2019 Minister’s Transition Book 2: Core responsibility 2—Payments and accounting
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Payments and revenue collection
Receiver General for Canada
The Public Works and Government Services Canada Act designates the minister as the Receiver General for Canada, and the deputy minister as the Deputy Receiver General.
The Receiver General for Canada is a central government service supporting both the treasury and accountant functions of the federal government. The mandate of the Receiver General is to safeguard the integrity of the consolidated revenue funds and the Public Accounts of Canada as per the Financial Administration Act.
Since 1976, the Receiver General operations in Matane (Quebec) has been responsible for a portion of the Receiver General treasury function, namely managing bank reconciliation and providing investigation, authentication and status verification services for Receiver General payments for federal government payments.
Receiver General treasury functions:
- manage the government’s bank account ($2.2 trillion in cash flow; $325.3 million payments issued of which 67% in social benefits programs; 99.9% timely and accurate payments)
- provide investigative, recovery and custodial services for federal government payments
- maintain and develop the government’s central treasury systems (Standard Payment System & Government Banking System)
- reconciliation of all Government of Canada payments
- ensure the safe storage of all cheques and electronic payments once the bank reconciliation is completed until their destruction at the end of the prescribed retention period
- produce and send reports from bank reconciliation operations and financial institutions
- provide telephone service for the authentication of government payments, fraud detection service and a cheque enquiry service on federal government payments
- investigate opportunities for proactive fraud detection
Receiver General accountant functions:
- maintain the Public Accounts of Canada and provide government-wide financial reporting
- prepare the monthly statements of financial operations for the Department of Finance Fiscal Monitor
- manage central accounting and reporting systems and the common departmental financial system
- publish financial datasets on the Government of Canada’s open data portal
Of note, the Auditor General (AG) of Canada has provided 21 consecutive years of clean audit opinion on Government of Canada consolidated financial statements. This opinion from the AG provides assurance that all data included in the financial statements are deemed reliable and that the government is properly reporting its overall financial performance to Parliament and to Canadians. The Public Accounts 2019 are tentatively scheduled to be tabled in the House of Commons in December once Parliament resumes after the election.
The Receiver General function is a pillar of Canadian democracy. For over 250 years, it has evolved with changes in society and technology.
The Receiver General has an opportunity to lead on:
- making financial information accessible to and for Canadians
- modernizing the Receiver General to meet needs of the government and Canadians for the next 5 to 20 years in light of emerging digital technology
Receiver General treasury and accounting modernization
The Receiver General for Canada supports both the treasury and accounting functions of the Government of Canada. The Receiver General operations have a record of excellent performance, but are reliant on aging information technology. Both the treasury and accounting sides of the Receiver General are looking at modernizing their systems and processes to ensure the long term stability of these critical functions.
Receiver General treasury
On the Receiver General treasury side, there are many interfaces and interdependencies on Canadian financial institutions who work with the Receiver General to offer services to Canadians for receiving money from and paying money to the federal government. The payments industry is undergoing significant change due to technological innovations and non-traditional financial service providers are disrupting the marketplace. The Receiver General treasury needs to revitalize the treasury systems and processes.
The objectives of the Receiver General treasury renewal initiative are to:
- revitalize the Receiver General treasury systems and processes
- ensure the Receiver General has adaptable and flexible applications and processes in place in order to implement payment industry innovations
- offer Canadians a choice of payment options
- enable more flexibility in offering value added services to support the departments and agencies in fulfilling their mandates
The treasury renewal initiative will use a phased approach, to be planned and executed over several years. The next steps in the project are:
- defining of program governance model
- defining a technological roadmap for transitioning key functions to new platform
- identifying client service improvements and internal efficiencies and
- defining first phase of renewal projects
A key to this approach is that the end state vision and governance framework will be developed collaboratively with all Government of Canada and industry stakeholders.
Receiver General accounting
On the Receiver General accounting side, bids were received for the first phase of the Receiver General and Pension Branch robotic automation project. This pilot for the automation of the production of the monthly statement of financial operations will begin this fall for January 2020 completion. The results of this phase will inform the timelines for the implementation phase.
Moreover, a study to assess the viability of all components of the Receiver General Central Accounting and Reporting sector for the next 20 years will be undertaken by a third party and should be completed by January 2020. The results will provide an unbiased view of the sector's operations and will be the first pillar for developing a long-term renewal plan.
