Proceedings of the Standing Senate Committee on
National Finance
Issue No. 59 - Evidence - January 31, 2018
OTTAWA, Wednesday, January 31, 2018
The Standing Senate Committee on National Finance met this day at 6:45 p.m. to study such issues as may arise from time to time relating to federal estimates generally, including the public accounts, reports of the Auditor General and government finance (topics: Auditor General of Canada’s 2017 Fall Reports: Phoenix pay problems and Canada Revenue Agency’s call centres.)
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: Honourable senators, I welcome you to the first meeting in 2018 of the Standing Senate Committee on National Finance.
[Translation]
Welcome everyone. My name is Percy Mockler, a senator from New Brunswick and the chair of this committee.
[English]
As chair of the committee, I wish to welcome, on behalf of the senators on the Finance Committee, all of those with us in the room and those who may be viewing across the country, watching us on television or online.
As a reminder to those watching, the committee hearings are open to the public and also available online on the Senate website at sencanada.ca.
[Translation]
I will now ask the senators to introduce themselves.
Senator Pratte: André Pratte from Quebec.
[English]
Senator Black: Doug Black from Alberta.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
Senator Eaton: Nicky Eaton, Ontario.
[Translation]
Senator Forest: Éric Forest from the Gulf region in Quebec.
[English]
The Chair: Thank you, honourable senators.
I would also like to recognize the clerk of the committee, Gaëtane Lemay.
[Translation]
I would also like to introduce our two analysts, Sylvain Fleury and Alex Smith, who, together, support the committee in its work. We would like to thank you.
[English]
Today we welcome, honourable senators and Canadians, the Auditor General of Canada, Mr. Michael Ferguson. He will make a presentation on two recent reports that are of interest to the Finance Committee of the Senate of Canada.
I would like to share and say to the Auditor General, Mr. Ferguson, there is no doubt in my mind, and I have been informed many times, that you have had a lot of readership with those two reports. The first one is on the Phoenix pay problems and challenges. The second one is on Canada Revenue Agency’s call centres.
We are pleased to welcome officially the Auditor General of Canada, Michael Ferguson. To assist him, we have two other officials.
[Translation]
Martin Dompierre and Jean Goulet, both Principals.
[English]
Mr. Ferguson, following your presentation, senators will be asking questions on the subject matters.
On this, I ask the Auditor General to make his presentation.
[Translation]
Michael Ferguson, Auditor General of Canada, Office of the Auditor General of Canada: Mr. Chair, thank you for this opportunity to discuss our fall 2017 reports on Phoenix pay problems and the Canada Revenue Agency’s call centres. I will summarize for the committee the relevant findings from these audits; however, it is important to note that our audit work was completed in September 2017.
Let us start with our audit of the Phoenix pay system. In 2009, the Government of Canada began to transform the way it processed pay for its 290,000 employees. This Transformation of Pay Administration Initiative had two projects. One involved centralizing pay services for 46 departments and agencies that employed about 70 per cent of all federal employees. The other involved replacing the 40-year-old pay system used by 101 departments and agencies with a new system called Phoenix. Since Phoenix went live in February 2016, the federal government has frequently not been able to pay federal public servants accurately or on time. Our audit 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.
[English]
This audit is important because the government’s pay problems have had a financial effect on tens of thousands of its employees and the system has to be fixed.
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. These 150,000 employees were waiting for about 500,000 pay requests to be processed. These numbers don’t include the outstanding pay requests in the 55 departments and agencies whose pay services were not centralized nor the outstanding requests required by the recently signed collective agreements with federal public service unions.
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 that was 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. Since that time, the department reacted to problems but implemented few permanent solutions. In fact, 16 months after the problems first arose, there was still no governance structure in place.
[Translation]
In our opinion, there are two parts to the solution of the Phoenix pay problems. The first priority is to pay people the right amount on time. However, after this is achieved, there will still be work to do to get a system that processes pay efficiently.
Public Services and Procurement Canada told us that it was developing a comprehensive plan, including detailed cost information, to resolve the pay problems. However, it had not finished this plan by the end of our audit.
To put in place a viable solution, the government needs to identify and address the root causes of the problems; exercise strong oversight of the steps taken to resolve the problems; and ensure that there is strong collaboration that includes Public Services and Procurement Canada, the Treasury Board of Canada Secretariat, and the affected departments and agencies.
[English]
In our view, fixing the Phoenix pay problems will take years and cost more than the $540 million that government organizations have so far estimated they will spend to solve the problems. We found that the Australian state of Queensland had dealt with a similar situation, and most of its pay problems took eight years and over $1.2 billion to solve.
