2022 Minister’s Transition Book 2: Core responsibility 2—Payments and accounting

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Payments and revenue collection

Receiver General for Canada

Mandate

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 reneral is to safeguard the integrity of the consolidated revenue funds and the Accounts of Canada as per the Financial Administration Act.

The majority of the staff supporting the Receiver General functions are located in the National Capital Region. Since 1976, the Receiver General operations in Matane, Québec have 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.

Key activities

Receiver General treasury functions
Receiver General accountant functions

The Auditor General of Canada has provided 23 consecutive years of clean audit opinion on Government of Canada consolidated financial statements. This opinion from the auditor general provides assurance that all data included in the financial statements are reliable and that the government is properly reporting its overall financial performance to Parliament and to Canadians.

Current status

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:

Receiver General treasury and accounting modernization

Mandate

The Receiver General for Canada supports both the treasury and accounting functions of the Government of Canada. 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

There are many interfaces and interdependencies on Canadian financial institutions working with the Receiver General to offer services to Canadian individuals and businesses for receiving money from and paying money to the federal government. The payments industry is undergoing significant change due to technological innovations; 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:

The treasury renewal initiative will use a phased approach and will be planned and executed over several years. The first phase of renewal projects has been initiated, which includes cheque imaging, payment reconciliation, and adopting the International Organization for Standardization (ISO) 20022 payment messaging standard. The next steps in the project are to:

A key to this approach is that the end state vision and governance framework will be developed collaboratively with all federal departments and agencies and industry stakeholders.

Receiver General accounting

There are several challenges in continuing to meet clients’ and stakeholders’ obligations with an aging technological architecture and highly manual processes. The foundational architecture and business processes have become outdated and inefficient. Consequently, the Receiver General’s increased requirement for manual interventions to collect, process and generate the information increases the risk for error. Critical areas for improvement currently reside in the modernization of its architecture, its information technology systems and current processes.

The objectives of the Receiver General accounting modernization initiative will enable the Receiver General to become more agile, efficient and responsive through:

The accounting modernization initiative will also use a collaborative phased approach and will be planned and executed over the next 10 years.

Receiver General for Canada and Phoenix overpayments

Mandate

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 has the authority to assist with the collection of Phoenix overpayments, and as such the Receiver General has taken on a role in the project and works with the Treasury Board of Canada Secretariat. The focus of the Receiver General’s efforts is on former public servants in receipt of a pension and former employees with no pension.

Key activities

The Government of Canada’s priority is to support current and former employees, and resolve public service pay issues, including the recovery of overpayments.

Recovery of overpayments supports the government’s mandate to eliminate the backlog of outstanding pay issues for current and former public servants that resulted from the Phoenix pay system. The recovery is expected to rebuild their confidence in the integrity of their pay and pensions.

Salary overpayments impact current and former public service employees across departments and agencies and across the country.

The Receiver General in collaboration with the Office of the Comptroller General has worked to establish recovery strategies:

The Receiver General, in collaboration with the Public Service Pay Centre, has begun the collection of overpayments from pensioners previously employed by departments and agencies served by the Public Service Pay Centre.

For former non-pensioned employees who were served by the Public Service Pay Centre, 2 attempts are made by the Public Service Pay Centre to recover funds upon termination of employment. If unsuccessful in recovering through these attempts, the file is transferred to the employer department or agency for further action.

Departments and agencies not served by the Public Service Pay Centre are responsible for recovery of funds from their current and former employees. The Government of Canada Pension Centre will assist with recovery from pension recipients if requested.

Current employees and pensioners facing financial hardship can have their recovery rate, traditionally set at a rate of 10% of their regular payment, lowered if requested.

Recovery of salary overpayments has always been part of the Government of Canada activities, even before the implementation of the Phoenix pay system. Numerous current and former federal employees have already reimbursed overpayments or have made arrangements to do so. Multiple measures have been put in place to support individuals experiencing financial hardship, including flexible repayment options.

