Thank you.
Madam Chair, thank you for this opportunity to present the results of our audits of building and implementing the Phoenix pay system and of Phoenix pay problems. Joining me at the table is Jean Goulet, the principal who was responsible for both audits.
In 2009, Public Services and Procurement Canada started its transformation of pay administration initiative to transform the way it processed pay for its 290,000 employees. There were two projects: one to centralize pay services for 46 departments and agencies that employed 70% of all federal employees, and the other to replace the 40-year-old pay system used by 101 departments and agencies.
In our audits, we reviewed Public Services and Procurement Canada's development and implementation of the Phoenix pay system and how the department managed the pay problems that the implementation of Phoenix caused.
In our audit of building and implementing the Phoenix pay system, we examined whether the decision to launch the new pay system included considerations of whether the system was fully tested, functional and secure and whether it would protect employees' personal information.
We concluded that the Phoenix project was an incomprehensible failure of project management and project oversight which led to the decision to implement a system that was not ready.
In order to meet budgets and timelines, Public Services and Procurement Canada decided to remove critical pay functions, curtail system tests and forego a pilot implementation of the system.
Phoenix executives ignored obvious signs that the Miramichi pay centre was not ready to handle the volume of pay transactions, that departments and agencies were not ready to migrate to the new system, and that Phoenix itself was not ready to correctly pay federal government employees. When the Phoenix executives briefed the deputy minister of Public Services and Procurement Canada that Phoenix was ready to launch, they did not mention significant problems that they knew about. Finally, the decision to launch Phoenix was not documented.
In our audit of Phoenix pay problems, we examined whether Public Services and Procurement Canada worked with selected departments and agencies to fix Phoenix pay problems so that government employees would receive their correct pay on time. After Phoenix went live in February 2016, the government frequently could not pay public servants accurately or on time. We found that pay problems continued to grow throughout the period of our audit.
A year and a half after the government launched the Phoenix pay system, the number of public servants waiting for a pay request to be processed had reached more than 150,000 in the 46 departments and agencies whose pay services were centralized. Those 150,000 employees were waiting for about 500,000 pay requests to be processed. Those numbers did not include the outstanding pay requests in the 55 departments and agencies whose pay services were not centralized, and also did not include the outstanding requests required by the collective agreements with federal public service unions that were signed in the fall of 2017.
Problems grew to the point that the value of outstanding pay errors totalled more than half a billion dollars at the end of June 2017. This amount consisted of money owed to employees who had been underpaid as well as money owed back to the government by other employees who had been overpaid.
Departments and agencies struggled with Phoenix pay problems from the time the system went live. However, it took Public Services and Procurement Canada four months to recognize that the problems went beyond normal processing levels.
We concluded that Public Services and Procurement Canada did not identify and resolve pay problems in a sustainable way to ensure that public service employees would receive their correct pay on time. In fact, according to the department, a backlog of unresolved pay requests continued to grow after the date of our audit conclusion.
In my opinion, there were three issues that were common to both the Phoenix implementation project and the department's immediate response to the post-implementation problems.
Those were a lack of oversight or governance to guide management activities, a lack of engagement with affected departments, and an underappreciation of the seriousness of the problems.
Before I close, I want to mention that in addition to the two audits I referred to, included in our spring 2018 report of the Auditor General was a message from the Auditor General in which I indicated that I believe that the culture of the federal government enabled Phoenix to become an incomprehensible failure, and I believe the committee should consider how that culture contributed to the failure.
Madam Chair, this concludes my opening remarks. We'd be pleased to answer any questions the committee may have.
Thank you.