Let me turn now to our audit of the Canada Revenue Agency’s call centres. The agency’s call centres are an important way for members of the public to obtain tax information. Our audit looked at whether the agency’s call centres provided Canadians with timely access to accurate information. We also examined the methods that the agency used to assess and report on its call centres’ performance.
Overall, we found that the agency did not provide timely access to accurate information. The agency blocked 29 million calls, or more than half the calls it received. It monitored how long callers waited to speak with an agent, and when an average wait time approached two minutes, the agency either blocked calls, usually by giving them a busy signal, or directed them to the automated self-service system.
The agency told us that callers preferred receiving a busy signal or an automated message to waiting more than two minutes to speak with an agent. However, the agency had not surveyed callers to verify this assumption. As a result, callers had to make an average of three or four call attempts in a week, and even after several attempts, some callers still did not reach an agent.
Through our tests, we found that the rate of agent errors was significantly higher than what the agency estimated. Call centre agents gave us inaccurate information almost 30 per cent of the time. This is similar to the test results of other assessors and is significantly higher than the error rate estimated by the agency.
[Translation]
We found that the agency’s quality control system did not test the accuracy of agents’ responses effectively, so the results of its tests were unreliable. For example, in most cases, agents knew that their calls were being monitored, which may have encouraged them to change their behaviours to improve their performances.
Finally, the agency reported that about 90 per cent of callers were able to reach either the automated self-service system or a call centre agent. However, we found that this percentage did not account for the calls it blocked — which were more than half its total call volume. After accounting for blocked calls, we found that only 36 per cent of all calls made to the agency’s call centres reached either an agent or the automated self-service system and lasted a minute or more.
We are pleased to report that the relevant departments and agencies subject to these audits have agreed with all of our recommendations and have committed to taking corrective action.
Mr. Chair, this concludes my opening statement. We would be pleased to answer any questions the committee may have. Thank you.
The Chair: Thank you very much, Mr. Ferguson.
[English]
Before we proceed, I would like to ask two senators, Senator Andreychuk and Senator Neufeld, to introduce themselves please.
Senator Andreychuk: I apologize for being late. There’s quite a bit of snow out there. I am Raynell Andreychuk from Saskatchewan. We’re not used to snow like this.
Senator Neufeld: Senator Neufeld from British Columbia.
The Chair: Thank you.
The first question will be from Senator Marshall, to be followed by Senator Pratte.
Senator Marshall: Thank you, Mr. Ferguson, for being here tonight and for your opening remarks.
I want to start off asking you a question to which I really didn’t see the answer in your report, but you did allude to it in your opening remarks and also in your report: the governance structure. You are saying there was still no governance structure in place.
When I read your report, I saw that they have that cabinet-level ministerial committee involved. They have an associate deputy minister responsible for activities to resolve pay problems. Then there was an interdepartmental deputy minister committee. There is also a project management office and an office of the Chief Human Resources Officer and Treasury Board. But I didn’t get a sense of how they are all related, and I didn’t get a sense of somebody — there must be one person. For any organization or project, there has to be a CEO in charge. The feeling I got reading your report is that all these committees or individuals are assigned tasks, but there is nothing bringing it together.
At the end of the day, who is responsible at the ministerial level and who is responsible at the bureaucratic level? There has to be one person. It can’t be like the impression I’m getting from your report. It seems like it’s all over the place.
Mr. Ferguson: Remember, again, that they put in place the system, so they had been all through the project management. That was a seven-year process, and they put the system in place and went live with the system.
Then the problems started to happen, and it took Public Services and Procurement Canada, which was responsible for the implementation of the project, a number of months to realize there were problems. Then, even when they realized the problems, they didn’t realize how long it was going to take to fix them.
No one identified earlier on that they needed to put in place a governance structure to deal with the problems. Again, this was post-implementation. They didn’t identify there were problems happening, that it was going to take a long time to fix them and that, therefore, they needed to have some sort of a governance structure.
The various committees and things you referred to are in paragraph 88 of our report on the Phoenix pay problems. These were based on an announcement by the Prime Minister in April 2017. Then in June 2017, Public Services and Procurement Canada and Treasury Board Secretariat acknowledged that the governance to manage the problems was not sufficient, so they announced these committees.
June 2017 is also the period of time when our field work stopped, so we didn’t get any opportunity to actually see these committees in action. They were just being formed.
The system was put live in February and April 2016. It was in June of 2017 that these three different groups were announced to try and provide some governance structure, so more than a year later. We couldn’t really comment on whether they were going to provide appropriate governance or not because we hadn’t seen them.
