Feds flunk SIN system, says Auditor General

Canada’s federal government just doesn’t seem to have the knack for numbers. Eight years of wrappings on the knuckles by the Auditor General still hasn’t fixed this country’s Social Insurance Number (SIN) management system, according to the latest audit.

In particular, two pressing issues dating back to 1998 remain unresolved. In her Status 2007 report tabled this week, Auditor General Sheila Fraser emphasized this was the fourth time since 1998 she had reported these problems and that the government should have fixed them by now.

Fraser described the SIN management system as severely lacking, and stung the responsible department – Human Resources and Social Development Canada (HRSDC) – for failing to adequately address the 1998 shortcomings.

Once again, Fraser had to reprimand HRSDC for the quality and authenticity of information retained in the Social Insurance Register and for the government’s policies on how other federal departments may use the SIN management system.

The Fraser Institute, a research and policy analyst organization, points out the scale of mismanagement translates to a cost of potentially $120 billion per annum.

“When the Auditor General sums up the report in two words – unsatisfactory progress – I think we have a real problem,” says Niels Veldhuis, a senior research economist with the institute.

“Canadians should be greatly concerned about this,” he adds. “When you add up how many benefits get paid out, it amounts to about $120 billion worth of spending every year.”

These issues have been pointed out by the Auditor General not only in 1998, but again in 2000 and 2002, Veldhuis notes. “This is 10 years of systematic problems that haven’t been dealt with.”

There are currently more Social Insurance Numbers than adult Canadians (an excess of almost three million), and a myriad of government programs tied to the use of Social Insurance Numbers, including Old Age Security and Canada Student Loans, says Veldhuis.

He added that if even a sliver of that spending was being attracted by fraudulent Social Insurance Numbers, it would carry a huge cost to Canadians. “When you have 2.9 million more Social Insurance Numbers than there are Canadians, the potential for fraud is enormous.

“What’s even more worrying is that there are still 6.4 million uncertified Social Insurance Numbers – these have been issued without any proof of identification.”

Fraser noted that there are areas in which the HRSDC have made progress, in that they’ve done “considerable” work to improve the way they issue Social Insurance Numbers by updating the standards for proving identity and redesigning the issuance process.

She stressed that good management of the SIN system was more important than ever in light of security concerns and the growing incidence of identity theft and fraud.

The Fraser Institute last week released its report on the government’s management of Social Insurance Numbers.

The institute has a project that categorizes all of the Auditor General reports for the past 17 years, says Veldhuis, and publishes the highlights in “Government Failure.”

“The one thing we found from that report is the SIN issue coming up time and time again, and not being dealt with,” he says.

Veldhuis added they have over 20 years of Auditor General reports that consistently show government failures, with over 200 similar cases costing taxpayers billions of dollars.

The cost estimate on fraud and overpayment in the SIN system is estimated by The Fraser Institute at between $377 million and $2.4 billion.

“If people’s jobs and remuneration were held on the line here, I think we would get some improvement very quickly,” says Veldhuis. “What would happen in the private sector if something like this went on for 10 years? People would lose their jobs.”

Fraser explains that policies governing the SIN system are the responsibility of the Treasury Board Secretariat, while the quality and integrity of information in the Social Insurance Register lies with HRSDC.

Veldhuis points out that the issue of accountability is prevalent in the federal government and says this is a result of the institutions and incentives traditionally associated with bureaucracy. “There’s just no incentive to change some of these things because their jobs don’t depend on it.”

While both HRSDC and Treasury Board Secretariat have agreed with the recommendations outlined by Fraser, Veldhuis says The Fraser Institute received a letter from HRSDC stating it viewed the institute’s report in a negative light.

“But I think this Auditor General report confirms there are still some very significant problems – and potential fraud – that can be had with the SIN mismanagement.”

Monte Solberg, the federal minister who heads HRSDC, was not available for comment, but on Tuesday went on record as saying: “We are going to do a lot more. We are going to get the problem fixed.”

Related content:

Read Auditor General Sheila Fraser’s report online

Big IT projects fumbled by Feds, says Auditor General’s report

PWGSC procurement reform baffling industry experts

Is someone else using your Social Insurance Number?

Your Social Insurance Number – Protect it

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