The accounting renewal initiative will use a phased approach, to be planned and executed over several years.
Although still in the pre-planning stage, funding sources for the treasury and accounting renewal initiatives are being identified with a view to seeking Treasury Board authority in the next 2 years.
Public Accounts of Canada
As the government accountant, the Receiver General is responsible for maintaining, preparing and publishing the Public Accounts of Canada. The authorities for the Receiver General accounting functions as per sections 63, 64, and 65 of the Financial Administration Act are: to maintain the Accounts of Canada; to prepare financial reports and the Public Accounts; and to request financial information from departments and agencies. The Department of Public Works and Government Services Act designates the minister as the Receiver General for Canada, and the deputy minister as the Deputy Receiver General.
The Public Accounts of Canada is the annual financial report to Canadians that covers the fiscal year of the government, ending on March 31. The report is based on financial transactions contained in the Accounts of Canada and detailed account records maintained by departments and agencies reported in accordance with the Receiver General instructions. It provides information to Parliament, and thus to Canadians, to facilitate an understanding and evaluation of the full nature and extent of the financial affairs and resources for which the government is responsible.
The Public Accounts are used by Parliament to ensure that funding appropriated is spent according to the amounts and for the purpose authorized in the Main Estimates. It is produced and published in 3 volumes:
- volume I presents the audited consolidated financial statements of the government, as well as additional financial information and analyses
- volume II presents the financial operations of the government, segregated by ministry
- volume III presents supplementary information and analyses
The report is published in 3 formats:
- printed (hard copy) version
- 2 web versions:
The Receiver General for Canada, the President of the Treasury Board, and the Minister of Finance have joint responsibility for the preparation of the Public Accounts. It is the responsibility of the Deputy Receiver General, the Secretary of Treasury Board, the Deputy Minister of Finance, and the Comptroller General to co-sign the consolidated financial statement on behalf of the Government of Canada.
The Receiver General has the responsibility for establishing and maintaining an effective system of internal control over financial reporting of data, sent by departments, to enable the preparation of consolidated financial statements, free from material misstatements due to fraud or errors, in accordance with stated accounting policies and standards. In addition, the Receiver General is responsible for the prevention and detection of fraud by designing and implementing appropriate controls to minimize risks of material misstatements resulting from fraud.
As the keeper of the Accounts of Canada, the Receiver General is accountable for making available all original accounting records and related relevant information that are requested for the purposes of the Office of the Auditor General’s audit.
The Auditor General of Canada is responsible for the audit of the consolidated financial statements and provides an independent audit opinion to the House of Commons. To date, The Auditor General has provided 21 consecutive years of unmodified opinion on the statements.
After the tabling of the Public Accounts by the President of Treasury Board, the House of Commons refers the documents to the Standing Committee on Public Accounts for the committee’s examination and ensuing report to Parliament together with any recommendations it may have.
Normally, they are tabled in October. In this election year, they will be tabled once Parliament resumes, after the election.
Public Services and Procurement Canada, through the Receiver General and Pension Branch, is responsible for pension administration and front line services (in whole or in part) to over 904,000 Canadians who are members of 8 different public sector pension plans: Public Service, Royal Canadian Mounted Police, Canadian Forces Members, Reservists, Members of Parliament, the Diplomatic Corps, Federal Court Judges, and Lieutenant Governors.
The department issues over 5 million pension payments each year totalling more than $12 billion and remits employee contributions to the Public Service Pension Investment Board every 2 weeks (average $80 million/bi-weekly) in order to comply with pension legislation and maximize the profitability of investments.
In 2018 to 2019, 98% of pension transactions and pension-related payments were processed within established timeframes.
There are 2 key organizations within the department delivering pension oversight and services.
Pension Service Excellence:
- ensures the back-office systems, tools, and products are in place to support the Government of Canada Pension Centre in delivering front-line services to clients
- ensures the ongoing integrity of pension data and ongoing compliance with pension legislation
- ensures sound financial management, risk oversight, internal controls, and system management practices are in place for the program
Government of Canada Pension Centre:
- administers pension services for active and retired members of 8 pension plans
- delivers medical and dental benefits administration services to retired members
- provides pension related counseling services over the phone via our toll-free line to active and retired members in Canada and around the world
The department will continue to proactively review and correct the pension related data received from the Phoenix pay system, in support of delivering timely, efficient and high quality services to active and retired plan members, within prescribed service delivery goals. The department will continue to upgrade pension digital services to be in line with industry standards, providing client-centric services that improve engagement with pension plan members and leverage industry proven best practices. Upgrades will include progress on the multi-year web renewal initiative to make services available to all members on the internet. The department will also seek to increase quality assurance activities and resources for all pension payments.