Throughout everything that we looked at, it was the Minister of Public Services and Procurement Canada and the deputy minister that were responsible at both the ministerial level and at the bureaucratic level.
Senator Marshall: If those are the two individuals responsible or they are the two in charge, obviously what’s happening is it’s not working; it’s not effective. My understanding from reading articles and even your report is that the problem continues to grow. It’s not like they’re getting a handle on the situation. It’s like two streams. They have to resolve the pay problems and they also have to fix the system.
I don’t know what’s happening with regard to fixing the system. I think somebody is working on it. We hear more about the individual pay problems, but the individual pay problems seem to be getting worse. The more you read about the individual pay problems, it seems they are getting more complicated. It’s not just people getting paid the wrong amount; it’s affecting things like their severance and their pensions. Talking to some of the public servants still working with the public service and also some retirees, they are owed severance. Their pensions are being calculated incorrectly. It seems like they really have quite a problem on their hands.
I noticed, in reading the report, in a number of your comments, in a number of places they’ve given this explanation:
A preliminary HR-to-Pay Integrated Plan for Phase I will be finalized by December 2017.
Would you have done any work on that or would you know what that is? I was trying to determine before the meeting if they actually achieved that by 2017, because that was last month. They kept missing deadlines. I thought if they met that deadline I would have some reason for optimism, but I don’t know what it means. Would you have done any on work on their responses?
Mr. Ferguson: I will ask Mr. Goulet to respond to that.
Jean Goulet, Principal, Office of the Auditor General of Canada: No, we did not do any work on that particular response.
At the time of the end of our audit, it was still something that was in planning. As far as we know, this has not been tabled yet, so it hasn’t been finalized. The last deadline that I have heard would be sometime this spring. However, we have seen a preliminary version of that. It’s a plan being developed by a consulting firm, and we do allude to it in the report. Other than that —
Senator Marshall: You don’t have an opinion on whether —
Mr. Goulet: No.
Mr. Ferguson: Senator, if I may, I’m glad that you have identified that and they have talked about that HR-to-Pay as part of the solution. It may very well be. They would have to describe how that is going to be part of the solution. But I think it also indicates that there could be some risk, because now they’re not just talking about fixing the pay problems and fixing the pay system. They’re also talking about this whole integrated HR information to pay information, and that could in fact complicate the whole project.
Now, I can’t tell you whether it would or would not, but the fact that they seem to be talking about an approach that seems to be sort of expansive, I think, is worth exploring with the department about whether they are taking on more rather than just trying to fix the issues that were already identified.
Senator Marshall: I agree with you. They’re expanding their risk. I know when we had hearings before Christmas, I think the Treasury Board people indicated they were developing some sort of system and they wanted to link it up to Phoenix. I was actually horrified at the thought that given the state of the Phoenix system they were actually looking to add something.
They’re still adding employees to the Phoenix system, are they not? So I don’t understand, if they have problems with a system that is not paying the employees accurately and they have a problem with the system. I know from your report that at least one department is using their old system for something. I just didn’t understand why they keep adding people to the system, especially students. You could use a separate payroll model. Why would they do that? Do you have any comments?
Mr. Ferguson: The other thing I will mention, senator, is we also have another audit under way on the Phoenix project. So in this audit, what we wanted to do was look at what they are doing to try to fix the problem, because we felt while they were in the process of fixing it, that was the best time for us to look and see whether they were on track and let people know what was happening.
We have another audit under way that will go back in time and look at how this all happened. We will report that in May. But we felt it was more important to look at these issues first because they were still in the process of trying to fix things, and then we’ll come back with the other audit that will talk about how it happened.
We have Exhibits 1.2 and 1.3 after paragraph 30 in our report that show after the first wave, so in February, when they brought in a number of departments, there was a certain level of unprocessed pay errors. Even between that and April you could see that there was a significant increase in errors, but they still decided to move the second wave of departments in.
Senator Marshall: I had that question. I thought that was odd. It seemed like they knew there were problems but carried on anyway.
Mr. Ferguson: Based on the information that they had and we put together, you could see that in that time between the two waves — you can see before the first wave that they were starting to fall behind a bit even before they implemented. Then when they implemented, in between the two waves the rate of problems got steeper and then it got steeper again after the second wave. So there were lots of indications of the problems.
Senator Pratte: I would like to ask you a little bit about this second audit that you are currently doing. Does that give you any window at all on what’s going on right now, or since you’re only looking at the past, does it not give you any indication about what’s going on right now with the Phoenix system?
Mr. Ferguson: Well, the first — I guess that is going to be confusing. The second audit is really the one that looks furthest in the past.