Public Accounts of Canada

Mandate

The Public Accounts of Canada is the annual financial report to Canadians covering the fiscal year of the government, ending March 31. The Receiver General (the minister), as the government’s accountant, is responsible for preparing and publishing the report. Sections 63, 64, and 65 of the Financial Administration Act provide the Receiver General with the authority to maintain accounts, to prepare the Public Accounts Report and to request financial information from departments and agencies.

Key activities

The Public Accounts Report is prepared based on financial transactions that are maintained by departments and agencies in accordance with the direction of the Receiver General. It provides Parliament with the information that explains the nature and extent of the financial affairs and resources for which the government is responsible. Parliament uses the Public Accounts to ensure that appropriated funding is spent according to the amounts and the purpose authorized in the estimates.

The report is produced and published in 3 volumes:

The Receiver General for Canada, the president of the Treasury Board, and the minister of Finance share responsibility for the preparation of the Public Accounts. The deputy receiver general, the secretary of Treasury Board, the deputy minister of Finance, and the comptroller general co-sign the consolidated financial statements on behalf of the Government of Canada.

The Receiver General has the responsibility to establish and maintain an effective system of internal control over the reporting of financial data. This system is essential for the preparation of consolidated financial statements that are free from material misstatements and that are prepared based on published accounting policies and standards.

The Receiver General is also accountable for making available all original accounting records and other relevant information to support the audits carried out by the Office of the Auditor General.

The Auditor General of Canada is responsible for the audit of the consolidated financial statements and for providing an independent audit opinion to the House of Commons. To date, the auditor general has provided 23 consecutive years of unmodified opinions on the statements.

Current status

At the time of this briefing, the Office of the Auditor General is nearing the completion of their annual audit of the consolidated financial statements of the Government of Canada.

On September 12, 2022, the auditor general is scheduled to meet the signatories of the consolidated financial statements to brief on the final results of the annual audit.

Upon signing of the audited consolidated financial statements, the Receiver General has the responsibility for transmitting the Public Accounts of Canada to be tabled by the president of the Treasury Board before the House of Commons. A transmittal letter will be prepared for your attention and signature as part of this process.

This year, the tabling of the Public Accounts of Canada is tentatively scheduled for the week of [Redacted], ahead of the legislated tabling date of December 31. You will receive an annotated copy of the 2022 Public Accounts the week before the tabling for your convenience.

After the tabling of the Public Accounts, the House of Commons refers the documents to the Standing Committee on Public Accounts for review and reporting back to Parliament with any recommendations.

Pension administration

In this section

Mandate

Public Services and Procurement Canada (SPAC) is accountable for the administration of multiple federal public sector pension plans (in whole or in part), serving more than 935,000 contributors and retirees governed under the:

It also provides pension services for members of Parliament, federal judges, the diplomatic corps, and lieutenant governors.

The department is not accountable for the administration of other federal public sector pension plans, namely Canada Post, Bank of Canada, Via Rail, Canadian Broadcasting Corporation, and Canada Mortgage and Housing Corporation.

Key Facts

Legal authorities

Functional authority is stipulated in the Department of Public Works and Government Services Act. Oversight and policy/legislative authority for the plans remain with the responsible Pension Plan sponsors, namely the Treasury Board of Canada Secretariat, the Royal Canadian Mounted Police, and the Department of National Defence.

The department provides both pay and pension administration functions pursuant to authorities as stipulated under section 5, 7(1) (d); section 12; and section 13 of the Department of Public Works and Government Services Act and pursuant to the following orders in council:

These authorize the minister to provide “such administrative and other services required for the disbursement of pay…” as well as to provide “such administrative and other services in relation to employee benefit plans and superannuation or pension plans…”

Key activities

Pension administration is stable and will continue to provide pension plan members with quality cost-effective pension services, including timely and accurate processing of pension payments within established service standards.

Over the past 2 years, the Pension Program has collaborated with the pay branches to address the longstanding pay data issues impacting pension and continued efforts to re-align and improve the quality of pay and pension data using a new interface solution by leveraging the innovation garage.

The Pension Program is upgrading pension digital services and continues to advance work on redefining the user experience for pension web tools with expanded functionality and more self-service options for active and retired members. This includes external access to members’ pension information via internet (outside Government of Canada (GC) network).

