The Canada Revenue Agency (CRA) recently released a report detailing the findings of its audits of the Canada Emergency Wage Subsidy (CEWS) program. The report revealed that $458 million in funds disbursed to employers through the wage subsidy program have either been denied or adjusted due to a partially completed auditing process.
The CEWS program was implemented to help businesses during the COVID-19 pandemic by providing wage subsidies of 75 percent, with the goal of encouraging companies to retain their employees. However, auditor general Karen Hogan’s report last year raised concerns about the eligibility of thousands of businesses that received the subsidies.
While the majority of employers who received the subsidy were found to be highly compliant, the report highlighted that most claim adjustments were a result of 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 reduced or denied.
Interestingly, audits that coincided with claims flagged by the auditor general resulted in $134.5 million in adjustments or rejections. The report identified insufficient revenue decline as a contributing factor in 14 percent of these adjustments. In total, the amount of claims adjusted or denied reached $458 million by the end of September.
The report also revealed significant issues with claimants who utilized third parties to prepare their applications. Approximately 85 percent of audits for such claims led to funding reductions or denials. The CRA found cases of aggressive non-compliance in situations where intermediaries knowingly facilitated inaccurate or non-compliant claims. Most of these cases were associated with small businesses having 25 or fewer employees.
The CRA has already imposed over $15 million in penalties related to these files, and some cases have even been referred to the criminal investigations program.
While the CRA acknowledges that third-party preparers can play a crucial role in the tax system, audits specifically targeting those who skirt the law are being conducted. The agency is confident in its efforts to address compliance issues and believes it has identified the right risks.
The audit of the CEWS program will continue until at least 2025, as the CRA aims to ensure that all claims are thoroughly reviewed to safeguard against fraudulent or ineligible applications.
Frequently Asked Questions (FAQ)
1. What is the Canada Emergency Wage Subsidy (CEWS) program?
The CEWS program is a wage subsidy program administered by the Canada Revenue Agency (CRA) to help businesses retain employees during the COVID-19 pandemic. It provides subsidies of 75 percent of eligible wages for qualifying employers.
2. Why were $458 million in wage subsidies denied or adjusted?
The funds were denied or adjusted by the CRA as a result of their auditing process, which identified issues such as calculation errors, lack of documentation, and cases of non-compliance by claimants who used third parties in preparing their applications.
3. What percentage of employers receiving the subsidy were found to be compliant?
According to the report, the majority of employers who received the wage subsidy were highly compliant. Most claim adjustments were due to errors and documentation issues rather than ineligibility.
4. What actions has the CRA taken in response to non-compliance?
The CRA has already applied over $15 million in penalties related to non-compliant claims. Some cases have also been referred to the agency’s criminal investigations program.
5. How long will the CRA’s audit of the CEWS program continue?
The audit is expected to continue until at least 2025 to thoroughly review all claims and ensure compliance with program requirements.