Senator Pratte: Like the Star Wars movies.
Mr. Ferguson: Yes, that’s right. So the second audit, the one we have under way, will look at the whole project implementation up until implementation.
This audit was looking very much at what they had been doing since implementation up until June 2017, so it was looking at what they were doing right at that time. We obviously haven’t gone back in since June 2017 to see what has been going on in the last nine months or so. But at the time this audit was presented, it was fully up to date with everything that was going on at that point in time.
Senator Pratte: It’s not absolutely clear in my mind what brought you to the conclusion that it would cost much more than $500 million and it would take years to solve the problem. I understand your comparison with Australia, but what exactly brought you to those two conclusions?
Mr. Ferguson: The first thing we did was survey the departments, including Public Services, to find out how much money they were already spending in that year and how much they were going to spend for the next couple of years. That’s where we came up with the $540 million. It would only go out about two years.
The reason we said it was going to cost much more than that and it was going to take longer than that was because those estimates were really about what the departments were doing just to try and solve the pay problems.
One of the things I keep explaining in this audit is that there are two aspects to it. There is getting people paid the right amount on time, but this system was supposed to deliver efficiences. This system was supposed to process pay more efficiently. Right now, they have a system that not only is producing more errors than the 40-year-old system that it replaced, but it is less efficient than the 40-year-old system that it replaced. Once they get the errors down to the point, or the processing down to the point, that they can process pay within that reasonable period of time, they will then need to turn their attention to making the system efficient.
For example, at the end of paragraph 58 in our report, the department told us that to achieve the efficiencies, they would need to improve the governance; they would need to improve the functionality and performance of Phoenix; they would need to improve the efficiency and effectiveness of business processes, improve data quality, enhance system and resource capacity and productivity, and work with departments to align current pay processes with Phoenix.
To do all of that on top of getting the pay fixed is going to take longer than the short period of time that we surveyed them regarding how much they were going to spend, which was over just a three-year time period.
Senator Pratte: This is subjective, obviously, but when you left the field in June 2017, were you under the impression that they were on the right track or that they were all still messed up as to where they were going with this?
Mr. Ferguson: All throughout the time of our audit, right up to the end of our audit, we saw that the problems kept accumulating, that the problems kept getting worse. There were only two months, I believe, in the whole time frame where the Miramichi Pay Centre was actually able to process more requests than came in. So it kept falling behind and it kept falling behind throughout this whole time period.
At least by the end of the audit period — before, actually, the end of the audit period — they realized they needed to put in place a comprehensive plan. They realized they needed to put in place a governance process to oversee all of this. But getting all of that in place was still going to take some time. So certainly at the end of our audit period in June of 2017, things were still getting worse. I can’t say what has happened since. I mean, we can all look at the things that are in the press that people are talking about, but right up until the end of our audit period, the problems were still getting worse.
Senator Pratte: Thank you.
Senator Eaton: Thank you, gentlemen.
In your report, you have recommended an in-depth analysis of the causes of pay problems, developing a sustainable pay solution, adopting timelines to resolve pay problems and that better information be gathered. Is this a blueprint for them to fix the system?
Mr. Ferguson: I don’t want to try and minimize the amount of work that they are going to have to do to fix this. This is a big problem that is going to take a lot of work.
I think just them understanding those causes, what is causing it — we identified a number of things. The system wasn’t prepared to deal with retroactive pay, but the federal government pays a lot of people retroactively. The system originally didn’t handle things like shift work and those types of things.
Senator Eaton: Is that the software itself? The person who designed the software didn’t really look at how the government pays its employees?
Mr. Ferguson: Well, with this type of system, you always have, “What are your business processes? What is it that you need to do?” You have a piece of software that is designed to handle certain types of transactions. If those two things aren’t in alignment right from the very beginning, you either need to figure out a way to bridge it or you need to change one or the other.
Senator Eaton: So is it bridging, or is it changing one thing or the other?
Mr. Ferguson: All three of those are possible solutions. Bridging means you have to customize, and that is expensive. It’s difficult to maintain. On the other hand, if you go in to try and change the system, you’re also customizing that. If you change your business processes, that’s not always easy because you may need to open union agreements —
Senator Eaton: Employees are used to certain ways.
Mr. Ferguson: Right. So all three of those have their challenges.
The problem was they didn’t make sure that their processes and the system processing could line up before they actually implemented.
Senator Eaton: I’m sorry. I’m sure this is very simple, but is somebody like IBM partially responsible? I guess you can’t point the finger, but is somebody like IBM partially responsible because they did not look at how the government pays its employees so the software doesn’t line up?
