A newly released report from the Canada Revenue Agency (CRA) sheds light on the compliance levels and challenges faced during the implementation of the Canada Emergency Wage Subsidy Program (CEWS). The program, which aimed to provide financial assistance to businesses grappling with the impact of the COVID-19 pandemic, has seen the denial or adjustment of $458 million in funds disbursed to employers.
The report, which covers the period up until September 29, reveals that the majority of employers who received the wage subsidy were highly compliant. The setbacks primarily arose due to calculation errors and lack of documentation, rather than ineligibility. Out of the $5.53 billion worth of audits completed by the end of March, $325 million in claims were either reduced or denied. Furthermore, audits overlapping with claims flagged by the auditor general unveiled $134.5 million in adjustments or rejections.
The report identified a concerning trend related to claimants who utilized third-party assistance in preparing their applications. Approximately 85 percent of audits conducted in such cases resulted in funding being reduced or denied. The CRA discovered instances of aggressive non-compliance, particularly among small businesses with 25 or fewer employees, suspected of using intermediaries knowingly facilitating inaccurate or non-compliant claims.
With this report, the CRA is taking necessary actions to address these challenges. The agency has already applied penalties exceeding $15 million as of September-end in relation to these cases. It is emphasized that although this report focuses on CEWS, many of the preparer-linked claimants also applied for the Canada Emergency Rent Subsidy, which will also undergo review.
Assistant Commissioner Cathy Hawara underlined the significance of intermediaries like accountants but stressed the importance of targeted audits to prevent any misuse or non-compliance. The CRA aims to maintain the overall high level of compliance exhibited by the majority of employers while actively tackling identified risks.
The audit of the CEWS program by the CRA remains ongoing and is expected to continue until at least 2025, ensuring accountability and efficacy in the distribution of funds.
What is the Canada Emergency Wage Subsidy Program?
The Canada Emergency Wage Subsidy Program (CEWS) is a pandemic-era initiative that subsidized businesses’ staff wages by 75 percent to encourage the retention of employees during the COVID-19 pandemic.
What percentage of employers displayed compliance with the wage subsidy program?
The report highlights that the majority of employers who received the wage subsidy were highly compliant, with most claim adjustments arising from calculation errors and lack of documentation rather than ineligibility.
What challenges were identified in the report?
The report reveals concerns regarding claimants who used third-party assistance, with audits of such claims resulting in funding reduction or denial in approximately 85 percent of cases. Instances of aggressive non-compliance were discovered, particularly among small businesses with 25 or fewer employees.
Has any action been taken against non-compliant claimants?
As of the end of September, the CRA has already applied penalties exceeding $15 million in relation to non-compliant claims, demonstrating its commitment to addressing challenges and ensuring compliance.