Federal pay administration
Pay administration overview
Under Section 12 of the Department of Public Works and Government Services Act and Order in Council P.C. 2011-1550, the Minister of Public Services and Procurement Canada is mandated to administer the disbursement of pay to employees of the federal public administration. Within the department, key partners in pay administration include the Pay Administration Branch, Human Resources (HR)-to-Pay Program Office and Pay Solutions Branch.
The Pay Administration Branch is accountable for administering payroll for nearly 330,000 federal employees (as of October 4, 2019), including all federal public servants working in 99 departments and agencies, as well as Members of Parliament and their staff. These employees are paid through the Phoenix Pay System.
The department is also responsible for provision of compensation advisor services for approximately 195,000 employees within 46 departments through the the Pay Centre.
The HR-to-Pay Program Office is accountable for the monitoring and oversight of activities/initiatives to stabilize HR-to-Pay. The branch manages the Client Service Bureau, which handles escalations and hardship files, and it supports the holistic project management of all initiatives impacting HR-to-Pay through functions such as integrated planning, governance, policy, analytics, change leadership, administrative services and strategic engagement with key partners including departments and agencies, bargaining agents and private sector actors.
The Pay Solutions Branch is leading the information management and information technology functions and solutions in support of the stabilization of the pay system, in addition to leading work on the MyGCHR platform, a web-based human resources system. It also manages contractual arrangements related to in-service support. The current vendor, IBM, is on contract until 2021, with an optional transition year.
Although intrinsically related to pay, the department is not responsible for HR policy or administration. Under Section 7 of the Financial Administration Act, the Treasury Board, as the employer of the public service, is responsible for HR management in the federal public administration. Treasury Board is supported by the Treasury Board of Canada Secretariat in direction and regulation for issues such as pay, hours of work, terms and conditions of employment, and implementation of collective agreements. Deputy heads are accountable for the delivery of HR services. In addition, the department provides Phoenix support to seperate employers, notably the Canada Revenue Agency.
Pay stabilization update
Stabilizing pay for federal public servants remains a key priority. As of early September 2019, the overall number of active cases at the Pay Centre was just under 415,000, a decrease of 34% (218,000) since January 2018. While progress is being made to reduce the queue, the number of outstanding pay cases remains high and employees continue to feel the strain. Monthly progress on reducing the queue is reported in an online dashboard.
To address the queue, capacity at both the Pay Centre and the Client Contact Centre have been increased. 1,300 new employees have been added to the Pay Centre and 200 new staff at the Client Contact Centre over the last 24 months, quadrupling operations. Additionally, the Client Contact Centre has been enhanced to allow staff to handle simple transactions for clients, as a first point of contact resolution.
Adding this important capacity is one component of an Integrated Plan for HR-to-Pay stabilization, which has strengthened governance and includes measures related to stable systems, efficient processes, accurate HR data, and engaged stakeholders.
Multiple technical changes to stabilize the system have been implemented, including over 2,500 systems changes, fixes and enhancements. Public Services and Procurement Canada has also entered into an agreement with IBM to manage pay systems operations and incidents, through the Application Managed Service model, which freed up public servant subject-matter experts to focus on strategic improvements and processes while the model handles daily routine operations 24/7.
As of May 2019, all departments and agencies served by the Pay Centre now operate under the pay pod model, which is intended to improve service delivery. Pods are groups of compensation advisors assigned to specific departments, to provide personalized service to organizations. This model has proved effective, particularly at increasing the proportion of transactions completed within service standards.
The Treasury Board of Canada Secretariat and Public Services and Procurement Canada are working with departments and agencies to improve the timeliness and accuracy of HR data submitted to Phoenix. HR transactions that are not entered in a timely or accurate manner can create inaccurate pay and increase the complexity of a transaction. The department is responsible for reporting to organizations on the information available in the pay system regarding timeliness of transactions. Organizations are then asked to match these reports with their own HR system data to develop an understanding of the business practices and challenges that affect employees’ pay files.