Mr. Ferguson: That, I think, is something that the department will have to give you the details on.
To get to the bottom of that question, it comes down to: What did the contract specify that IBM had to do? If IBM did what the contract specified they had to do —
Senator Eaton: They’re off the hook?
Mr. Ferguson: — it wasn’t their issue. It was that the department didn’t make sure that the contract reflected what they needed it to do.
So you would have to find out from the department where that laid, but to me it would very much be dependent on what the contract said IBM had to do.
Senator Eaton: Thank you. That eliminates a lot.
Senator Black: Gentlemen, thank you very much for being here.
My questions are of such a nature that you need to understand that I’m not shooting the messenger. I appreciate very much that this information has been tabled, but I need to say as one senator, I’m sure speaking on behalf of Canadians: This is a shameful embarrassment.
I come from the private sector and I’m a lawyer. So following up on what Senator Eaton has asked, has anyone in the government been held responsible for this mess?
Mr. Ferguson: Again, I think that’s something the department will have to explain to you. It’s not information that I have.
Senator Black: Thank you very much. So you wouldn’t know whether anyone, as would happen in the private sector, has been fired for this?
Mr. Ferguson: No, that’s not information that I would have.
Senator Black: I also want to talk to you about, as Senator Eaton has raised, the circumstance around legal action against the provider.
I understand what you have just said about you would have to look at the nuance of the contract, but we have to recognize, at the end of the day, the contract has fundamentally failed to deliver what was contracted to be delivered. On the face of it, there is an incredible legal action there.
Do you have any knowledge as to whether or not the government intends to sue the provider?
Mr. Ferguson: Again, that is something that the department would have to respond to.
I’m not trying to imply that the provider did not supply what the contract asked the provider to supply. That’s something that the department would have to tell you. It could just have been that the department did not make sure that the contract reflected what the department actually needed, but I don’t have all of that information. The department would have to explain that.
Senator Black: But on the face of it, I would hope that the department and the provider expected to pay people on time.
Mr. Ferguson: That was certainly the original intention of this system. This system was intended to be a more efficient system than the old system.
Senator Black: You bet. And you found that it isn’t, so that is that.
Can the Phoenix system be abandoned?
Mr. Ferguson: Again, that’s a decision of the department.
I’ll provide you some concerns that I would have with that, which doesn’t mean that it couldn’t be done, necessarily.
To put the Phoenix system in place took seven years. If there was a system that you could just go and buy off the shelf somewhere that would handle all of the government’s pay transactions without any problem and have it implemented in a very short period of time, I’m assuming that would have been the system they would have selected in the very first place.
Senator Black: We would hope we can assume that.
Mr. Ferguson: To me, the issue is that even if they decided they wanted to go down another road now, it would take years to identify what the system needs to do, how we would implement it, how we test it and how we get it up and running.
As we say in the report, there were 150,000 people waiting for pay requests to be processed. In my opinion, you can’t start a new system with 150,000 problems going right into it. So even if they decided they wanted to start a new system, they have to get all of this backlog of problems resolved to give a new system a fair chance of actually being successful.
Whether they decide to go with another system or not doesn’t change the fact they have to get the current system working properly and get people paid properly.
Senator Black: Finally, the folks who have been penalized because of these problems, are you satisfied that systems or processes are in place to ensure that people are not facing hardship because of the government’s negligence?
Mr. Ferguson: That is really probably a question for the Treasury Board Secretariat, which has put in place some processes around how people can apply for assistance if there has been hardship. Certainly, you hear about a lot of different stories. I can’t speak to those stories individually, but when people are not paid the right amount on time, it affects many things.
Senator Black: Of course.
Mr. Ferguson: Student loans, mortgages, pensions — all kinds of things. Again, I’m not privy to all of the actions that are being taken to try and make people whole on those fronts, but I think it is a very valid and fair concern.
Senator Black: Thank you very much.
Senator Neufeld: Thank you for being here to answer some of these questions.
You said that they started in 2009 and went live in 2016. Does that mean they started trying to get a bid package together in 2009 and it took until 2016 — seven years — to actually get that process in place so they could go live? Would that be correct for me to say?
Mr. Goulet: The project was formally launched in 2009, with a request for proposal. The successful bidder was chosen in 2010. The design occurred up until 2012, and then the build part started in 2012, all the way up deployment in 2016.
Senator Neufeld: Are people in your department experts on the IBM pay machine? Is that why you were there, to help the people who were supposed to be running it to figure out how to run it? Do you have expertise that lends to that?
