Canada Customs and Revenue Agency, penalize employers who remit late, who file late, who don't remit, or who short remit. When we detect it we penalize them. When they don't remit, we go on site and assess them. We assess them penalties. We do all of these things as part of our risk analysis within the audit world. And I'm not an expert on the audit world—maybe Harvey could say a few words about it—but I do—

Mr. Alex Shepherd: Realistically, though, none of these employers has ever had a tax audit. Is that correct?

Mr. Guy Proulx: They may or may not have.

Mr. Harvey Beaulac: Audits are generated through a number of leads. There's a regular screening mechanism, and there may be instances where we gather information from one source that will trigger an in-depth audit of a much bigger nature.

Mr. Alex Shepherd: But the answer given was that through none of this investigatory process, through HRDC, did they ever trigger an audit.

Mr. Harvey Beaulac: It was prosecutions, I believe.

Mr. Alex Shepherd: You use the word prosecution, but you mean a civil action, not a criminal prosecution.

Mr. Harvey Beaulac: I wouldn't be at liberty to ascertain whether these turned into leads, but as a former auditor myself, I know in a number of instances we have had information coming from numerous areas in order to generate a full-scale audit.

Mr. Alex Shepherd: But have have any of these employers ever been charged? I think of the criminal act of income tax evasion. I mean, that would be public knowledge.

Mr. Harvey Beaulac: Criminal charges, yes.

Mr. Alex Shepherd: Yes, they have had criminal charges?

Mr. Harvey Beaulac: No. To answer your question, I'm not.... I couldn't answer it.

Mr. Alex Shepherd: Why can't you answer it?

Mr. Harvey Beaulac: Because I don't have the information, Mr. Shepherd.

Mr. Alex Shepherd: Why don't you have the information? Wouldn't it be important?

Mr. Harvey Beaulac: As I indicated earlier, our responsibility, in appearing before the committee, was to deal with suspected abuse and suspected fraud regarding the situation in the lower mainland of B.C., and to deal with what steps we have taken to improve our cooperation with HRDC, that aspect of it. This is what we've addressed. If, in some instances, some actions have generated into a tax matter, this is not, in my view, what I was coming here to discuss.

• 1715

Mr. Alex Shepherd: I'm just saying that you seem to be thinking in a very small box. I'd like to think that CCRA doesn't do that.

Mr. Harvey Beaulac: We try to deal with compliance. A while ago someone mentioned that people are basically honest and that 95% of all taxes come in voluntarily. We have to take corrective measures to make sure we look after all aspects of it.

Mr. Alex Shepherd: I understand that, but when you get a known case of defalcation, that leads to other questions of.... It creates a pattern.

Mr. Harvey Beaulac: Yes, it could have, Mr. Shepherd, I agree.

The Chair: Just following up on that point, Mr. Shepherd is absolutely right: if you're dishonest in one area, you're likely dishonest in many areas. If you do a tax investigation and you find out there's tax abuse, then obviously you would suspect there could very well be EI abuse by the same employer. Do you pass the fact that you have found tax abuse on to HRDC? How can you communicate to them that if you found tax abuse, the likelihood is perhaps they should do an investigation for EI abuse?

Mr. Harvey Beaulac: We have section 241 of the Income Tax Act.

The Chair: That says you can't do it. But you've done the investigation on behalf of HRDC on insurability. After all these years, now you're claiming section 241 of the Income Tax Act prevents you from passing the information on. HRDC say we are the guys who do the investigation, and you keep the information to yourself. It seems rather strange to me.

Ms. Jennings has some questions. Madam Jennings.

Ms. Marlene Jennings: It seems kind of strange to me as well, Mr. Chair.

This thinking in the box.... Let's break the box down. I don't think there's a Canadian citizen who would accept a police officer or a police force stating that while they knew there was someone who had an extensive criminal record of say break and entry living in a particular neighbourhood, who has just moved in, and that neighbourhood suddenly becomes a victim of break and entry, that would not be sufficient reason or grounds to investigate that person and see that person as a liable suspect. In this case, you're both here saying that.

HRDC has received information that there's alleged fraud or suspected fraud or abusive practices that are happening within a particular company. The investigation happens. You, Mr. Proulx, have said that in most of the cases the investigation does not lead to sufficient evidence to lay criminal charges, but that's because the standard of proof is so high: it's beyond a reasonable doubt. But it's led to sufficient evidence for the agency or HRDC to be able to levy administrative penalties. So then we're talking about on the balance of probabilities or the preponderance of the evidence or the proof, which is a lower standard.

Now, if there were sufficient evidence to be able to levy administrative penalties against employers and to deprive or to claw back someone who has received benefits to which he or she was not entitled, I find it unfathomable that this is not sufficient evidence or grounds to trigger an audit of that employer. It's clear that it's not an administrative error, because if it had been, if it's a first-time offence, you have the authority under the act, in fairness, not to apply the administrative penalty. You don't have to apply it in many of the cases. So if the evidence is not that there was intent, but the evidence is not clear enough to meet the criminal standard but it is clear enough to meet the civil standard or administrative standard, I don't see why that doesn't provide sufficient grounds to trigger an audit of that company, period. I'd like you to explain to me why.

The Chair: Mr. Proulx.

Mr. Guy Proulx: Okay. First of all, in the cases at hand the issue was one of suspected fraud and abuse. So when it's suspected fraud and abuse, they're not officially fraud and abuse until they're proven to be fraud and abuse. The standard of proof is pretty high, and I think even the OAG people recognize that.

