PROVINCIAL GOVERNMENT AND OVERALL GRAND PRIZE WINNER
Reducing Fraud and Waste In Income Security Programs in Canada
by
Ms. Tina MacDonald, Mr. Duncan MacDonald & Ms. Sheila Blair
EXECUTIVE SUMMARY
There are several critical types of fraud in the various income support systems which are difficult to identify and prevent because of current federal legislation. The following types of fraud account for the majority of inappropriate expenditures, overpayments and waste:
1.Undeclared Income - Clients in all of the income support programs are required to declare their income. Various program regulations define how this income is handled, ranging from income exemptions, through benefit reductions or complete disentitlement. Undeclared income results in significant overexpenditures.
2.Multiple program claims - Clients are often eligible for more than one income support program. When this is reported by the client, various regulations clarify how the program interaction affects benefit levels and eligibility. However, when this is not reported, overpayment result.
3.Cross-jurisdictional claims - Clients who are willing to travel can establish eligibility in similar programs offered by several jurisdictions (e.g. two or more provincial welfare programs plus Indian Affairs benefits). This results in overpayments, particularly at the provincial level, but cost-shared at 50% by the federal government.
The approach proposed in this concept paper would allow these types of fraud to be more readily controlled.
In the United States, the federal government has taken leadership in the area of fraud control through legislation requiring states delivering the federal programs of Food Stamps, Aid to Families with Dependent Children (AFDC) and Social Security to implement fraud control programs. These fraud control programs are also funded directly by the federal government. Other federal legislation around security and privacy supports this initiative.
In Canada, not only is there no leadership in this area, current legislation actively works against detection and prevention of fraud and abuse in the various income support programs. The following main thrusts would establish a strong federal leadership role and a climate for appropriate fraud and abuse control in all Canadian income support programs.
1.Establish a priority for fraud prevention and detection - Through the development of new legislation and/or adapting current legislation (e.g CAP legislation), identify a requirement for federal and provincial income support programs to actively prevent and detect fraud and abuse. Requirements for reduction of administrative and client error could also be included. (Only a few provinces are currently active in fraud prevention).
2.Require the use of a common client identifier - The Social Insurance Number (SIN) is the obvious choice for a client identifier. However, current legislation on the use of the SIN prevents some programs (most noticeably provincial income support programs) from requiring applicants and spouses to disclose or obtain a SIN number as a condition of eligibility. Cross-program and jurisdictional comparisons cannot occur without a common identifier.
3.Improve access to federal tax information - The confidentiality provisions in the current income tax system prevent income support programs from accessing data to identify current income sources and amounts except in individual cases. Routine data matching is required to ensure early detection and prevention rather than the current system of using the income tax information in specific cases to confirm the existence of fraud found through other methods.
4.Facilitate routine cross-program and cross-jurisdictional data matching - As the federal government embarks on a major program to redesign the Income Security computer systems, a key objective should be to ensure the feasibility of determining from which other programs an applicant or current client is receiving assistance. In effect, this means the creation of a client index for all federal programs (including federally funded natives receiving assistance on reserve) which could also be accessed by provincial and municipal administrations.
5.Allow administrative disqualification for assistance - In Canada, enforced by CAP legislation, benefits are based on need only, and past or current fraudulent behaviour has no impact on current and future eligibility. In the United States, one identified instance of fraud or program abuse results in a six-month disqualification, two instances result in one year of disqualification, and more than two instances of fraud result in a lifetime disqualification. If this were implemented in Canada, information on fraud and abuse disqualifications should be shared between programs and jurisdictions.
6.Expand the use of the tax system to recover income support overpayments - The tax system is regularly used to recover UIC and OAS/GIS overpayments. Expanding the use of the tax system to include overpayments in other federal and provincial and municipal income support programs would result in millions of dollars being recouped annually. Currently, the record on recovering overpayments in provincial income security programs, particularly on closed files, is dismal. This is referred to as a "tax-intercept program" in the United States.
7.Encourage the establishment of early fraud prevention and detection systems - Over 30 American states, at the direction of the federal government, have established early detection systems which intercept probable cases of fraud before assistance is granted by integrating fraud prevention and detection into the intake system. Cases are referred for investigation if certain criteria are met (such as lack of or forged identification, needs consistently exceeding income, etc.). In Florida, California and Texas, for example, approximately 70% of the cases result in assistance being denied or benefits reduced.
