Fixing Phoenix pay system will cost over $540 million, says auditor

In all, there were 150,000 employees with pay problems that needed correcting at the start of summer, audit reveals

A landscape view of Ottawa, Ontario (Adwo/Shutterstock)

A landscape view of Ottawa, Ontario (Adwo/Shutterstock)

OTTAWA – The federal government’s chronic salary struggles could be on the verge of ballooning into a billion-dollar boondoggle, the auditor general says in a scathing review that hints the entire system should be scrapped.

Michael Ferguson’s review of the disastrous Phoenix pay system reveals just how many and how often public servants are either being overpaid and underpaid, how little headway federal officials have made to correct the mistakes, and how the government under-reported the number of outstanding pay problems even as issues continued to grow.

In all, there were 150,000 employees with pay problems that needed correcting at the start of summer, and a value of over $520 million worth of mistakes – almost as much as the government initially believed it would cost to fix Phoenix.

And that number – $540 million – is likely well below what it will ultimately cost, Ferguson concludes.

RELATED: Ottawa’s public service pay system problems worsen

The Liberal government can’t assure Canadians about when the pay problems will end or how much it will ultimately cost to get a system that “comes close to its original goal,” said Ferguson, who makes a point of citing a similar problem in Australia that took seven years and $1.2 billion to resolve.

Canada, he warns, is in the same ballpark.

And while he doesn’t say what the government should ultimately do, his auditors recommend the government look at all options, including whether it might be better for the Liberals to ditch the system entirely.

The government has agreed to provide Parliament with a full and detailed cost estimate, but not until next May, with plans to finalize by next month a preliminary roadmap of dozens of projects aimed at fixing Phoenix.

Phoenix was not the only issue Ferguson identified in his latest tranche of audits:

• Callers to the Canada Revenue Agency got the wrong answer to their questions 30 per cent of the time, well above the 6.5 per cent error rate that the agency publicly reports – and that’s only when they were able to actually get through to an employee; only 30 per cent of calls placed by auditors were connected.

• Immigration, Refugees and Citizenship Canada didn’t monitor whether Syrian refugees were being properly integrated into Canadian society, including basic information such as how many children were enrolled in schools.

• Health Canada couldn’t say whether its oral health program for First Nations and Inuit children helped in any way.

• Female offenders weren’t getting the rehabilitation they needed, especially those with mental illnesses; some prisoners with severe impairments or at risk of suicide continue to be held for observation in segregation cells, against the advice of experts.

• Cadets at the Royal Military College were being academically challenged, but the school didn’t ensure they learned proper military conduct, ethics or adequate leadership skills.

Combined, the audits amount to what Ferguson describes as a bureaucratic focus inward, rather than thinking about the people they are there to serve. It’s a message that Ferguson has delivered before, but that the government has yet to hear, he said.

“When I look at these audits together, I find that once again, I’m struck by the fact that departments don’t consider the results of their programs and services from the point of view of the citizens they serve,” he said in a statement.

That message appeared to ring loudest in Ferguson’s review of Phoenix, which the Liberals themselves requested last year. The IBM-designed Phoenix system, a project originally embarked upon by the government’s Conservative predecessors, was supposed to save $70 million a year by modernizing, consolidating and centralizing pay processing.

Instead, the government has had to hire hundred of experts to deal with a relentless barrage of pay problems that don’t seem to be getting fixed. The Senate has decided to pull out of Phoenix, and departments and agencies have had to implement workarounds to make sure employees get paid.

RELATED: Goodale to head committee created to fix Phoenix pay problems

Statistics Canada, for instance, kept its old pay system in place for the army of temporary workers hired for the 2016 census.

The Liberals expect to spend $540 million to fix the system that cost $310 million, but Ferguson warned that figure is likely to climb even higher, going so far as to warn about similar problems in Australia that have ended up costing the government $1.2 billion over seven years.

Ferguson only looked at what happened since the Liberals took office. An audit about what went wrong in the lead-up will be released in May.

