What we examined (see Focus of the audit)

In 2009, the Government of Canada began to transform the way it processed pay for its 290,000 employees. Public Services and Procurement Canada was responsible for this Transformation of Pay Administration Initiative. The initiative had two projects: one to centralize pay services for 46 departments and agencies that employed about 70 percent of all federal employees, and the other to replace the 40-year-old pay system used by 101 departments and agencies.

In May 2012, Public Services and Procurement Canada began to centralize pay advisors for 46 departments and agencies in the new Public Service Pay Centre in Miramichi, New Brunswick. Approximately 1,200 pay advisor positions in those 46 departments and agencies were eliminated by early 2016 and replaced with 460 pay advisors and 90 support staff at the Miramichi Pay Centre. As a result, the 46 departments and agencies no longer had responsibility for entering data directly into the pay system and did not have direct access to the new pay system—this work would be done by the pay advisors in Miramichi. The other 55 departments and agencies kept their approximately 800 pay advisors and continued to enter pay information for their own employees in the new system.

This audit examined whether Public Services and Procurement Canada, working with selected departments and agencies, resolved pay problems in a sustainable way to ensure that federal government employees would receive their correct pay, on time.

We did not examine the events and decisions that led to the implementation of the Transformation of Pay Administration Initiative, including the centralization of pay advisors and the launch of Phoenix. The implementation of Phoenix is the focus of a future audit.

Why we did this audit

This audit is important because the federal government’s pay problems have financially affected thousands of its employees. These problems need to be resolved in order to ensure that federal employees are paid accurately and on time. The government’s current annual payroll is about $22 billion.

What we concluded

We concluded that Public Services and Procurement Canada did not identify and resolve pay problems in a sustainable way to ensure that public service employees consistently receive their correct pay, on time.

Departments and agencies contributed to the problems; however, Public Services and Procurement Canada did not provide them with all the information and support to allow them to resolve pay problems to ensure that their employees consistently receive their correct pay, on time.

What we found

State of pay operations

Overall, we found that a year and a half after the Phoenix pay system was launched, the number of public servants in departments and agencies using the Miramichi Pay Centre who had an outstanding pay request quadrupled to more than 150,000. Departments and agencies have struggled with pay problems since the launch of Phoenix. However, it took Public Services and Procurement Canada four months to recognize that there were serious pay problems, and it took the Department about a year after that to have a better understanding of the problems. During this time, the Department focused on responding to the growing number of pay requests. At the end of our audit, the Department had started to develop a longer-term plan toward a sustainable solution.

The problem grew to the point that as of 30 June 2017, unresolved errors in pay totalled over half a billion dollars. This amount consisted of money that was owed to employees who had been underpaid plus money owed back to the government by other employees who had been overpaid.

In addition, departments and agencies struggled to do the tasks they were responsible for in paying their employees under Phoenix. Public Services and Procurement Canada did not provide sufficient information and reports to help departments and agencies understand and resolve their employees’ pay problems.

This is important because the federal government has an obligation to pay its employees on time and accurately. Not doing so has had serious financial impacts on the federal government and its employees.

• The number of pay problems continues to increase

  Recommendation. Public Services and Procurement Canada, in partnership with the Treasury Board of Canada Secretariat and departments and agencies, should conduct an in-depth analysis of the causes of pay problems to determine what solutions are needed to resolve them.

• Public Services and Procurement Canada did not have a full understanding of the extent and causes of pay problems

  Recommendation. Public Services and Procurement Canada, in partnership with the Treasury Board of Canada Secretariat and departments and agencies, should conduct an in-depth analysis of the causes of pay problems to determine what solutions are needed to resolve them.

  Recommendation. Public Services and Procurement Canada, with the support of the Treasury Board of Canada Secretariat, and in partnership with departments and agencies, should develop a sustainable pay solution, which includes

  • a thorough analysis of possible options for a sustainable solution that includes detailed cost information; and
  • a complete and comprehensive plan for implementing the chosen option, including alignment to human resource systems and processes, timelines, accountability, and costs.

• Departments and agencies had significant difficulties in providing timely and accurate pay information and in supporting employees in resolving pay problems

  Recommendation. The Treasury Board of Canada Secretariat should

  • establish with Public Services and Procurement Canada timelines for departments and agencies to submit accurate pay information that will enable them to meet the terms and conditions of employment; and
  • support Public Services and Procurement Canada and departments and agencies in the development of performance measures to track and report on the accuracy and timeliness of pay.

  Recommendation. Public Services and Procurement Canada should:

  • work with departments and agencies to identify and provide relevant, accurate, and timely information and reports for them to properly assess pay problems where they have a responsibility to do so; and
  • ensure sufficient, reliable, and timely access to the pay system for departments and agencies to process pay requests and to perform checks and authorizations they are responsible for.

Way forward

Public Services and Procurement Canada and the Treasury Board of Canada Secretariat did not recognize early enough that they needed a comprehensive governance structure to resolve pay problems and develop a sustainable solution. Public Services and Procurement Canada initially responded to pay problems on its own and did not fully involve departments and agencies in developing a plan to resolve pay problems.

Public Services and Procurement Canada and departments and agencies expected to spend $540 million to resolve the pay problems over a three-year period. We believe that this will not be enough to achieve the efficiencies expected from the Transformation of Pay Administration Initiative. The Department stated that it was developing a comprehensive plan, including detailed cost information, to resolve pay problems, and that until this is finalized, it cannot provide Parliament with any assurance as to how much it will cost or when it will have a sustainable solution. The government needs to be aware that it may be in a similar situation to Queensland Health, a department in the Australian State of Queensland, which after eight years has spent over CanadianCAN$1.2 billion and continues to resolve problems with its pay system.

This is important because the government needs to understand how much effort is needed to put in place the right governance structure and to develop a sustainable solution for timely and accurate pay.

• There was no comprehensive governance structure in place to resolve pay problems in a sustainable way

  Recommendation. Public Services and Procurement Canada, with the support of the Treasury Board of Canada Secretariat, and in partnership with departments and agencies, should develop a sustainable pay solution, which includes

  • a thorough analysis of possible options for a sustainable solution that includes detailed cost information; and
  • a complete and comprehensive plan for implementing the chosen option, including alignment to human resource systems and processes, timelines, accountability, and costs.

  Recommendation. Public Services and Procurement Canada, with the support of departments and agencies, should resolve outstanding pay requests as soon as possible, by

  • considering all the outstanding pay requests; and
  • establishing priorities and setting targets to process all outstanding pay requests, and monitoring and reporting regularly on progress.

• A sustainable solution will take years and cost more than the $540 million the government expected to spend to resolve pay problems

  Recommendation. The Treasury Board of Canada Secretariat, with the support of Public Services and Procurement Canada, and in partnership with departments and agencies, should track and report on the cost of

  • resolving pay problems, and
  • implementing a sustainable solution for all departments and agencies.

Entity Responses to Recommendations

The audited entities agree with our recommendations and have responded (see List of Recommendations).

Related Information

Report of the	Auditor General of Canada
Type of product	Performance audit
Topics	Employment Financial Management and Government Spending Income Security Public Administration Public Service
Entities	Canada School of Public Service Canadian Security Intelligence Service Correctional Service Canada Employment and Social Development Canada National Defence Natural Resources Canada Privy Council Office Public Services and Procurement Canada Royal Canadian Mounted Police Shared Services Canada Statistics Canada Treasury Board of Canada Secretariat
Completion date	25 September 2017
Tabling date	21 November 2017
Related audits	Chapter 2—Modernizing Human Resource Management, 2010 Spring Report of the Auditor General of Canada

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