Report 4 – Canadian Child Benefit – Canada Revenue Agency (2023)

Introduction

Background

Canadian child benefit

4.1The Canada Child Benefit is a Canadian government program that helps certain families who need financial support to raise their children. The program provides a non-taxable monthly payment to eligible families, based on their net household income. In the2019–2020In the fiscal year, the program allocated $24.5 billion to 3.3 million families in Canada responsible for 5.9 million children under the age of 18.

4.2The government introduced the program in 2016 to replace three different benefits:

• the Canadian child tax benefit
• the National Child Benefit Supplement
• the Universal Childcare Allowance

4.3Since July 2018, the government has indexed the maximum benefit amounts due under Canadian child benefit to inflation. It also introduced income thresholds or levels above which payments would be reduced.

4.4The Canada Revenue Agency administers Canadian child benefits. Her responsibilities include determining eligibility and payments to families, and communicating with families about entitlements.

Payment to benefit recipients during the pandemic

4.5Our audit included an investigation into the measures taken in response to the coronavirus disease(Covid-19)pandemic. In May 2020, the government expanded the program to provide families with additional income support. The benefit amount was increased by up to $300 per child that month.

United Nations Sustainable Development Goals

4.6In September 2015, Canada committed to meeting the targetsUnited Nations 2030 Agenda for Sustainable Development. The Canada Child Benefit program supports the goal of zero poverty (Goal 1) of the United Nations Sustainable Development Goals.

4.7In the course of our work, we have heard that certain vulnerable populations in Canada are struggling to access the Canada Child Benefit and similar programs. In the near future, the Office of the Auditor General of Canada plans to conduct an audit of the Canadian government's outreach activities to vulnerable populations.

Focus van audit

4.8This audit focused on whether the Canada Revenue Agency ensured that Canadian child benefit recipients were eligible for benefits and that payments were made in a timely and accurate manner.

4.9This check is important because the benefit is intended to help with the costs of raising children under the age of 18. The Canada Child Benefit is an important policy tool for reducing poverty and inequality by providing assistance to low-income families.

4.10More details on the audit objective, scope, approach and criteria are availableAbout the auditat the end of this report.

Findings, recommendations and reactions

Process application and payment process

Context

4.15For eligible families, the Canada Child Benefit program offers a non-taxable monthly payment based onnet familyincome^{Definition 1}. To be eligible (that is, to meet the program requirements), an applicant must do so

• living with a child under the age of 18
• has primary responsibility for the care and upbringing of the child
• be a resident of Canada for income tax purposes
• be a Canadian citizen, permanent resident, or protected person (or have a spouse or partner who is).Immigration and Refugee Protection Act, a temporary resident or an indigenous person who meets the definition of "Indian" in theIndian Act

4.16The eligible person must apply for the program when

• a child is born
• a child goes to live with the applicant or returns to the applicant after temporarily living with someone else
• the applicant initiates or changes a shared parental responsibility arrangement
• the applicant is given custody of a child
• the applicant, or his or her spouse or registered partnership, meets the eligibility conditions

4.17Based on factors set forth in theIncome tax regulationsthe Canada Revenue Agency defines the primary caregiver as the person responsible for the care and upbringing of a child, including overseeing the child's daily activities and needs, for example arranging medical appointments and arranging child care. If the child lives with the female parent, theIncome tax lawstipulates that the female parent is considered to have primary responsibility for the child; this is known as the “feminine assumption.”

4.18There are 3 ways to claim Canadian child benefit (Appendix 4.1):

• Automated Benefit Application: All counties and the Northwest Territories send information from a child's birth registration form to the agency for use as a benefit application.
• Online Application Benefits: An individual submits an application online through the Canada Revenue Agency's My Account web portal.
• mail-in application: a person fills out a paper application form and sends it by mail.

4.19The agency processes the applications in 3 tax centers located inJonquiere, Quebec; Sudbury, Ontario; and Winnipeg, Manitoba. The data required to process an application depends on the application method and the time that has passed since the birth of the child.

4.20When all program requirements are met, the amount payable will be calculated based on the net household income reported on the prior year's income tax return, along with the spouse's or spouse's income tax return. applicant. if present. The calculated amount is paid in equal monthly amounts for a12 monthsperiod from July to June.