Mr. Ferguson: I just to want clarify that IBM was the implementer of the system. The core system is called PeopleSoft. It’s a package system that can be purchased. Then the implementation and the modifications, when you put that all together, that’s what the Phoenix project was.
So the software was not IBM software. The software was PeopleSoft, and IBM was the implementer; their job was to put it in place.
We were not in any way trying to look at all of the technical details of implementation. We were looking at how the department was working with other departments when the problems arose, how they were managing those problems and what sort of governance structure they were putting in place.
We were not trying to do a technical software architecture type of audit. We were trying to manage, essentially, a crisis problem; that’s what we were looking at in the audit.
Senator Neufeld: Did you determine to go in and look at it, or were you requested to go in and look at the system to find out what could be done?
Mr. Ferguson: I’m going to go by memory. First of all, for any of these audits of government programs, we choose what we’re going to audit. We did get a request from the Minister of Public Services and Procurement at the time, requesting us to look at the Phoenix system. My recollection was that it was primarily about looking at the implementation and the problems with implementation.
But when we considered the whole Phoenix issue, we decided we could provide more value by looking at how they were fixing the problems, because that’s what was going on then. We decided that’s what we wanted to look at first, and now we’re in the process of looking at the other issue, which is what the problems with the original implementation were up to the end of April 2016.
Senator Neufeld: The folks who have been underpaid and overpaid, is all of that rectified? I know it has been said, and I totally agree: It’s terrible that people have to go to the bank to borrow money because they can’t get paid from the government. Let me tell you, if it was the private sector doing this, all the owners would probably be in jail by now. Government gets away with it for whatever reason, I guess, but they do.
So, have the people who have been underpaid now been paid, and have the people who were overpaid sent the money back?
Mr. Ferguson: I can’t give you an update on the number. The only thing that I can tell you is “no.” There are people still on both sides of that. To what extent and what the number is, I don’t know what that number is now. In March 2017, it was $520 million, which was for 100,000 people, so it was an average of about $5,000 a person.
Senator Neufeld: I think you have said it could take years to get fixed, if you compare it to Australia, so would you estimate that people will be underpaid and overpaid for another six or eight years with the system we have here now?
Mr. Ferguson: Again, that’s why there are two parts to resolving this issue. The first part is just getting the system to the point where people can get their requests for adjustments paid within a reasonable time period — 30 days or whatever that time period is. They have to clear the backlogs, and they have to get people within 30 or 45 days, whatever would be considered normal.
At that point in time, though, you will no longer hear about the problems, perhaps, because people will be paid what they need to be paid, but it will only happen because they have thrown so many people and resources at doing it that the system is not efficient and the system is costing a lot more than the old system. So then the second part of what they need to do is get the system to the point where it is efficient. Doing all of that will take the years.
I would hope they will be able to get to the point of getting people paid the right amount much sooner than that eight-year time frame.
Senator Neufeld: I have one last question. I have in my notes that your office recommended that Public Services and Procurement Canada, in partnership with the Treasury Board of Canada Secretariat, departments and agencies, conduct an in-depth analysis of the causes of pay problems to determine what solutions are needed to resolve them.
If you have a system as messed up as what it was, why would a department need an Auditor General to come in and say something that straightforward? Are they that incompetent or something? Do they not understand what they have to do to get it fixed? Does it take your department to come in and tell them, “You’d better put together a group of people and figure out how you’re going to fix this”? It amazes me, to be perfectly honest.
Mr. Ferguson: The problem started in February 2016. By the time the second wave happened, it was April of 2016. Shortly after that, it was obvious there were problems.
Public Services and Procurement Canada originally came out and said, “Yes, this is the result of the backlog of pay requests that need to be processed, and we will have that all resolved by October of 2016.” Of course, it wasn’t, and the problems kept getting worse. The problems kept getting worse after that. That’s why we point out that it took them a year to realize this was going to be a long-term problem and that it was going to take a lot of time and effort to get it resolved.
In Queensland, Australia, they had similar problems. They identified about four months into it that they had these problems, and they started right then putting in place the type of plan that we described. So I guess I will give Public Services and Procurement Canada the benefit of the doubt that by the time we came in they were realizing that they needed to do those types of things, but it took them too long to realize it.
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Senator Forest: Thank you for your presentation. In this day and age, this mess is a huge embarrassment. Federal employees are being penalized. The first question that comes to mind has to do with the departments’ responses according to your report. You were told, among other things, that an HR-to-pay integrated plan would be developed. Did the department promise to have a plan by the end of December 2017? Whose responsibility is it to follow up on that? Was the plan submitted? What is the plan? Is there a timetable?
