Over a million potentially fraudulent CERB payments made

When Prime Minister Justin Trudeau was pressed about the possibility of fraud within the federal government's emergency benefits program, he suggested turning attention to the number of unemployed Canadians.

The high number of Canadians unemployed due to the pandemic made it essential to distribute money quickly and without too many questions, he said last Thursday.

But the question of who exactly is receiving the benefits from the Canada Emergency Response Benefit (CERB) is suspicious, to say the least.

Statistics Canada's labor-force survey for April, completed April 18, suggests that three million Canadians have lost their jobs and another 2.5 million are currently working less than half the normal hours since the outbreak of the virus—5.5 million total.

But then on April 19, the government had received 6.7 million CERB claims from across the country, a difference of more than one million people.

Economists cannot come to an agreement on what this data means. Some are of the opinion that it is just a statistical anomaly, as the employment numbers do not match the CERB stats.

“It’s close enough that it’s likely a timing issue,” said David Macdonald, a senior economist with the Canadian Centre for Policy Alternatives.

Others believe that the situation can be at least partly explained by Canadians taking advantage of an open benefits scheme, whether legally or otherwise.

“The capacity for abuse or opportunistic behaviour in this program is enormous,” said Philip Cross, a former Statistics Canada economist and fellow at the Macdonald-Laurier Institute. “If you advertise that you’re going to be approved — no questions asked — you’re going to get pensioners applying for it.”

A spokeswoman for Ahmed Hussen, the Families, children, and social development minister, said Tuesday that there are likely several factors to consider in explaining the apparent discrepancy, including the fact that the CERB number is cumulative and includes those people who no longer receive benefits because they have returned to work.

But it seems that there should be a concern for where every penny of the program is going, given that it is one of the priciest programs ever to unfold in Canada, which has distributed $35 billion in a little over a month.

CERB gives $2,000 a month to people who "have stopped working" due to the pandemic, so long as they made at least $5,000 with the last year and did not quit their job voluntarily.

There has been an increased focus in recent days on whether the government could have done something in order to prevent the waste.

Guidance memos sent to Employment and Social Development Canada employees advise them to effectively ignore any potential abuse, and to approve payments to those who have quit their jobs or were fired for cause, in direct contradiction of the rules.

One source within the system said people who have reported no income for years, like because they were working under the table, are routinely receiving perks from CERB.

Mortgage broker Ron Butler says that his company discovered that a client, who was about to purchase a house, received a CERB payment even though he was fully employed.

The client shared that his two cousins had recommended applying for the benefit, as they had done. But doing so was fraud, and Butler's company had to report the illegal action to the bank, which turned around the canceled the man's mortgage.

“His reaction was extreme disappointment,” said the broker.

There is no doubt a substantial number of Canadians who need the CERB support in order to survive, but there are others who are simply taking advantage of the system.

The survey conducted by Statistics Canda conducted in the middle of April found that 5.5 million people would be eligible for the CERB benefit, but 6.73 million had applied for the benefit, meaning that $19.8 billion had been paid out.

The number of applicants has since jumped to 8 million.

Due to the shifting of the employment landscape, Statistics Canada will likely see their figures change and grow within the jobless ranks, including CERB claims, Macdonald said.

He acknowledged that there is certainly fraud occurring, but added that applying the usual safeguards would be disastrous.

“You probably could have caught that one out of a hundred that’s trying to defraud the system,” he said. “But the trade-off would be that 99 legitimate applicants didn’t get their money for a month-and-a-half and therefore had to go to a food bank.”

A stern front-end warning that cheaters would be prosecuted may have dissuaded some from abusing the system, said economist Jack Mintz of the University  of Calgary's School of Public Policy.

Trudeau and other government officials have said that any fraud will eventually be regained on the "back end" through the income-tax system.