Partners and stakeholders

Federal public sector pension plans are the responsibility of a Cabinet minister supported by the Treasury Board of Canada Secretariat with day-to-day administration carried out by Public Services and Procurement Canada:

The Treasury Board Secretariat provides an overarching governance role to the different employee pension plans and to the Public Service Investment Board while also being the stakeholder for the Public Service Pension Plan.

The Royal Canadian Mounted Police and the Department of National Defence are stakeholders for their respective pension plans and manage their governance separately.

The Office of the Auditor General performs annual audits on the pension plans financials and pension valuations by the Office of the Chief Actuary.

The Office of the Chief Actuary within the Office of the Superintendent of Financial Institutions provides actuarial advice and pension plan valuations which are then tabled in Parliament.

Key considerations

The Receiver General and Pension Branch (Pension Program) has its own fiduciary and duty of care responsibilities which are separate from those of the employer (human resources (HR) and pay administration):

The Pension Program will continue working with Shared Services Canada and the Office of the Chief Human Resources Officer (Treasury Board Secretariat) to ensure pension data requirements are taken into account in the new HR-pay system (Next Gen) and remains vigilant in order to prevent similar issues with Phoenix from happening in the future.

Federal pay administration

In this section

Pay administration overview

Mandate

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, and the Digital Services Branch—Pay Solutions.

Key activities

The Pay Administration Branch is accountable for the administration of compensation and benefits for over 380,000 active and inactive federal employees (as of August 2022), as well as data integrity. This includes all federal public servants working in over 100 departments, agencies and crown corporations, as well as members of Parliament and their staff. These employees are paid through the Phoenix pay system.

The branch is also responsible for the provision of compensation advisor services for approximately 260,000 employees within 49 departments through the Public Service Pay Centre. Equally, the branch’s Client Contact Centre serves as the first point of contact support to current and former employees, answering questions about their pay and resolving simple issues. As pay administrator, the branch also provides support to the compensation community across the Government of Canada through training and communications.

Lastly, the branch is accountable for the monitoring and oversight of activities and initiatives to stabilize HR-to-Pay. It supports the holistic project management of all initiatives impacting HR-to-Pay through functions, such as integrated planning, governance, analytics, change leadership, administrative services and strategic engagement. Departments and agencies, and bargaining agents are key partners in the management of these initiatives.

The Digital Services Branch—Pay Solutions is accountable for the information management and information technology functions and solutions in support of the stabilization of the pay system. Another key role played by the branch is to lead the work on a web-based human resources platform called MyGCHR. It also manages contractual arrangements related to in-service support. The current vendor, IBM, is on contract until March 2023 (with 11 additional 1-year options that can be exercised on an as-needed basis).

Key considerations

Although fulfilling a key role on the pay file, Public Services and Procurement Canada is neither responsible for human resources policy nor the administration of the terms and conditions of employment, as set out in collective agreements. Under section 7 of the Financial Administration Act, the Treasury Board, as the employer of the public service, is responsible for human resources 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 the establishment of collective agreements; and deputy heads are accountable for the delivery of human resources services. As the service delivery partner in compensation and benefits administration, strong collaboration with the Treasury Board Secretariat has proven key to ensuring successful implementation in many initiatives, including collective agreement implementation.

The pay stabilization mandate includes resolving outstanding Phoenix pay system issues for public servants once and for all. The Pay Administration Branch teams are managing a number of key risks to project success. These include the recent and sustained increase in new intake at the Pay Centre that challenges efforts to eliminate the backlog, compensation workforce retention and recruitment challenges, ongoing government-wide HR priorities, and associated scrutiny and public criticism of project efforts. For example, key files such as the recovery of salary overpayments from employees are generating public interest and reaction from key stakeholders including employees and bargaining agents.

Pay stabilization update

Mandate

Public Services and Procurement Canada has been mandated to work with the president of the Treasury Board to resolve outstanding Phoenix pay system issues for public servants once and for all, while advancing work through Shared Services Canada on the next generation pay and human resources system.

