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Solving Phoenix will take years to resolve and more money than government estimates: AG

By Emily Haws      

The Auditor General’s fall report on the Phoenix pay system, tabled Tuesday, says the cost of outstanding overpayments and underpayments is over $500-million.

In his latest report, Auditor General Michael Ferguson, pictured last year, concluded that Public Services and Procurement Canada took four months to recognize there were serious problems with the Phoenix pay system, and another year to understand them.
The Hill Times file photograph

Public Services and Procurement Canada has failed to sustainably solve the Phoenix pay system issues and the solution will cost far more than $540-million the government currently plans to spend and years to properly resolve, according to the latest report from federal Auditor General Michael Ferguson.

“We are concerned … those cost estimates did not include the cost to get the pay system to work the way it was supposed to work,” reads the report, adding there is no centralized process to track Phoenix-related costs.

“We believe … the cost to have a sustainable system … comes close to its original goals of automating pay and achieving efficiencies would be much higher.”

PSPC had spent at least $145-million on fixing pay issues as of March 2017. They planned to spend at least $395-million over the next two fiscal years meaning they will keep the $210-million in budget reductions for 2016-17 and 2017-18 fiscal years, as well as $330-million to resolve pay problems.

The total cost of unresolved pay issues was approximately $500-million as of June. This included those underpaid or overpaid, not those with collective agreement pay issues.  The government’s annual payroll is about $22-billion, and about half of the government’s 300,000 employees have experienced problems.

The Auditor General’s fall general report, tabled in the House of Commons Tuesday, concluded PSPC took four months to recognize there were serious problems with Phoenix, and another year to understand them. Conducted between Feb. 2016 and June 2017, it is the first of two reports and examined whether PSPC resolved pay problems in a sustainable way to ensure that federal government employees would receive their correct pay, on time. The second report, tabled in the spring, will focus on the implementation of Phoenix.

In 2009, IBM was contracted by the Conservative government to configure off-the-shelf software to work with government HR systems, dubbed Phoenix, for 101 government departments. As well, the restructuring program centralized pay advisers for 46 government departments at the Public Service Pay Centre in Miramichi, N.B. The other 55 departments kept their pay advisers to administer pay in their own departments through the software.

The Phoenix pay system was rolled out by the Liberals in February 2016. It was meant to streamline government payroll, but has left employees underpaid, overpaid or not paid at all.

The pay system overhaul cost the government about $300-million to implement and was supposed to save the government $70-million annually. So far the Liberals have spent $400-million to fix it. Public Services and Procurement Minister Carla Qualtrough (Delta, B.C.) told CTV News earlier this mont that she couldn’t guarantee the cost to fix Phoenix won’t go over $1-billion.

The report concluded PSPC responded to pay problems on its own and did not fully involve other departments to establish a plan to solve the issues. Sixteen months in, PSPC had yet to implement a comprehensive structure to resolve the causes of the issues. In contrast Queensland Health, an Australian department experiencing similar problems, implemented a plan within four months of problems arising. Over the last eight years, Queensland Health has spent over CAN$1.2-billion and continues to resolve problems.

PSPC, the Treasury Board, and the Privy Council Office, along with nine other departments were audited in the report. It found the problems continue to worsen, saying over half of paycheques issued on April 19 had errors compared to the 30 per cent wrong in April 6, 2016.

The report also found departments and agencies could not meet the processing deadlines required by Phoenix, leading to more pay errors. As well, PSPC did not give departments and agencies enough time to review paycheques before they were issued, or provide them with timely and accurate information for them to support their employees.

The report had six recommendations, including that the Treasury Board and PSPC conduct an in-depth analysis on what caused the issues and determine what is needed to solve them; PSPC and affiliated departments develop an analysis of possible options for a long-term solution including cost information and a complete plan for implementing the chosen option; and Treasury Board and PSPC should track and report on the cost of resolving Phoenix.

Treasury Board and PSPC agreed with the recommendations, with Treasury Board planning to establish a cost estimate for fixing Phoenix by the end of May 2018. PSPC noted its development of the multi-phased HR-to-Pay Integrated Plan, which will looks to identify a solution.

“It … ensures an alignment of governance, human resources, systems, processes and controls, and change management,” reads PSPC’s response, adding additional analysis will be incorporated as it becomes available.

“A preliminary HR-to-Pay Integrated Plan for Phase I will be finalized by December 2017.”

Last Friday, Ms. Qualtrough issued a letter saying there were over 500,000 open cases backlogged at the Public Service Pay Centre, about double what was previously reported. These cases were non-financial issues such as name changes. The report included non-financial requests because a pay adviser still has to process them.

“Even if there is no financial impact … it requires effort from a pay adviser to confirm this and to close the request, which means … all of the pay requests require some processing,” said the report. “Moreover, these pay requests are counted by the department in its number of processed requests.”

The government blamed the increased backlog of cases with financial impact on the implementation of 19 collective agreements, which included up to four years of retroactive payments. Almost 40 per cent of these time-consuming transactions were processed by hand.

Last week, Professional Institute of the Public Service of Canada (PIPSC) President Debi Daviau called on the government to scrap Phoenix, replacing it with a new system built by the government’s own IT professionals.


The Hill Times

Correction: This story has been updated to reflect that the focus of this audit examined whether Public Services and Procurement Canada resolved pay problems in a sustainable way to ensure that federal government employees would receive their correct pay, on time.

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