Before the holidays, we met with PSPC officials. My impression was that nothing tangible had happened. This is a huge problem, and yet we can’t manage to get any clear deadlines or figure out who is responsible for making sure the necessary steps are taken to resolve the problem. We aren’t able to clearly identify whose shoulders that responsibility falls on.
Mr. Ferguson: We completed our audit in June 2017, and the department told us that the plan would be finalized in December 2017. That was after we had finished our examination. The department also prepared a more specific plan aimed at resolving the issues, and it was submitted to the House of Commons Public Accounts Committee. The plan sets out dates in 2018 and 2019.
I do not have any information on the department’s progress in terms of the December 2017 deadline, but Mr. Goulet might be able to provide more information.
Mr. Goulet: At this stage, we don’t really have any further information, as I mentioned earlier. A preliminary plan had been developed through consultation, but that was prior to the release of our report in November. We aren’t aware of any plan being finalized in December 2017. What we have been told, further to our second audit, is that the plan should be ready this spring.
Senator Forest: That’s basically what I find unacceptable. You released your report in June, the affected departments agreed with your recommendations and told you that they would develop a plan along with a deadline, but there has been no follow-up. Someone in the government has to put their foot down at some point. We have to know who in the government is responsible for making sure the proper measures are being taken.
This is a huge problem affecting all federal employees, as you rightly point out in your report. After the report, however, heads go down and the hits just keep coming. Someone has to assume the leadership and oversight to fix this problem.
Mr. Ferguson: Finding a way to identify the results of the department’s plan is tough, because the deadlines are still to come. In the audit, we noted many figures tied to the issues observed at the time, and I think the department can continue to update those figures to provide assurance that the problems aren’t growing. Mr. Goulet may be able to add something.
Mr. Goulet: That would certainly be a good idea. I know the department is a bit more open to that. Once a month, it updates a dashboard on its website, and those figures seem to be much more realistic than what we had seen in the past. In fact, it’s mentioned in the report. I cannot, however, provide any assurances as to the merit of the figures since we do not check them.
Senator Forest: At some point, someone in the government has to take control of the dashboard and see to it that things are getting done. Otherwise, we will never manage to solve a problem of this magnitude.
Mr. Goulet: It may be relevant to note that we are conducting a second audit, thus putting pressure on the department, which then makes an effort to speed things up. The department knows that, once the report is released, many questions will be asked about the progress being made.
Senator Forest: If I understand correctly, one of the elements you will be examining in your second audit has to do with the call for proposals, at the front end of the process. The contract should have indeed been put out to tender. If that was the case, there have to be project specifications and contractual obligations.
Who was responsible at that point, before this mess occurred? Were the project specifications laid out clearly enough? Were the requirements poorly assessed? Were the contractor’s obligations poorly defined? Will you be examining what happened before the contract was awarded, in other words, the project specifications, the contractual obligations and the public tendering process? This is after all a multi-million-dollar contract.
Mr. Goulet: All I can say is that we are examining those elements as part of our second audit.
Senator Forest: You will be focusing on that in your audit?
Mr. Goulet: Yes. In order to establish the history, if you will, we are looking at that in our second audit.
Senator Forest: First, to establish the history and, second, to identify who is responsible for this mess. Was the call for proposals process specific enough? The CRA mentioned a new centralized business call centre that was supposed to be operational in June. I hope it will draw some lessons from the Phoenix debacle.
Mr. Ferguson: Our second audit should help us identify all the issues that arose with the project. We intend to explain all the problems that existed around the planned implementation of the system.
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Senator Andreychuk: Maybe I’m very simplistic. This is not my area of expertise, but we’re talking about why the problems occurred, and I think what you’ve given us is they accelerated during the time that you were there, or they took longer. That is not very helpful. I’m not looking at the blame game; I’m looking at how to fix it.
So there was a system in place, but part of it is who inputs, how skilled they are and how the departments were adaptable for the new change. Did you not look at whether there was any testing period before?
I remember 20-plus years ago when there were attempts to computerize, not in this global way, but in portions of it in one department. They took test cases. They didn’t jeopardize the entire system. They hived off and said, “Let’s simplistically see if it works.” Guess what? It didn’t. That collapsed and then they went off.
To make an evaluation of what went wrong, you would have to know, first of all, not just the design of the system, but those who were inputting and the test period. Did you look at anything to see whether some testing would have been done? They undertook a tendering process. They had a lot of meetings, decided on one and jumped on the Good Ship Lollipop and it didn’t work.