Key activities

A list of key activities that are underway, to reach pay stabilization, are articulated as follows:

Partners and stakeholders

The department awarded a contract to McKinsey & Company in February 2020 for accelerator services, to transform ways of working at the Pay Centre, including management practices and tools, to improve both productivity and the experience of our clients and client organizations. In January 2021, the department awarded a contract to IBM, which has allowed PSPC to build on the robotic process automation work completed to date and accelerate the automation of pay processing.

The department and the Treasury Board of Canada Secretariat are working with other departments and agencies to improve the timeliness and accuracy of human resources data submitted to Phoenix. The department is responsible for reporting monthly to other departments and agencies on the timeliness of transactions.

The department also works with the Treasury Board of Canada Secretariat to minimize the impact of future collective agreements on pay.

Key considerations

Processing and delivering public service pay requires ongoing support across the entire pay ecosystem. It is critical that departments participate in program oversight and review their HR practices to ensure stabilization is achieved, especially when it comes to timeliness of HR data entry.

New challenges have been affecting progress to eliminate the backlog and keep up with new intake. The population of departments served by the Pay Centre has been growing over the past several years and intake has grown accordingly. The combined growth of these departments between July 2019 and July 2022 was 16%.

The Pay Centre experienced a significant increase in the number of transactions received in 2021, and this increase continues to accelerate in 2022. In the first half of this year, the Pay Centre received 95,000 more transactions compared to the first half of 2021, representing a 19% increase in workload.

These challenges include the high complexity of cases that remain in the backlog, as well as government-wide operational and HR policy priorities which have contributed to workload increases. Examples include critical system upgrades during the summer of 2021, as well as classification conversion, implementation of the mandatory vaccination policy and associated leave without pay processing, vacation/compensatory leave cash-out, and others.

The ongoing complexity of the “machinery” of HR-to-Pay, including negotiated provisions in collective agreements and legislated processing requirements, continues to pose challenges to overall pay administration, from both a stabilization and service provider perspective. If left unaddressed, this will continue to be a challenge for any future pay system.

The department continues to reconcile employee pay files, including overpayment recoveries. Since the launch of Phoenix, approximately 366,000 employees have been identified as having received either an administrative overpayment or true overpayment, totaling $3.0B. As of August 15, 2022, overpayments were repaid by approximately 248,000 of those employees, representing a total of approximately $2.4 billion in recovered funds. As of August 15, 2022, approximately 118,000 employees have an outstanding overpayment balance. The outstanding salary overpayments stands at approximately $555.4 million.

These recoveries are subject to statute limitations of 6 years from the date of the overpayment. As recovery work advances, continued public reaction is expected from current and former employees as well as from bargaining agents.

IBM: Phoenix

Mandate

As Phoenix’s designer and prime implementer, IBM’s expertise and operational support are critical to long-term stabilization of the system. IBM provides functional and technical support 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 robotic process automation, and the automation of business processes.

Key activities

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 to IBM Canada (2011 to 2018) towards the design and implementation of the Phoenix pay system. There were 50 amendments to the original contract for a total contract value of $545 million (taxes included). 

Since the original contract was issued, the Crown has moved towards an application managed service model. Under this outcome-based model, IBM has taken on an enhanced role in delivering more of the day-to-day operations and that has allowed the department to focus on strategic improvements and processes. Below is a list of benefits to date:

In February 2019, the department received funding and contracting authority for the IBM operational support contract for a 3-year period that ended on March 31, 2022.

The contract included services for:

To ensure ongoing pay operations and support beyond 2022, the department initiated a process to re-tender the operational support contract.

In May 2019, a request for information was posted on BuyandSell.gc.ca to gauge industry interest and capacity to provide ongoing operational maintenance and support services. This was followed by an industry day in June 2019 with private-sector vendors. Ongoing industry engagement was key to ensuring fair and equal opportunity to all interested suppliers and a successful procurement process. To maximize the market response, the department incorporated lessons learned from previous industry consultations in this area.

Following the request for information, an invitation to qualify was issued in May 2020 on BuyandSell.gc.ca.

