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Taxman erroneously pays millions to staff no longer on payroll

OTTAWA - The Canada Revenue Agency has issued at least $3 million in paycheques to people who don't work there, says a new audit.

OTTAWA - The Canada Revenue Agency has issued at least $3 million in paycheques to people who don't work there, says a new audit.

"Overpayments generally occur when employees leave the agency and through errors or omissions their pay is not stopped on time," says the internal report.

The problem dates back at least to 1999 and has been getting worse in recent years, the investigators found.

There were 1,922 people who received pay they didn't deserve in the 2005-06 fiscal year, says the document. The number rose to 2,258 the following year.

By February last year, the outstanding amount not yet returned to the agency had reached $3 million, up from $2.2 million two years earlier.

"Although the amount of overpayments represents a small fraction of CRA's total payroll costs, a 36 per cent increase over two fiscal years is significant," the audit concludes.

The agency is currently attempting to identify the older amounts "with the intent of writing off any uncollectable balances," says the document, dated last October.

Senior managers told the auditors they will decide by next month on an acceptable level of overpayments, and begin to monitor the problem quarterly to ensure the amounts are within established limits - in effect, acknowledging that mistakes will continue to be made.

A spokesman noted that the agency has about 43,000 workers, and the overpayments represent less than one per cent of the annual salary budget of $2.8 billion.

"Overpayments often result from situations that are variable in nature and unpredictable, such as death in service or unexpected leave without pay due to illness and family-related issues," Noel Carisse said in an email response to questions.

In 2007-2008 the agency trimmed the amount of outstanding overpayments back to $2.4 million, he added.

Carisse said management recovers the "vast majority" of overpayments made to former staff, sometimes by clawing back pension or severance pay, though he did not provide a figure.

About a third of all overpayment cases involve staff who permanently leave the agency, rather than those taking unpaid leave or other options that remove them from their jobs temporarily.

Some ex-employees find jobs in other federal government departments, with whom arrangements can be made to recoup the money, Carisse said.

"Since this review, considerable work has been completed on the management and analysis of overpayments in the agency to ensure the percentage of overpayments in the agency is as low as possible," he said.

The audit also found that paycheques to existing employees were frequently late and contained errors.

A sampling of 258 pay transactions from October 2006 to June 2007, for example, found 13 had incorrect amounts paid to employees - four of them with errors greater than $5,000.

That works out to a five per cent error rate, the maximum permitted under agency guidelines.

Last week, the agency's human-resources function came under fire from the federal auditor general, who noted in a report to Parliament that the hiring process is plagued by lengthy delays.

 
 
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