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Anatomy of a blunder: How Veterans Affairs quietly buried a $165M accounting error

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It was an incredibly simple (and incredibly daft) mistake — and it led to a $165 million federal fiscal faux-pas.

In 2001, the Liberal government of Prime Minister Jean Chrétien made what appeared to be an innocuous change to federal tax forms.

It separated federal and provincial tax exemptions, shuffling the basic personal tax credit from one part of the document to another.

Staff at Veterans Affairs, who administer disability awards and pensions, did not pick up on the modification to the tax law for several years and ended up short-changing former soldiers — most of them elderly — who received disability pensions and awards benefits.

It was a mistake that cascaded, over time, into a whopping, multi-million dollar fiscal mess that Justin Trudeau’s Liberal government began to mop up last fall.

CBC News has obtained hundreds pages of documents under access to information legislation, and has conducted a series of background interviews with current and former federal officials, to understand the extraordinary blunder that shortchanged up to 272,000 disabled veterans of roughly $165 million.

The documents show how officials traced the confusion back to the change in the forms and in the Income Tax Act.

More troubling is the fact that the error was discovered and quietly fixed by Veterans Affairs in 2010 — but no effort was made to notify or reimburse those affected by it.

For critics, the records obtained by CBC News raise important questions about fiscal accountability at Veterans Affairs. What actions did bureaucrats take when the error was first discovered? Why it was kept hidden until the former veterans ombudsman blew the whistle internally in 2017?

A significant number of the affected veterans — 170,000 — have since passed away. While the Liberal government has pledged to repay their estates, the documents reveal that Veterans Affairs does not keep track of next-of-kin and has no means of finding them.

No one was held accountable for covering up the mistake and the Liberal government has shown no interest in conducting a follow-up investigation to get to the bottom of the matter.

Jean-Pierre Blackburn shakes hands with veteran Bruce Bullock, 87, in Ottawa on Saturday, May 8, 2010. Blackburn was Veterans Affairs minister when the department corrected an accounting error that cost veterans roughly $165 million – without attempting to compensate those affected. (Pawel Dwulit/The Canadian Press)

A spokesman for Veterans Affairs Minister Seamus O’Regan ducked questions about who made the decision to cover up the error, and why.

“While I cannot speak about the decision-making processes of the previous government, it would be hard to believe a decision regarding the financial benefits of Canada’s Veterans would have been made without the Minister’s awareness,” said Alex Wellstead, a spokesman O’Regan.

“What I do know is that when this was brought to our government’s attention, we fixed it.”

The minister at the time was Conservative Jean-Pierre Blackburn.

He was unavailable when contacted CBC News.

A ‘fundamental breakdown’

Another former Conservative veterans minister, Erin O’Toole, said he believes there should be an investigation and described the decision to bury the mistake as an ethical lapse.

“This appears to be a fundamental breakdown of proper practices in a major department of the government,” he said.

“I believe we would support the government on some sort of investigation into this to see if there’s a cultural issue here. If someone elevated it to the political level on our watch and we didn’t fix it, that is a mistake.”

The briefings, slide deck presentations, letters, evaluations and actuarial projections offer a sketch of how the embarrassment unfolded and proceeded unchecked at the department level for the better part of eight years.

Starting in 2002, Veterans Affairs did not take into account the impact of the basic provincial tax credit on veterans.

The flawed method used to calculate disability pensions and awards “was never really questioned until about 2011,” says an undated federal government analysis.

The department insisted recently in a statement to CBC News that it “consistently applied the formulas correctly” and blamed the tax changes themselves for the error.

According to the documents obtained by CBC News, Veterans officials at the time appeared to be operating on the assumption that they had the law on their side because the legislation was “silent” on the precise method of conducting the calculations.

The “Pension Act does not specify the calculation for the annual adjustment,” said a December 2019 slide deck presentation.

Downplaying the error

The law may not be precise, but the documents show — under the heading of “new information” — that the regulations supporting the legislation do spell out the proper method for calculating the adjustment.

Internally, it seems, officials were trying to gloss over the mistake by downplaying its significance and making it appear — in one of the more recent briefings — as a proactive, positive measure:

“In 2011, [Veterans Affairs Canada] implemented a prospective change to the calculation of Disability Pensions and Disability Awards which was to the benefit of the veteran.”

A number of troubling questions need to be put to current and former Veterans Affairs officials now, said O’Toole.

“Did the age — and in some cases, the relatively small amounts — lead someone to make the wrong decision from an ethical standpoint? That is what we should investigate,” he said.

“That is perhaps one of the most troubling connections we might draw from this. I sincerely hope that was not the determination made by someone.”

In the documents, Veterans Affairs defended its financial practices and said it “employs a rigorous process whereby all escalation calculations are completed by the Statistics Directorate and validated by the Attestation Unit. [The] review and sign off is completed by various directors up to and including the director general of finance.”

It’s not clear whether anyone in those positions was held accountable when the error was discovered.