4.21For example, for payments made between July 2020 and June 2021, a recipient will receive monthly payments based on the net household income reported on their 2019 tax return. The higher the net household income, the smaller the benefit amount payable to the qualifying parent. If one or both applicants have not filed an income tax return, no payment will be made under the program.

The assessment of child benefit entitlement in Canada was well managed

What we found

4.22We found that the Canada Revenue Agency had effective systems and processes in place to assess the eligibility of Canadian child benefit recipients. However, changing certain aspects of the requirements and processes would improve the integrity of the program.

4.23We visited tax centers where the agency was processing applications for the program. While first-level agents were only responsible for data entry and had to work quickly, we saw some of these agents taking the initiative to verify the submitted information. In our view, this extra vigilance, while not always exercised, had the potential to strengthen the integrity of the program.

4.24We have seen some cases in our sample where months elapsed before the agency was notified of a change in the situation affecting a beneficiary's eligibility for the programme. We also noted that the agency maintained a list of documents that could be provided to support the assessment of a beneficiary's eligibility, but that not all of the proposed documents were useful for this purpose.

4.25The analysis supporting this finding discusses the following topics:

• Effective determination of suitability
• Restrictions on suitability assessment
• Outdated information
• Limited value of some benefit eligibility documentation

Why this finding matters

4.26This finding is significant because effective eligibility checks help protect the integrity of the Canada Child Benefit program. They also reduce the amount of compliance checks required and, in some cases, the financial burden on later ineligible recipients who then have to repay benefit amounts already paid to them. If payments are made to someone who is ineligible or who later becomes ineligible due to a change in circumstances, the cost to the state coffers could add up to $100,000 over time in payments for each child involved.

Recommendation

4.27Our recommendation in this area of ​​research appears onparagraph 4.42.

analysis to support this finding

Effective determination of suitability

4.28We have determined that the Canada Revenue Agency has put in place checks to validate eligibility, including compliance assessments and quality assessment.

4.29We selected a representative sample of benefit applications and files for the2019–2020fiscal year. We assessed whether the eligibility conditions of the program were met and whether they reflected the process described in the program operational manual. We found that the agency made sure that benefit recipients met the program's eligibility criteria.

4.30We also found that the agency performed validations to determine eligibility after it began making initial payments to a recipient. In some cases, validations were performed at a later date based on risk assessment. This approach was intentional; The agency's goal was to begin payments as soon as possible to help families.

4.31This approach had the potential to increase the risk of undetected errors in eligibility assessment. Nevertheless, for the automated application process, we found the balance between payment speed and controls to be acceptable. We believed that an application received through the automated benefit application process had a lower risk of error because the information was provided by a provincial or territorial government.

Restrictions on suitability assessment

4.32First-line agents at the Canada Revenue Agency had to complete initial processing of benefit applications in about five minutes. In this very limited time, they were expected to enter information from a paper application into an electronic database. The system logic then made the decision whether to approve, reject, or move the request to a higher level for further review.

4.33We visited tax centers where we saw first-line agents processing applications for the program. Although they were solely responsible for data entry and had to work quickly, we saw some of these agents taking the initiative to verify the submitted information. While this vigilance was not exercised in all cases, it did identify applications requiring further assessment.

4.34In our view, with more time to process benefits claims, front-line agents would be better able to verify the information provided. For example, they could check whether another child of the same parents had been born in the past nine months. They can also check the validity of supporting documents, such as a birth certificate from another country, proof of residency in Canada, or a citizenship document. The additional information could improve the validation process.

4.35Agents at all levels sought clarification when an application lacked the required information or contained information that was unclear, but what they were told was often not confirmed through documentation checks. For example, during our visits to the tax centers processing Canadian child support applications, we observed senior agents calling applicants to obtain citizenship information and then entering this information into the database without asking for supporting documentation. In our view, information in the agency's databases must be accurate and supported by evidence so that Canadians can maintain confidence in the proper management of the public funds used by this program.

4.36In some cases, other departments of the agency and other federal departments likely had information that could support a benefit application, such as the renewal of a resident card. Access to this information would have enabled agents to assess suitability with a higher level of confidence.

