Phoenix Pay Problems

Opening Statement to the Standing Committee on Public Accounts

Phoenix Pay Problems

(Report 1—2017 Fall Reports of the Auditor General of Canada)

28 November 2017

Michael Ferguson, Chartered Professional AccountantCPA, Chartered AccountantCA
Fellow Chartered Professional AccountantFCPA, Fellow Chartered AccountantFCA (New Brunswick)
Auditor General of Canada

Mr. Chair, thank you for this opportunity to present the results of our report on Phoenix pay problems. Joining me at the table is Jean Goulet, the Principal who was responsible for 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% of all federal employees, and the other to replace the 40-year-old pay system used by 101 departments and agencies with a new system called Phoenix.

Since Phoenix went live in February 2016, the federal government frequently could not pay federal public servants accurately or on time. Our audit examined whether Public Services and Procurement Canada worked with selected departments and agencies to fix Phoenix pay problems so that government employees would receive their correct pay, on time.

This audit is important because the government’s pay problems have had a financial effect on tens of thousands of its employees, and the system has to be fixed.

We found that pay problems continued to grow throughout the period of our audit. A year and a half after the government launched the Phoenix pay system, the number of public servants waiting for a pay request to be processed had reached more than 150,000 in the 46 departments and agencies whose pay services were centralized. Those 150,000 employees were waiting for about 500,000 pay requests to be processed. Those numbers do not include the outstanding pay requests in the 55 departments and agencies whose pay services were not centralized, and also do not include the outstanding requests required by the recently signed collective agreements with federal public service unions.

Problems grew to the point that the value of outstanding pay errors totalled more than half a billion dollars at the end of June 2017. This amount consisted of money that was owed to employees who had been underpaid as well as money owed back to the government by other employees who had been overpaid.

Departments and agencies struggled with Phoenix pay problems from the time the system went live. However, it took Public Services and Procurement Canada 4 months to recognize that the problems went beyond normal processing levels. Since that time, the Department reacted to problems and implemented few permanent solutions. In fact, 16 months after the problems first arose, there was still no governance structure in place.

In our opinion, there are two parts to the solution for the Phoenix pay problems. The first priority is to pay people the right amount on time. However, after that is achieved, there will still be work to do to get a system that processes pay efficiently. The longer-term solution needs to last and be as efficient as it can be.

Public Services and Procurement Canada told us that it was developing a comprehensive plan, including detailed cost information, to resolve the pay problems. However, it had not finished that plan by the end of our audit.

To put in place a viable solution to the pay system problems, the government needs to identify and address the root causes of the problems; exercise strong oversight of the steps taken to resolve the problems; and ensure that there is strong collaboration that includes Public Services and Procurement Canada, the Treasury Board of Canada Secretariat, and the affected departments and agencies.

In our view, fixing the Phoenix pay system will take years and will cost more than the $540 million that government organizations have so far estimated they will spend to solve the problems. We found that the Department of Health in the Australian State of Queensland had to deal with a similar situation, and it took 8 years and over $1.2 billion to find solutions to most of its pay problems.

We made 4 recommendations to Public Services and Procurement Canada and 2 recommendations to the Treasury Board of Canada Secretariat. They both agreed with the recommendations.

Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions the Committee may have. Thank you.