With the application process for the Canada Emergency Wage Subsidy (CEWS) under way, many Canadian-based employers are looking to this program for support to balance their cash flow and keep their employees working during the COVID-19 pandemic.
However, like most tax legislation, the CEWS is complex—presenting Canadian employers with scenarios that require judgment and decisions that create risk. In the short time since the rules were introduced, finance teams across the country have raised questions around eligibility at a pace far greater than the Department of Finance has been able to answer.
In this article, we look at some of the risk areas you should consider, such as:
- Appreciating the importance of Generally Accepted Accounting Principles (“GAAP”) to the CEWS
- Attesting the CEWS claim
- Reliability of monthly reporting
- Measurement of “qualifying revenue”
- Audit risk and penalty exposure
This article does not attempt to address all aspects of the CEWS claim calculation. For a detailed discussion on the mechanics of the claim, including discussion around “eligible remuneration”, please refer to Grant Thornton’s CEWS article.
How can we manage our business risk?
The CEWS was unquestionably put in place to provide much-needed financial support to those businesses most impacted by the current COVID-19 pandemic and resulting business closures. Canadian companies should consequently look at this program from every angle to determine if they are eligible to participate. At the same time, they must make sure that their entitlement is robust and supported. CEWS legislation is new and unprecedented, and the individuals responsible for submitting the CEWS application should work closely with those responsible for financial reporting.
Additional care should be taken by Canadian companies with external reporting obligations. That’s because the existence of a CEWS claim of a material nature can place additional obligations on management and the external auditor to support the company’s entitlement to this claim.
If you need help claiming the CEWS, Grant Thornton is here for you. We can work with you to compile your supporting documentation, conduct the necessary financial analyses or specified work around the determination of “qualified revenue” and develop supported conclusions for your claim. We can also advise you on the supporting documentation you are required to retain under federal law.