The department continues to work closely with the Treasury Board of Canada Secretariat to minimize the impact of future collective agreements on pay.
The department is undertaking a variety of initiatives to further accelerate progress, including:
- technical systems to improve how Phoenix functions
- process changes and new work models for compensation staff to make manual work more efficient
- partnerships with the private sector to identify additional opportunities to improve outcomes through innovation
- working with and supporting departments and agencies in improving the HR data that is submitted to Phoenix to make processing easier and more automatic
Collective agreement implementation
The department is responsible for implementing pay and benefit changes for public servants that result from new collective agreements. All signed collective agreements are run through an automated process and are reviewed by compensation advisors in departments to ensure updated provisions are accurately implemented. The Pay Centre then completes any residual manual work needed to process revised payments, often as a result of complexities behind automation capacity.
In relation to the 2014 round of collective bargaining, as of September 2019, collective agreements and salary rate updates for 122 Treasury Board Secretariat and separate employers’ classification groups have been processed, and more than $2.1 billion has been paid out to employees. This has created a significant work pressure for compensation staff, yet concurrent progress has still been made on reducing the queue of pending pay transactions.
Since January 2018, the department processed over 138,000 collective agreement transactions manually. Given the complexity of this work, some payments are still outstanding. As well, the department is conducting a post-validation exercise to review payments to employees in all groups and to ensure retroactive payment amounts are accurate.
The department is currently implementing the 2014 round of collective bargaining (27 collective agreements where Treasury Board is the employer, and 62 for separate employers, have been signed between early 2017 and September 2019). It is anticipated that this work will be completed by April 2020.
In collaboration with the Treasury Board of Canada Secretariat, the department has developed a Collective Agreement implementation schedule that establishes the order of priority for the completion of outstanding work for all signed collective agreements. This prioritization framework takes into consideration legislative responsibility, compliance orders and contractual obligations.
In addition, the department has begun implementing the 2018 round of collective bargaining (17 collective agreements where Treasury Board is the employer, and 12 for separate employers, have been signed as of September 9, 2019).
Collective agreement Implementation post-validation exercise
In November 2017, the Public Service Alliance of Canada filed a complaint with the Federal Public Service Labour Relations and Employment Board. The board ruled that the employer failed to meet timelines for the implementation of collective agreements for 4 work groups and directed that payments be verified for the Public Service Alliance of Canada.
As a result, since spring 2019, the department has temporarily reallocated compensation resources from working on the overall queue to focus on the 2014 collective agreement implementation post-validation exercise. This was done in order to meet the set September 2019 deadline to complete the post-validation cases for the Program and Administrative Services (PA) group.
The post-validation exercise involves reviewing automatically processed collective agreement cases that have been flagged for further manual processing. The work will continue for remaining groups until spring 2020.
The reallocation of resources has recently led to a temporary slowdown of progress in reducing the overall queue, as reported in the August 2019 Public Service Pay Centre dashboard.
The 2014 round of collective bargaining
Lessons learned from the ongoing implementation of the 2014 round of collective agreements identified the need to reduce manual work by compensation advisors in order to expedite payments to employees.
The department will continue to work closely with the Treasury Board of Canada Secretariat to ensure completion of the 2014 round and smooth implementation of the 2018 round of collective agreements. The department has completed over 87,000 accounts for the Pay Administration group by the September 30, 2019 deadline.
The 2018 round of collective bargaining
To facilitate the implementation of the 2018 round of collective bargaining, the department and Treasury Board Secretariat have undertaken a new automated mass retroactive process for the implementation of 2018 collective agreements. This new process has also been endorsed by other employers and bargaining agents. It reflects lessons learned from the last round of collective agreements which includes simplifying the current process, reducing the mass retro processing time, reducing manual intervention and expediting issuance of payments.
The department is developing a schedule for implementation of the 2018 round of collective agreements that have been signed to date with a view to avoiding penalties for late implementation.
The Treasury Board of Canada Secretariat is responsible for tracking and reporting progress of implementation of both its own 2014 collective agreements and those of separate employers. It is responsible for engagement with unions on collective agreements and communications related to the 2014 round.
As required, and in discussion with the Treasury Board of Canada Secretariat, the department prepares communications products to share with departments related to implementation of the 2014 and 2018 collective agreements. The department has also assumed responsibility for communications related the 2018 round.