Outdated information

4.37We found that Canada Revenue Agency agents at higher levels sometimes did not have the most up-to-date information when determining eligibility for the program and calculating payments. For example, in the sample we analyzed, there were instances where the agency was not notified of changes, including the departure of a recipient from Canada. Payments continued until the agency received an account adjustment or until the parent stopped filing a Canadian income tax return. In these circumstances, some amount would have to be paid back to the government.

4.38In our view, the task of assessing suitability in such cases was made more difficult due to the limited information exchange between the agency and other federal departments. With a better information sharing process, where the agency is notified when recipients permanently leave the country, the agency could update account information and ensure eligibility requirements are met. Another factor that could affect benefits was a change in marital status or custody arrangement. The benefit would vary depending on whether the parents were married, whether they had separated and only one parent had custody of the child, or whether they were divorced and shared custody of the child on an equal or nearly equal basis (Figure 4.2). If marital status or child custody information is out of date, the benefit amount or recipient may be incorrect.

Limited value of some benefit eligibility documentation

4.39We found that some of the documents applicants could choose from to demonstrate eligibility for benefits were of limited value. Also, no birth certificate was required on application for a child under eleven months who was born in Canada.

4.40The senior agents at the Canada Revenue Agency assessing eligibility had to make a judgment on the information provided. For the purposes of assessing the eligibility requirements, in particular who is primarily responsible for the care and upbringing of the child, certain documents that applicants may provide, such as a court order or a separation agreement, may not in themselves be sufficient to determine the applicant's eligibility. . For example, to determine which parent had primary responsibility for caring for the child, the documents listed by the agency were used

• court order and divorce agreement
• registration form or receipt for an extracurricular activity
• any document showing that the child lived with the applicant

4.41Some of these documents may not reflect the real situation of the family. For example, proof of a child's registration for an activity shows who paid for the activity. This document may not show that the child lived with the paying parent.

4.42 Recommendation.To improve the management of the Canada Child Benefit program, the Canada Revenue Agency should do this

• ensure that the list of documents that applicants can submit is appropriate to assess eligibility
• A valid birth certificate is required for all applications
• improve the receipt of data from other government organizations to gain greater assurance that eligibility requirements are met

The agency's response.Agreed. As the Office of the Auditor General of Canada has observed cases where Canada Revenue Agency agents reviewed applications where they did not correctly apply the List of Acceptable Documents in determining eligibility, the agency will send a reminder to all reviewers . In addition, the agency will review and, if necessary, revise the list and related training products.

The agency will conduct an investigation to determine the risks associated with the requirement to provide a valid birth certificate for all applications. The agency will also review when to provide this documentation to validate and support the Canadian child benefit application.

In addition, the agency will work with its partners to improve the data received to ensure Canada Child Benefit eligibility requirements are met. Finally, the agency will continue to work with and support the two remaining territories in their implementation of the automated benefit application.

Benefit payments were accurate and timely

What we found

4.43We verified that payments to Canadian child benefit recipients were accurate. Payments were made in a timely manner according to service standards set by the Canada Revenue Agency.

4.44We found that the system could process an automated benefit application in seconds, and a first-level employee could enter data from a paper application in under five minutes. The service standard for the first payment was 8 weeks for an automated benefit application and an online benefit application and 11 weeks for a mail-in application from the date it was received by the Canada Revenue Agency.

4.45The analysis supporting this finding discusses the following topics:

• Accurate payments
• Timely payments

Why this finding matters

4.46This finding is important because benefit recipients are each entitled to the amount to which they are entitled (that is, the correct amount under the law), as stated in the Taxpayer Bill of Rights. Given the purpose of the program, it is important that the first payment is made in the shortest possible time frame, as families entitled to the benefit need the financial support to raise their children.

Context

4.47Once the agency determines that a benefit application meets the eligibility requirements of the program, benefits are calculated based on net household income, using the formulas set out in theIncome tax law. Benefits are paid around the 20th of each month and a week earlier in December.

Recommendation

4.48We have not made any recommendations in this area of ​​research.

analysis to support this finding

Accurate payments

4.49We have verified that the Canada Revenue Agency has accurately calculated the amount a qualifying parent is entitled to for the coming year. It did this by establishing that a benefit claimant met the eligibility requirements of the program and by referring to the claimant's income tax return for the previous year. Benefits were calculated for a period of twelve months from July. Even if someone were eligible for the benefit, the net household income would determine how much that person was entitled to and whether any payment had to be made. The higher the net household income, the smaller the benefit amount payable to the qualifying parent. The payment also varied depending on the number of children in a family (Appendix 4.3). This was in addition to variations depending on marital status and parental custody arrangement (seeFigure 4.2).