A history of program gaffes

Retired lieutenant-general Walter Semianiw, a former senior official at Veterans Affairs, said he’s not surprised that the blunder happened in the first place. He also questioned the meticulous fiscal image the department has tried to present in the documents.

During his three years there, Semianiw said, department officials were called on the carpet regularly by the federal Treasury Board for being unable to accurately cost programs.

“Every time we developed a new policy based upon direction from government, gave it to corporate services to figure out the dollars, had it ready in a Treasury Board submission … to be fair, not all of them, but enough of them came back from Treasury Board, saying, ‘You’re numbers are wrong,'” he said.

“When I was there, this seemed to be a challenge for the department’s corporate services area to be able to determine the correct financial make-up for any type of new program.”

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Students call on University of Ottawa to implement pass/fail grading amid pandemic

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OTTAWA — The University of Ottawa Students’ Union (UOSU) is calling on the university to introduce optional, one-course-only pass/fail grading for the Fall 2020 and Winter 2021 semesters amid the COVID-19 pandemic.

The students’ union said nearly 5,000 uOttawa students have signed its petition supporting the grading system.

In a letter to the university, the UOSU said it is asking the school to make changes to the grading structure, including allowing one course per semester to be converted to the “pass” or “satisfactory” designation.

The UOSU also made recommendations regarding a reduction of workload and course delivery.

“The adaptation to online learning during the pandemic for students has created unique challenges and disruptions that could not have been anticipated,” wrote Tim Gulliver, the UOSU’s Advocacy Commissioner. 

“The use of flexible compassionate grading options has been introduced in other universities, such as Carleton University which includes a use of Pass/Fail which we feel could be implemented at the University of Ottawa.”

Carleton University approved the use of flexible and compassionate grading for the Fall 2020 and Winter 2021 terms in early November.

The UOSU also called for all grades that constitute a fail to appear as “Not Satisfactory” on their transcript, which would not be included in grade point average calculations. 

The union represents more than 38,000 undergraduate students at the University of Ottawa.

In a response to CTV News, the University of Ottawa said it is aware of the petition.

“Last spring a decision was made by the (University) Senate to allow the Satisfactory/Non Satisfactory mark to be used, given the unique circumstances of the pandemic, which hit us close to the end of the Winter 2020 semester. The University is aware of the petition and is looking into the matter.”

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OPP warn of phone scams in Ottawa Valley

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Upper Ottawa Valley OPP warn residents of a phone scam that’s been making its way through the region recently. 

Police say a scammer pretends to be from a local business and tells the person their credit card didn’t work on a recent purchase before asking the person on the phone to confirm their credit card number. 

The victim may not have even used the card at the store, but police said the scammer creates a sense of urgency. 

Police remind residents to verify the legitimacy of any caller before providing any personal information over the phone. 

Similar scams have been reported recently in the region, according to police, with scammers posing as police officers, Revenue Canada or other government agencies demanding payment for a variety of reasons. A Social Insurance Number scam has also been reported recently, where a victim is asked for their SIN number under threat of being arrested. 
 
If a scam artist contacts you or if you have been defrauded, you’re asked to contact police or the Canadian Anti-Fraud Centre at 1-888-495-8501 or visit their website at www.antifraudcentre.ca.

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The human history of Ottawa Valley is thousands of years old. Archeologists may have found a piece of it on Parliament Hill

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OTTAWA—Archeologists working on Parliament Hill have discovered a relic of Indigenous life that one Algonquin leader sees as a symbol of his people’s long history in what is now the heart of Canadian political power.

The jagged stone point was unearthed last year on the east side of Centre Block, but its discovery was not publicized as officials worked with Algonquin communities to authenticate the object, the Star has learned.

Stephen Jarrett, the lead archeologist for the ongoing renovation of Parliament’s Centre Block, said this week that while such an object is “not an uncommon find,” the stone point joins just a small handful of Indigenous artifacts ever discovered on Parliament Hill.

“It’s about the size of my palm, and it could be used as a knife or a projectile,” Jarrett said this week in response to inquiries from the Star.

He said the point is made of chert, a type of sedimentary stone most often used for implements of this type. And while the point was unearthed in what Jarrett calls “disturbed soil” — earth that has been dug up and moved, most likely during construction of Parliament — the soil it was in “is natural to the site.”

That means “it came from a source nearby, but finding exactly where it came from is impossible,” Jarrett said.

For Douglas Odjick, a band council member responsible for education and culture with the Kitigan Zibi Anishinabeg, this artifact of “an original world” is a testament to the longevity of his Algonquin nation in an area they still claim as unceded and unsurrendered territory. Based on the assessment of Ian Badgley, the top archeologist with the National Capital Commission, Odjick said the stone point is likely 4,000 years old and dates to a time when the confluence of the Ottawa, Gatineau and Rideau Rivers — along with all their tributaries that stretch out into the surrounding area — served as a great hub of regional trade activity.

“It symbolizes who we are and how long we’ve been here,” Odjick said, comparing the area to an ancient version of a busy hub like New York’s busy Grand Central Station.

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