2019 tax season
Preparation for the tax season is a year-long activity structured to produce and deliver accurate tax slips from Phoenix to over 300,000 Government of Canada employees, by the legislative deadline of February 28 each year. There are 4 main streams of activities:
- review of the systems configuration and execution of dress rehearsals to test year-end programs and confirm readiness of Phoenix to produce tax slips
- implementation of year-end system changes related to any legislative changes
- correcting account data to ensure accuracy of tax slips (such as reporting overpayment amounts), thus reducing the number of T4 amendments required
- communication of key information to all Government of Canada departments and agencies using Phoenix (for example communication of deadlines for submission of transactions)
Changes to Phoenix are limited from mid-November to mid-March each year to avoid additional stress on systems during year-end system preparation and testing activities. This approach proved effective for the 2018 tax season.
The department continues to address tax issues as they arise during the year. This includes issuing amendments for previous year tax slips, and resolving emerging tax issues, all as part of Phoenix’s regular payroll processing schedule.
Applying the lessons learned from 2016 and 2017 tax seasons resulted in a successful 2018 tax season with fewer data issues, no major system issues and fewer inquiries from clients, when compared to the previous 2 years. Preparations for the 2019 tax season are currently underway based on the lessons learned from the previous tax seasons to ensure another successful tax season. The department is undertaking data error analysis, review, development and implementation of any system changes, as well as preparation of implementation critical checklists and dress rehearsals of tax slip production. This work continues until December 2019.
Pay pod model
As part of efforts to stabilize the pay system and ensure employees are paid accurately and on time, the department is pursuing innovative ways to better deliver its pay services. One successful initiative has been the implementation of pay pods.
In December 2017, a pilot project was launched at the Pay Centre to assess a new way of processing pay transactions. This new process aimed to make more efficient use of resources, process pay transactions more effectively and improve client service.
The concept, an employee-led initiative called pay pods, groups together compensation advisors and compensation assistants assigned to specific departments and agencies served by the Pay Centre. The pod works cohesively to process new pay requests as they arrive while also working through the queue and addressing outstanding backlog cases in an employee’s file. This is in contrast to the previous approach, which addressed pay issues by transaction type.
The pay pod model has helped reduce the overall queue of transactions, improved service standards and productivity, increased client satisfaction, and strengthened relationships with departments. By processing current intake and associated cases that are already in the queue, over time employees become "current". As well, with this “new never becomes old” approach, payments are issued on time and the creation of late transactions, which are more difficult to process, is reduced.
The pod model allows for improved operational and strategic relationships between the Pay Centre directors, pod leadership teams (team leads, client contact officers, resource analysts and coaches) and departmental and agency contacts. This allows for quicker resolution of pay issues, more attention being focused on quality and timely data entries, and the development of greater departmental expertise.
Following the successful pilot project, pay pods were rolled out to all 46 departments and agencies served by the Pay Centre in a phased approach, based on individual departmental readiness and available capacity at the Pay Centre. All departments at the Pay Centre are now served by a pod. Implementing pay pods is one element of a multi-prong approach to processing cases more effectively and reducing the queue. The focus now will be to maintain and improve upon the success of the pod service delivery model (such as improving service standard success rate and ensuring timely compensation services are provided to federal public servants).
An analysis will be undertaken in fall 2019 to ensure that all pods are appropriately resourced, as they were initially resourced according to estimated size and type of intake as well as the number of clients.
As the designer and prime implementer of Phoenix, IBM’s expertise and operational support are critical to achieving long term stabilization. IBM provides functional and technical support (24/7/365) by managing the daily administration of pay. In addition, IBM assists with strategic initiatives designed to contribute to stabilization such as advanced analytics, the implementation of artificial intelligence, and the automation of business processes.
In June 2011, after a competitive process, IBM was awarded the contract for the new pay system. Under this contract, the department paid $170 million (taxes excluded) to IBM Canada (2011 to 2018) towards the design and implementation of the Phoenix pay system. There have been 46 amendments to the original contract, for a total contract value of $393.7 million (taxes included).
Since the original contract was issued, the Crown has moved toward an Application Managed Service model which is an industry standard designed around outcomes-based contracts. This means that the work under the contract is considered complete when certain outcomes have been achieved, regardless of how much work is required to achieve that outcome.