4,50A lack of up-to-date information about net household income, number of children, marital status, or custody arrangements may affect the amount of payment to a recipient. The payment may be stopped or the amount spent is incorrect; a situation where the recipient may be required to repay a significant amount of money to the government.

4.51The payment depends on the applicant's eligibility for the program and on the established entitlement, i.e. the correctly calculated amount according to theIncome tax law. We found that once the agency determined that the conditions were met and the income tax returns confirmed net household income, the payments were recalculated and issued annually until there was a change in the situation or the child reached age 18.

4.52To test the accuracy of payments to eligible recipients, we selected samples for the period from April 1, 2019 through March 31, 2020. For the recipients in our samples, we obtained net income from the primary caregiver and of that person's spouse or partner, as stated on their income tax return, as well as the number of their qualified dependents. We then recalculated the payment amount using the formula in subsection 122.61(1) of theIncome tax law.

4.53Our recalculation of the payments for the selected samples showed them to be accurate.

4.54When a child reaches the age of 18, the child's primary caregiver or parent with shared custody, as the case may be, is no longer eligible to receive benefits for that child. In the samples we examined, we saw that payments stopped when a child turned 18, which meant that age control was working as intended.

Timely payments

4.55We determined that the Canada Revenue Agency met timeliness standards for disbursing payments under the program. It took the agency about seven business days to prepare payment information and send it to Public Services and Procurement Canada. In turn, that department typically took two business days to print and prepare checks for mailing. At the request of the Canada Revenue Agency, time was set aside for last-minute corrections to the payments. Any additional time between check printing and payment due date was for mail delivery across Canada; this can take up to 7 days.

4.56Almost all payments under the program were made around the 20th of the month and a week earlier in December. If the information did not reach the agency in time to meet the deadline, payment would be listed for issue the following month by Public Services and Procurement Canada. For example, there may be a delay if the agency was processing a change request or an application for a child that was not previously covered.

4.57To account for all time factors, the agency's standards for making an initial payment were eight weeks from the date of processing for an automated benefit application and the online benefit application, and 11 weeks for a mail-in application. Employees of the employment agency may also make payments manually in some circumstances.

One-off payment during the corona crisis(Covid-19)pandemic

The government used the Canada Child Benefit program to support more families at the start of the pandemic

What we found

4.58In March 2020, as part of Canada'sCOVID 19Economic Response Plan, the government announced that the Canada Child Benefit program would provide an additional one-time payment of up to $300 per child, based on a sliding scale of net household income. The program expansion was aligned with a policy change introduced by the government and legislation amending the lawIncome tax law. We found that the formula used for the top-up payment allowed nearly 265,000 higher-income families who were not previously entitled to the program to benefit from it. Payments to higher-income families were nearly $88 million.

4.59The analysis supporting this finding discusses the following topic:

• One-time payment to families in May 2020

Why this finding matters

4,60This finding is important because among theCOVID 19In the Economic Response Plan, the government wanted to help families with the high costs of caring for their children during this challenging period.

Context

4.61The additional payment to help families during the pandemic was a one-time, non-taxable amount to be added to the Canada Child Benefit program payment in May 2020.

Recommendation

4.62We have not made any recommendations in this area of ​​research.

analysis to support this finding

One-time payment to families in May 2020

4.63In March 2020, to allow for the one-off payment of up to $300 per child, Parliament temporarily changed the formula for calculating payments under the programme. We found that the changed formula allowed the recipients of the additional one-time payment to include families who were previously not entitled to the benefit because of their higher net household income. Our review of the data showed that nearly 265,000 additional families received the May 2020 benefit, totaling nearly $88 million.

4,64The agency followed the formula prescribed for the one-off payment, as set out in the March 2020 amendment to theIncome tax law. The changed formula entitles families with a higher net income to the one-off payment. For example, before the formula was changed, a family with one child under age six could receive benefits if the net household income did not exceed $195,460. The changed formula increased the maximum to $307,960 for the one-time payment in May 2020 (Figure 4.4). In the case of a family with one child between the ages of 6 and 18, the revised formula increased the maximum net household income from $163,050 to $275,500 for the May 2020 one-off payment.