The seven themes identified in this proposal combine to form a unified and comprehensive fraud strategy for income security programs in Canada. Although almost all of the changes suggested here require changes at the federal level, provinces, territories and municipalities will share in the gains.
As the details in each chapter explain, it is often difficult to estimate a specific cost-benefit for many of the initiatives. However, the American experience clearly demonstrates that all these proposals offer a positive, and sometimes very high, return on dollars invested.
To reiterate, Canadian income security programs cost over $85 billion, $39.2 billion of which are programs which are considered to be at high risk of fraud and client error. A conservative estimate of the amount of fraud in these programs is estimated to be 4%, and client error is estimated at 5%. Therefore, the magnitude of the fraud and error "problem" in income security programs in Canada is approximately 3.5 billion dollars, spread across federal, provincial, territorial and municipal programs. If it is assumed that the programs proposed in this document offer the potential to reduce the level of fraud and client error by one quarter to one-third, this would result in a total savings to these Canadian income security programs of something between $875 to $1,155 million annually when fully implemented.
This is an ambitious proposal with many facets. However, it offers significant savings at a time when the country needs deficit reduction strategies. The mood of the electorate also makes this a timely proposal. It is clear that taxpayers want to see expenditures reduced rather than taxes raised. However, they also do not want to see their social programs decimated. This proposal allows managed reductions at all levels of government without effecting the benefits available to those who truly need assistance.
FEDERAL GOVERNMENT PROGRAM WINNER
Cost Saving through Restructuring of the CBC
by
Colin Hoskins and Stuart McFadyen
EXECUTIVE SUMMARY
This proposal recommends restructuring the CBC's English Television Network and French Television Network and examines the cost savings resulting. The CBC receives almost $1.1 billion in parliamentary appropriations. This subsidy supports a mandate, infrastructure and bureaucracy which is no longer appropriate in a multi-channel environment. After examining the rationale for a public broadcaster in the new broadcasting environment we conclude that CBC's primary mandate should be provision of a reduced schedule of distinctive information, drama, variety and children's programming of high quality. CBC should move out of foreign programming, sport, and local and regional programming for a local/regional audience; these program areas are plentifully supplied by the private sector. The CBC owned-and-operated stations and transmitters should be sold by auction. Except for national/international news and current affairs, CBC should eliminate all in-house production and buy from independents. Advertising as a source of funding should be eliminated. Even with the loss of net advertising revenue, we estimate that annual net cost savings associated with our restructuring proposal would permit CBC to operate with parliamentary appropriations cut of $350 million, the cut that the CBC President has been led to expect by 1998-99. In addition, there would be the one-time proceeds of some $500 million from the sale of CBC stations and transmitters and a proposed levy on the price of transfers of ownership which could bring in $37 million annually. At the same time the service provided by CBC would be enhanced. Elimination of advertising means that programming and scheduling decisions would no longer be influenced by commercial considerations. CBC would offer a distinct service that would complement that of the private sector.
LOCAL GOVERNMENT PROGRAM WINNER
Challenge, Change and the Bottom Line: A Break from Tradition
by
Mr. Jim Godfrey
Langley, B.C.
EXECUTIVE SUMMARY
More than ever before, taxpayers are expecting local government to provide responsive, efficient and cost effective services. The private sector restructured in the 80's in response to difficult economic times. They listened and responded to the needs of their customers. Citizens are expecting nothing less from government. To meet this challenge, the Township of Langley is changing the way it does business, with impressive bottom line results.
One major change involves the restructuring of our budgeting process, by implementing a system that:
provides employees with incentives to save money
encourages entrepreneurial activity and the generation of new revenue sources
provides the investment capital required to test new ideas
creates a predictable financial environment
promotes productivity improvement
encourage competition
provides managers with the autonomy required to meet the needs of a changing environment
controls expenditures
simplifies budget preparation and administration
These incentives together with an annual budget adjustments (based on a formula involving inflation and growth) are projected to provide a dividend ranging from $14.7 million to $19.3 million over the next five year period.
The Township of Langley is redefining how it does business, our modified budgeting system is but one small step along this exciting journey.