This change in contracting model means that IBM is taking on an enhanced role in delivering more of the day-to-day operations and responsibility for risks associated with pay administration. This allows the department to focus the vendor’s efforts on daily transactions and free up public servant subject-matter experts to focus on strategic improvements and processes.
Benefits seen to date:
- The end to end process to operate the Phoenix Pay System is now fully documented, which has contributed toward the stabilization of payroll processing
- The number of IBM resources has increased, strengthening payroll operations. Specifically, IBM has 109 functional resources and 55 technical resources providing 24 hour support, 365 days per year. As part of the fixed price contract, IBM ensures the continuous onboarding and training of staff to meet the outcomes identified, and the contract costs are not impacted
- Improvements have been made to backend system processes through the introduction of automation, database processing performance, and pay processing
- More performance metrics are being calculated and tracked
In February 2019, the department received funding and contracting authority for a 3-year period for operational and support contract. The contract with IBM ends March 2021, with an option to extend to 2022.
The contract includes services for:
- technical and functional support under a managed services model for Phoenix
- implementation of the PeopleSoft 9.2 upgrade
- software maintenance and additional activities to help stabilize the pay system
To ensure ongoing pay operation and support beyond 2022, the department has initiated the process to re-tender the operational support contract. Initiating the process now will ensure sufficient time to complete procurement activities and allow for a 1 year transition period should it be required.
In May 2019, a request for information was posted on Buy & Sell to gauge industry interest and capacity to provide services for ongoing operational maintenance and support, followed by an Industry Day in June with private sector vendors. Ongoing engagement with industry is key to ensure fair and equal opportunity to all interested suppliers and a successful procurement process. To maximize the market response, the department is incorporating lessons learned from previous industry consultations in this area.
The department intends to pre-qualify suppliers in December 2019, as part of the initial phase of the re-tendering process. A request for proposal will be issued in spring 2020 to ensure the department has sufficient time to complete the following activities:
- negotiate/contract award—2020 (3rd quarter, summer)
- on-boarding and recruitment—2020 (4th quarter)
- transition of vendor—2020 1st quarter—2021 4th quarter
- contract award—2022 1st quarter
Two class actions have been filed to seek compensation for damages federal employees incurred as a result of the Phoenix pay system. The court has allowed the Bouchard v. Attorney General of Canada class action to proceed whereas the Delorme v. Her Majesty the Queen in Right of Canada, IBM Canada Limited has not yet received the green light. The Department of Justice leads these matters, and the department is supporting when requested.
Ezmie Bouchard v. Attorney General of Canada—“Bouchard”
In 2017, an application to institute a class action was filed by Ezmie Bouchard in the province of Quebec. The class action seeks to represent any individual who has worked for the Government of Canada at any point in time since February 2016 (the individuals who fit this description are referred to as “members” of the class). The plaintiff alleges that the Government of Canada failed to fulfill its obligation to effectively manage employees’ pay and by negligently managing the crisis generated by the failure of the Pheonix pay system. Through this class action, the plaintiff seeks to obtain damages for the pain and suffering sustained by members and amounts owing to members, as well as interest and additional indemnity where applicable.
Renée Delorme v. Her Majesty the Queen in Right of Canada, IBM Canada Limited—“Delorme”
In 2018, an application to institute a class action was filed by Renée Delorme in Alberta on behalf of all individuals who have worked for the Government of Canada at any point in time since 2014 (the individuals who fit this description are referred to as “members” of the class). As opposed to Bouchard, the Delorme action names both the Government of Canada and IBM Canada Limited as defendants. The plaintiff alleges that the 2 defendants failed to exercise their due diligence in the project and did not take reasonable measures to address pay issues swiftly when they arose. The plaintiff is seeking $1 billion in damages and compensation, payment of amounts owed to members, and punitive damages of $5 million or any other amount appropriate to the Court, among other things.
On April 3, 2018, the Superior Court of Quebec allowed the Bouchard class action to proceed but excluded from the class employees who are subject to the grievance process in accordance with section 236 of the Federal Public Sector Labor Relations Act. On May 3, 2018, the plaintiff filed an appeal contesting the definition of the class. The appeal is set to be heard on November 21, 2019.
As for Delorme, the class action has not been allowed to proceed yet. No dates have been set by the court so far for next steps.
Auditor General reports on Phoenix pay problems
In addition to 2 dedicated performance audit reports on Phoenix in 2017 and 2018, the Office of the Auditor General (OAG) analyzes progress and provides feedback and recommendations on multiple aspects of HR-to-Pay on a yearly basis. Work is ongoing to implement recommendations from all OAG reports.