The Liberals green-lighted the new system shortly after coming to office, despite concerns from officials that it wasn’t ready to handle the 80,000 different rules overseeing issues like parental leave or compensating those in temporary supervising roles, known as acting pay.

Acting pay makes up one-quarter of all outstanding pay issues – a queue that as of the end of June sat at 494,500, the report says, or about five times what it was when Phoenix launched in early 2016. About 49,000 employees have waited more than a year to have their pay issues resolved.

In the last fiscal year that ended in March, some 62 per cent of employees sampled were paid incorrectly at least once, the report found.

The causes of pay problems were myriad, including pay experts who couldn’t enter data into the system half the time to fix errors because doing so would cause further mistakes.

Even as the backlog of cases grew, the report says that the government under-reported the numbers by about 30 per cent because it excluded requests that didn’t have a dollar value, or that it didn’t believe would take a lot of time to process.

The report says that the government has set aside a lot of time, money and bodies to deal with Phoenix, but it hasn’t addressed any of the underlying causes or developed a long-term sustainable solution.

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Fixing Phoenix pay system will cost over $540 million, says auditor

  1. Meanwhile, millions of Canadians have their remuneration including pay, benefits and expenses managed by EDP pay systems that, oddly enough, work pretty well. Somehow federal civil servants decided that they were royally challenged and sufficiently royal to need a custom-built solution. Half a billion going down the plug hole is of little concern when those other pay systems are reliably deducting taxes at source.

    • Federal civil servants didn’t decide this needed changing – their managers and those who wanted to make a name for themselves (ie: ministers) did. The average civil employee was quite happy with the status quo, namely, getting paid properly and on time.

  2. CRA has this “untouchable” air about them. If they screw up your assessment, you are to pay first then appeal (which is usually denied). I’ve had nothing but problems with them from the time I started filing returns 20+ years ago, but of course, they’re not to blame. It’s all me, apparently. Nothing can be easy with them and on the personal side, they are intractable in their belief that they are ALWAYS right. The business people are much more easy to talk to and more helpful than those on the personal tax side.

    Phoenix was a gong show from the start and if any other company in Canada treated their employees as the Federal government has, they’d be out of business with the lawsuits leveled against them. For the Senate to remove themselves from the pay system speaks very loudly as to how the levels of government view themselves.

    It’s disheartening to see the Empire Building going on.

  3. How about all journalists agree to only focus on fixing the payroll system at all federal news conferences regardless of why the news conference was convened. After all listening to a talking head repeating information prepared by people not getting paid is tacitly supporting a broken system. The only way to get the momentum to solve this is to hold politicians feet to the fire.

  4. Being a successful politician has no correlation with being a good manager.

    Think about it. These are the people we entrust with our civilizations future, and look how they always screw up. This time, something as academic as a payroll system.

    We elect these idiots once every four years because of a cable bundle of confrontational issues that they blindly stand for. Or maybe because they have nice hair.

    You reap what you sow, only many times over and some time later.

    If we had a referendum system of governance, like the Swiss model, the partisan games would be eliminated and civil servants would be elected for their managerial skills.

    • This is just another in a long list (one that makes War and peace look like a novella) of evidence of the desperate need for fiscal reform. Simply put, we need to take the money away from these people. In the real world, if you bought a $400 million dollar system, and it didn’t work, there’s a good chance that you wouldn’t be forking out another $500 million to the same company to fix it. That we are paying the supplier this kind of money to fix a system that hasn’t worked from day one illustrates the problems inherent with giving substantial spending rights to people who don’t earn the monies they spend, but simply confiscate it.
      We don’t need tax reform, we simply need acquisition and spending reforms. Limit taxation. Limit borrowing. Limit spending.

      • Would you apply the same regulations and limits to the private sector? They’re just as corrupt.

        As long as partisan politicians act as incompetent managers of our taxes they’ll screw up as little or as much as they can.