• 1720

The second thing is that when the cases are referred, the mandate of our people is to determine whether these people who are claiming EI benefits have worked or not and whether they are entitled to EI benefits or not. In a simple form, that's roughly what we have to do. As part of doing that, we'll look into the books and records. We'll try to satisfy ourselves, based on the evidence we have, as to whether these people did work or did not work. We refer the issues back to HRDC on the basis that we think people have been in insurable employment or have not been in insurable employment, and here is the outcome of our investigation or determination. HRDC has the authority to launch a full-fledged investigation into the criminal or potential fraud and abuse.

When these things happen, what we would like to do in the future, through the better training of our people, is send our people on site and do an investigation of the full payroll. If we think at that point that the people are also delinquent on GST and things of that nature, we will follow up on them. That is part of the issues we are looking at in terms of improving the process. Did it happen as a de facto process? No.

Do we have the troops required to follow up on all of these people? Sometimes there are honest mistakes that happen out there. Sometimes it isn't fraud. We do fraud investigations in CCRA and so does HRDC. When the cases of fraud do come out, that information becomes public. Those prosecutions are there. So there's nothing preventing CCRA or HRDC from looking at each other's fraud cases and saying maybe they're there for us as well. Is there an official automatic relationship between the two? No.

Ms. Marlene Jennings: Why not?

Mr. Guy Proulx: It's a question of risk. Right now the systems and a lot of the processes that we follow up on are driven by factors other than the cases you're talking about. Should they be? Perhaps.

Ms. Marlene Jennings: Then I would suggest that you sit down and look at that and determine whether or not. I think it should be. I think you should develop criteria that would actually help you decide whether or not, when you've done the investigation on the employer-employee side—was the person really employed, is it an admissible or eligible position under EI benefits, etc.... Develop the criteria. Once you've developed that something happened that wasn't right, that it was in fact fraud, that the criminal standard of proof will not be met but it was sufficient to trigger the administrative penalty side in that, you should develop criteria to then allow you to determine whether or not you should go in and do a complete audit—GST, etc. I think that would be a worthy exercise.

This may sound like a really simplistic example, but one of the problems we have had as a Canadian society with law enforcement in terms of dealing with organized crime, the biker gangs, etc., has been that each police force, up until very recently, has operated in its own isolated box. So all the biker gangs and organized crime families and figures had to do was move out of one jurisdiction and then they had free reign. No information was being shared from jurisdiction to jurisdiction. That culture of isolation has changed. We're now starting to see significant positive impact of law enforcement in Canada against organized crime.

I'm not suggesting that organized crime is involved here, but I am suggesting that there probably is systemic fraud and abuse that happens. It may only be 1%, it may be 5%, but you don't even know. With the systems you've put in place, you may be able to answer that confidently in two years or three years. Then you'll also be able to answer confidently, if you actually look at it, whether or not there is a need to trigger full-scale audit and what the results of that are. Is it worth it to continue? You may do the experience and the experience shows that it's not worth it, but I think you have to do the exercise and look at it before you simply discount it out of hand.

Thank you, Mr. Chair.

The Chair: Thank you, Ms. Jennings. I'm sure they will take your remarks under advisement.

• 1725

I still don't have it clear, based on Mr. Shepherd's point that if you're dishonest in one area you're likely dishonest in many areas.... If you do a tax investigation and you find that they're dishonest in the tax investigation, how can you get that information over to HRDC so they can say that perhaps they have to do an audit of the EI, because they're dishonest there too?

Remember, you are passing information to HRDC that the ROE is legitimate. So you are passing information. You're claiming that with section 241, you can't do it. But maybe you just write a memo, asking why don't they investigate all these people. You don't have to say you found them guilty of tax fraud or tax abuse or tax evasion or whatever word you want to use, but maybe send a clear statement from you to HRDC that this may be a high-risk individual, so why don't you take a look at them.

For goodness sake, there is only one taxpayer, and these silos and lack of information.... I can appreciate section 241 of the Income Tax Act, and I appreciate why it's there. I'm not really intending to meddle with it, but you have to resolve this problem.

Is there any last comment before we go to the Auditor General on that issue?

Mr. Guy Proulx: Just a very summary observation. We worked very closely in one case out in the Maritimes, which is the Sharbells case, and we were severely criticized for partnering maybe too closely with HRDC—

The Chair: Who criticized you?

Mr. Guy Proulx: The Tax Court.

We were at that point doing some of the early front-end work with HRDC, rather than each on our own. Rather than them just passing over things, we were working with them. We were found to be too close: we needed to be more at arm's length. While I think this offers potential, we also have to.... We've tried it, and sometimes we get the opposite signal.

The Chair: I think a simple letter from your department to HRDC saying you think these are high-risk individuals.... You don't have to say why you think they're high-risk individuals. You don't have to release income tax information. But if an HRDC investigator says CCRA says these are high-risk individuals, they would take that seriously.

We're running out of time. Mrs. Fraser, do you have a closing comment?

Ms. Sheila Fraser: Thank you, Mr. Chair.

I'd just like to repeat that we were concerned that in cases of suspected abuse and suspected fraud, the level of investigation that was being carried out was not rigorous enough. From what I've heard today from the department and from the agency, I think their responses to our concerns are reasonable.

We would appreciate receiving a copy of the action plan. I would suggest that the committee might be interested in receiving that. And we will be following up in two years.

The Chair: Okay. The committee did ask for a copy of that action plan. Send a copy to the Auditor General too, please.

The meeting is adjourned.