On November 21, 2017, the Office of the Auditor General tabled its first report on Phoenix pay problems, which focused on the government’s response to pay issues following the implementation of Phoenix. The audit found that a year and a half after the Phoenix pay system was launched, the number of public servants served by the Miramichi Pay Centre with an outstanding pay request had quadrupled. The audit also found that it took the department too long to recognize that there were serious pay problems, and to have a better understanding of the problems. At the end of the audit period, in June 2017, it was found that the department had started to develop a longer-term plan toward a sustainable solution.
On May 29, 2018, a second report was tabled, titled Building and Implementing the Phoenix Pay System, which focuses on whether the department provided management and oversight to the Phoenix pay system implementation, and whether the decision to implement the system was reasonable.The audit found that the department failed to properly manage the Phoenix project and that the system was implemented without critical pay processing functions; fully testing the system; addressing significant security weaknesses; developing an adequate contingency plan; and developing any plans to upgrade the underlying software. The department also did not fully consult and involve other departments and agencies in building Phoenix, or adequately train them to use it. Phoenix senior executives did not understand the importance of warnings that the Miramichi Pay Centre, users and the new system were not ready; and there was no oversight of the decision to implement Phoenix.
For the past 3 fiscal years, the Office of the Auditor General has issued Phoenix-related observations as part of their annual commentaries on financial audits related to the annual audit of the Public Accounts. Three key Phoenix results measures are monitored year after year: the percentage of employees with errors in their paycheques, the number of employees served by the Public Service Pay Centre with outstanding pay action requests and the total number of outstanding pay action requests at the Pay Centre (one employee can have more than one outstanding request). The Office of the Auditor General generally concludes each year that there is little to no improvement to the situation for government employees. The Office of the Auditor General also recognizes that departments and agencies play a key role in providing the department with timely and accurate data, so that employees can be accurately paid on time.
Both performance audits came with recommendations, which the department and the Treasury Board of Canada Secretariat have accepted and are implementing through management action plans.
The department is also implementing a series of measures related to pay transactions and processes, as well as information technology (IT) tools and infrastructure, in response to the observations made as part of the financial audits.
Goss Gilroy Report
In 2017, the Government of Canada hired Goss Gilroy Inc. to conduct an independent review of the Transformation of Pay Initiative and is now using these lessons learned in guiding HR-to-Pay stabilization efforts.
The Goss Gilroy study was conducted from February to July of 2017,consisting mainly of consultations with various stakeholders from many departments and agencies as well as a document review. The final report was released on July 31, 2017.
The report focused on the management and implementation of the Transformation of Pay Initiative during the period of 2008 to April 2016 when Phoenix was launched. It identifies a total of 17 lessons learned in the following 6 major areas:
- initiative definition
- governance and oversight
- change management
- business case and outcomes management
- initiative and project management
- capacity management
The report emphasizes that change management was a major gap in the Transformation of Pay Initiative, and neither the vast scope of transformation, nor the underlying complexities of pay administration in the government were adequately considered. Public Services and Procurement Canada and the Treasury Board of Canada Secretariat have responded to this finding by investing resources into enterprise-wide engagement to support new processes and practices, as well as initiatives to develop leadership and culture change.
Along with change management considerations, further priorities stemming from the report included: the need for a robust central project management office; ensuring broad and inclusive governance; fully testing IT solutions before launching them; and ensuring adequate workforce capacity is available through to the end of the project.
The Government of Canada accepted the 17 lessons learned, and has used them in guiding stabilization efforts. The Goss Gilroy Report continues to provide valuable guidance in the form of lessons learned for pay stabilization and for future transformational initiatives, in particular the Next Generation Human Resources and Pay system (often referred to as “Next Gen”).
Next Generation Human Resources and Pay system
Stabilizing pay for federal public servants served by Phoenix remains a key priority. Concurrently, a new HR and pay system to replace Phoenix (Next Gen) is being developed. The Treasury Board of Canada Secretariat has led a procurement process to identify possible vendors, and is working with Shared Services Canada and Public Services and Procurement Canada to develop pilots for testing the software.