Female assumption

The female presumption posed problems for the applicants and the agency

What we found

4,65Under the concept of the female presumption, the Canada Revenue Agency paid Canadian child support to the female partner while determining that the presumption was applicable and not rebutted on the basis of the information provided. We found that in some samples, because the presumption was applied based on the available information, the parent who actually had primary responsibility for the care and upbringing of the child did not initially receive the payment. The concept of the female presumption influenced the program's eligibility requirements, which stated that an applicant must have primary responsibility for the care and education of the child for whom the benefit was intended.

4.66The analysis supporting this finding discusses the following topic:

• Difficulties due to female presumption

Why this finding matters

4.67This finding is significant because the concept of female conjecture may not reflect contemporary reality. Today, families in Canada come in many different forms that were only possible a short time ago. Laws, procedures and systems have not always kept pace with the changing realities of what constitutes a family.

Context

4,68After the agency determines the benefit amount, if the applicant is not a parent with shared custody, payments will be made to the primary caregiver. When deciding who is the primary caregiver, the agency should refer to theIncome tax lawand its regulations. The law states that when the child resides with the female parent, the parent who has primary responsibility for the care and upbringing of the child is presumed to be the female parent. The law provides for certain circumstances where the presumption does not apply.

4.69Today, the concept of female conjecture is still justified. Women in the labor force earn less on average than men. Most women also perform a disproportionate share of household chores and childcare. Continuing to pay benefits to the female parent adds to her financial security as a primary caregiver and helps her make her own financial decisions.

Recommendation

4,70Our recommendation in this area of ​​research appears onparagraph 4.77.

analysis to support this finding

Difficulties due to female presumption

4.71We found that the Canadian child benefit program remained tied to the traditional concept of female presumptions. This concept appears in theIncome tax law. If the presumption is found to be true and not rebutted, the program will direct each payment to a woman living with the child or children for whom the payment is being made, as she is presumed to be the primary caregiver.

4,72In order for a male parent to receive payment, he had to include a signed letter from the female parent he lived with stating that he is the parent primarily responsible for all children in the home. This also applies to a male parent if a new female partner lives with him. In the case of a same-sex couple, the female presumption does not apply: the agent may assume that the applicant is the primary caregiver.

4,73The concept of female presumptions made it difficult for the Canada Revenue Agency to treat all applications equally in light of the diversity of families in Canada.

4,74Our representative sample included cases where female presumptions were applied. In some reconstituted and blended families, it was the new female partner who received benefits based on the information available, even though she was not in reality the primary caregiver. In these cases we saw complicated and confusing letters from the agency, informing the male partner who would receive the benefit based on the information the agency had and the steps that could be taken to remain the primary carer in the agency's view .

4,75In his2016–17In its annual report, the Office of the Taxpayers' Ombudsman noted complaints from male primary carers, in which they argued that the concept of the female presumption had gotten them into trouble by requiring a male applicant to prove that he was the primary carer – a step that was not required of a female applicant.

4,76To improve the efficiency of the process, the agency has considered options such as sending payments to the parent who applied for the benefit or paying two payments per household for a blended family. There was no change in legislation at the time of our audit.

4,77 Recommendation.The concept of the female presumption is a legal requirement and under the law only one payment can be made per householdIncome tax law. The Canada Revenue Agency should improve its procedures and communications to reduce the confusion and sensitivities caused by this concept.

The agency's response.Agreed. The Canada Revenue Agency follows a People First philosophy. Consistent with this philosophy, the agency will review procedures and communications resources, such as the Canada.ca website, applicable manuals and forms. The revision will ensure that information is readily available to help everyone understand the steps required for a family's primary caregiver to receive Canadian child benefit.

Conclusion

4,78We concluded that the Canada Revenue Agency ensured that Canada Child Benefit program benefit recipients were eligible and that payments were made in a timely and accurate manner. The Canada Revenue Agency had effective systems and processes in place to assess the eligibility of Canadian child benefit recipients. Our audit also confirmed that benefit amounts were accurate and paid in accordance with the agency's standards of service.

4,79At the same time, we noted areas where the agency could improve program management through better management of the information used to assess program eligibility and entitlement.