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Last updated: March 31 2021
CEWS & CERB: Audit Potential Emerges for High Ineligibility Rate
Beth Graddon
The Canada Emergency Wage Subsidy (CEWS) program is set to end on June 15, 2021. Has it been a success? It depends on your perspective. Last week, a Performance Audit on this program and the Canada Emergency Response Benefit (CERB) was completed by the Auditor General of Canada and the findings do raise eyebrows.
Fast distribution. Both reports indicated that overall these programs were successful in getting money quickly into the hands of Canadian businesses and individuals in need of financial assistance due to the pandemic, but at a high cost of over-payment to ineligible recipients, some of whom had a previous history of taxfiling penalities.
CEWS Findings. To date, the CEWS has provided over $71 billion in subsidies, lending support to over 5 million employees. Period 6 had the most activity (August 2 -29, 2020) when support went to 5,293,050 employees. A total of 2,980,000 applications were approved, of 3,009,500.
However, the 90% approval rate may have included ineligible employers, according to Auditor General Karen Hogan who outlined that "without effective controls for validating payments, the 
integrity of the program is at risk and ineligible employers might receive the subsidy."
Failure to File Audits Coming? In addition, the report identified that the CRA may not have had all up-to-date earnings and tax details when applicants for the CEWS program were assessed. This includes 28% of applicants who had not filed a GST/HST return for 2019 at the time of their applications, which lead to payments being issued despite these businesses having a history of penalties for failure to remit.
Although the CRA had no legislative authority to deny access to the CEWS due to this, the Auditor General Report indicated that the CRA should be dedicating increased resources to enforcing GST/HST delinquent filer compliance which had a $3.2 billion impact for the 2019-2020 fiscal year.
CERB Findings. An audit was also completed on the CERB payments. The Auditor General indicated that the program came at a cost of approximately $74 billion when it ended in October 2020. After this, individual income support was transitioned to the Canada Response Benefit (CRB) program. One concern was identified: that some employees may have received the CERB while their employers were collecting CEWS for them because they were working, CRA was left with no way to verify this, as employee SIN numbers were not required with CEWS applications. That’s an administrative miss.
The CRA claims to be working to collect ineligible CERB claims that are verifiable; this in the midst of the complexity the CERB has added to tax season. There are taxpayers who have received T4A slips that don’t appropriately reflect repayments, and a number of other issues affecting tax reporting, including the 8,500 Canadians who were victims of fraudulent CERB claims. They are now in the unfortunate position of having to report and pay taxes on funds they never applied for or received, or face tax audits to explain the situation later.
Taxpayers are encouraged to get help from tax professionals, including a DFA-Tax Services Specialist™ for personal tax assistance, to ensure proper tax and reporting compliance, particularly if they tapped into any emergency response benefit programs in 2020.
Professionals are encouraged to attend two important CE Summits in May and September.