Budget 2018 announced the government’s intention to move away from the Phoenix pay system; a decision which was re-affirmed in Budget 2019. The department is involved in the governance of the Next Gen project at the senior officials level (such as deputy minister and associate deputy minister). The Treasury Board of Canada Secretariat began preliminary analysis of available vendors to identify areas of private sector expertise and potential innovative alternatives for the new system. This analysis was part of an agile, open and iterative procurement process, with a notice of proposed procurement being issued in August 2018 and followed by employee and vendor engagement and events.
The Treasury Board of Canada Secretariat launched the first phase of their procurement process in October 2018 via an “invitation to qualify” process. Vendors’ interest and technical criteria were assessed, followed by engagement sessions with interested parties (for example, employees and bargaining agents). Further stages in the procurement process took place between December 2018 and February 2019, to identify options and solutions, and additional engagement sessions were held with employees. In May 2019, a second invitation to qualify was launched with the Treasury Board of Canada Secretariat identifying 3 vendors. These vendors will continue to work with the Next Gen team to develop a path forward for the Next Generation solution.
In early September 2019, the government announced an investment of $117 million in Next Gen, for co-designing and the delivery of pilots. Further details on the design of the pilots are still in development, but the Next Gen team will continue to engage with interested parties in an open and transparent manner around their design.
Other issues, such as change management or training needed to implement Next Gen, are expected to be informed by the completion of the pilots. In moving to a Next Gen environment, it will be important to build on lessons learned from the implementation of Phoenix. Moving from Phoenix to Next Gen is more than simply replacing one type of software with another. To set Next Gen up for success, it will be necessary to study the “pay ecosystem” and how HR operates in the context of the federal government. This is one of the key lessons learned as part of an independent study (2017 Goss Gilroy Report) that reviewed the implementation of the Phoenix project. Concepts to consider would include HR operations, employee management, collective bargaining, financial systems, delegated authorities, pensions and benefits systems, and the interplay between them all.
Payments in Lieu of Taxes Program
The Government of Canada’s property is constitutionally exempt from local taxation. However, since 1950, the federal government has shared in the cost of local government, where it owns real property, by making payments in lieu of property taxes.
The Payments in Lieu of Taxes Program is administered by the department under the authority of the Payments in Lieu of Taxes Act. Across Canada, payments are made on approximately 22,500 federal properties located in almost 1,200 taxing authorities encompassing more than 50,000 buildings. For the 2018 tax year, the department paid $561,854,441 in the Payments in Lieu of Taxes Program.
Payments are based on the principle of fairness, respecting both the taxing authorities and the federal government. They are intended to be equitable in comparison to other property owners and are designed to be predictable for all stakeholders.
Under the Payments in Lieu of Taxes Act, the Minister may make payments in lieu of:
- real property taxes
- frontage and area taxes (local improvements)
In certain circumstances, the minister may also make payments in lieu of taxes on federally owned property occupied by third-party occupants who have defaulted on their property taxes. The values and rates used in the calculation of payments for federal departmental property are set at the discretion of the minister.
The minister is also responsible for the valuation of unique properties such as military bases, prisons, national parks, national historic sites, historic and heritage properties.
Clients and stakeholders
Federal custodial departments and agencies
The minister makes the payments and is accountable to Parliament for the program. Since 1997, each department has been financially responsible for payments made on its property and is required to reimburse the department the amounts paid on its behalf.
- Taxing authorities are the program beneficiaries, and payments in lieu of taxes are made to municipalities, school boards, provinces and First Nations governments
- The Federation of Canadian Municipalities represents the interests of municipalities at the national level
Assessment authorities determine assessed values on which taxing authorities base their applications for payments in lieu of taxes.
Independent of the minister’s authority, each Crown corporation is fully responsible for its own payments in lieu of taxes program, except for a few specific properties made eligible for the Payments in Lieu of Taxes Program by regulation (for example museum corporations).
Dispute Advisory Panel
The Dispute Advisory Panel has a mandate to provide advice to the minister to resolve disputes between the federal government and taxing authorities regarding property values, property dimensions or effective rates used in the calculation of payments in lieu of taxes.
The composition and term of the panel is set in section 11.1 of the Payments in Lieu of Taxes Act. The panel includes at least 2 members from each province and territory appointed by the Governor in Council, with terms not to exceed 3 years (renewable). The Governor in Council names 1 member as chair.
The same panel also provides advice to the heads of Crown Corporations who exercise discretion regarding their respective corporation’s payments.
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