[Redacted]

Litigation: Class action lawsuits

Mandate

Over the last 5 years, 2 class actions were filed in 2 different provinces to seek compensation for damages federal employees incurred as a result of the Phoenix pay system. Public Services and Procurement Canada is defending the following 2 class actions:

The Department of Justice leads these matters and Public Services and Procurement Canada supports 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 by negligently managing the crisis generated by the failure of the Phoenix 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 class 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.

Key activities

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. This application was rejected by the Supreme Court of Canada in April 2020.

As for the Delorme class action, it has not yet been allowed to proceed. The court invited Delorme to bring its certification motion, or Canada to apply to strike the action. No such steps have been taken by either party. [Redacted]

Partners and stakeholders

In Public Services and Procurement Canada, the HR-to-Pay Program Office and the Digital Services Branch collaborate closely to ensure that the associated litigation hold is duly implemented.

Payments in Lieu of Taxes Program

In this section

Mandate

The Government of Canada contributes to the cost of local government in communities where it owns real property. While the Government of Canada is not subject to tax under the Constitution Act, it makes voluntary payments under the Payments in Lieu of Taxes Act (akin to property taxes). The Payments in Lieu of Taxes Program is administered by Public Services and Procurement Canada on behalf of all custodian departments. The payments are based on the principle of fairness and are intended to be equitable in comparison to other property owners. Across Canada, payments are made on approximately 14,000 federal properties located in almost 1,100 taxing authorities. For the 2021 tax year, the department made payments totaling more than $584 million.

Key activities

Under the Payments in Lieu of Taxes Act, the minister of Public Services and Procurement may make payments in lieu of:

Payments may be supplemented if delayed.

Under certain circumstances, the minister may also make payments in lieu of taxes on federally owned properties 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 of Public Services and Procurement.

The minister is also responsible for the valuation of unique properties, such as military bases, prisons, national parks, national historic sites, and historic and heritage properties. Unique properties represent approximately 40% of the payments paid to taxing authorities across Canada.

Partners and stakeholders

Taxing authorities

Taxing authorities are the program beneficiaries, and departments’ payments are made to municipalities, school boards, provinces and Indigenous governments. The Federation of Canadian Municipalities represents the interests of municipalities at the national level.

Federal custodial departments and agencies

The minister is responsible for making the payments on all Crown-owned property under the administration of custodian departments and agencies and is accountable to Parliament for the program. Since 1997, departments have been financially responsible for payments made on their properties and are required to reimburse Public Services and Procurement Canada the amounts paid on their behalf.

Assessment authorities

Assessment authorities determine assessed values on which taxing authorities base their applications for payment in lieu of taxes.

Crown corporations

Independent of the minister’s authority, each Crown corporation manages its own payment in lieu of taxes program under the Crown corporation’s regulations on the Payments in Lieu of Taxes Act. This includes calculating and issuing payments to taxing authorities and making their own decisions based on advice provided by the Dispute Advisory Panel on property held by the Crown corporation.

Dispute Advisory Panel

The Dispute Advisory Panel has a mandate to provide advice to the minister on how to resolve disputes between the federal government and taxing authorities regarding property values, property dimensions or effective rates used in the calculation of payments.

The composition and term of the panel is set in the act. The panel includes at least 2 members from each province and territory, who are appointed by the governor in council and with terms not exceeding 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.

Key considerations

There have been many advances in the domains of property taxation and assessment across Canada over the past 25 years, and the Payments in Lieu of Taxes Act may not be aligned with these changes. The act underwent some limited amendments in 2000 to expand the types of eligible federal property and to establish the Dispute Advisory Panel. However, the last significant amendment to the act took place in 1980; therefore, many of its clauses and wording have not been updated in more than 40 years.

Furthermore, assessment authorities across Canada have moved to a market value assessment methodology for property tax. Although this methodology is effective for most properties, it creates challenges for unique federal property (that is, national historic sites and military bases), which have limited comparability to the taxable sector and real estate market.

The challenges regarding unique properties and outdated wording in the Payments in Lieu of Taxes Act have contributed to increased disputes with taxing authorities both at the Dispute Advisory Panel and at the Federal Court.

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