Mr. Ferguson: All of that, including what they did around testing, will be the subject of the second audit that we will release in May. I can’t speak to the details of that yet because we’re still in the process of working through with the department about exactly what they did in all of those areas. What I can tell you is that we very much are looking at what they did in terms of testing and implementation in the course of the second audit.
What happened here, really, was once they implemented and once there were problems — and remembering that there were 46 departments, that their pay advisers were moved to Miramichi, and that represented about 70 per cent of government employees. What happened was right from the very beginning, again, as is shown in this audit, the Miramichi Pay Centre couldn’t handle all of those transactions, so they fell behind. Every month they were getting more requests for changes than they could process in that month, so they kept falling behind every month because they couldn’t keep up with it. Once there was a significant backlog, they couldn’t even keep up with what was coming in on an individual month basis.
The department then, as we explained in this audit, hired more pay advisers for Miramichi. They put some pay advisers back into departments and started doing a whole number of those types of things to try and catch up, but they were still not able to catch up right through to the end of June 2017. They would have to explain to you what they have done since then.
Senator Andreychuk: But there was no hint to you? If I were in your position, I would want to say: Didn’t you see the problem coming? Didn’t you test it? As big as the Canadian government is now, wouldn’t there be a backup plan?
Apparently they had to collapse the old system completely to start the new system, which immediately gives me pause because in every other place I have been in there has been a backup system in some interim period, and that’s why there was some small testing to see if it works.
To come to any of the conclusions that you have made, we have to know all that in your next audit. That is, again, a long-time gap while the system is not working, whereas if there had been some testing or analysis at the front end, you might just give it up. That is what happens in the system I was in. They just said, “Wait, we’re not ready for this,” and they canned it. It cost a lot, but it certainly didn’t cost what this is because they just keep persevering.
It seems to me that it should be part of — if your next analysis is going to be from day one, you will have to revisit what you’re saying now because I’m not sure what you’re saying if I don’t know the background.
Is it a tender problem? Is it a system problem? Is it input? You have to start at square one.
Mr. Ferguson: And that’s what we’re doing in the second audit. It will include all of those things that you talked about. It’s not just about tendering and those sorts of things. It’s about the whole project management. It’s about what they did to make sure that the system was going to be ready to go live and what they did to make sure the people were ready to go live. All of those things are what we’re exploring in the second audit.
We didn’t deal with them in this audit because those decisions had been made and they couldn’t be changed. What we felt we needed to look at first is what they are doing now to fix the problems, and then we will go back to give you the whole history, including what decisions they made about testing.
Senator Andreychuk: I understand the problems in the CRA. I tried to use them. I must say it was much better years ago under the ministry. You actually got to talk to people. You could get orders, et cetera. It wasn’t perfect, but it certainly is difficult now and I get a lot of complaints that way.
We’ve now laden on this new tax reform and gave all of the businesses two weeks to understand the rules. I’m hearing from lawyers and accountants. They’re still trying to figure out what it means to all these small and medium businesses. Some may be directly affected and some may not, but they all want to know.
Will the deluge of requests that will be coming from this very dramatic change of tax reform compound the problem?
Mr. Ferguson: I won’t speak to any specific tax reform. I think in the course of the audit — and we have a graph about how many calls, essentially, came in over a period of time and things like that. You can see that in years where there are significant changes to tax laws there’s a change in volume.
I can’t speak to any specific item, but we have seen in the past that when there are changes to tax laws, it does result in a change in the volume that the call centres will receive.
Senator Andreychuk: Will you be going back on any assessment of this?
Mr. Ferguson: Right now we don’t have any plans in place yet. That’s part of our normal process; we do an audit and a few years later on we will look at which audits we should go back in and do a follow-up to see whether they have gotten better.
I think this one is a prime candidate. The chance of getting through to a call centre was, I think, 36 per cent. The chance of getting a wrong answer from an agent was 30 per cent. I think this is a prime candidate for us to go in, in a few years’ time, to see whether they have managed to get it fixed, but so far we don’t have that planned.
Senator Marshall: My question is on the Canada Revenue Agency.
When you look at the results, the statistics as posted by the Canada Revenue Agency, they post it between, in your report, 87 and 90 per cent, but when you did your calculations, you’re saying the success rate shouldn’t have been that high; it should only have been 36 per cent.
This government is really focused on results and departments are posting their results on their websites, so who is verifying this information?
I find it somewhat offensive that the Canada Revenue Agency is posting on their website that they have a success rate of 87 per cent and you’re coming in behind saying it is actually only 36 per cent.
Who is verifying this information? Do you have any opinion on that? All of this data is going out for public consumption. Obviously no one is verifying it and people aren’t getting accurate information.
Mr. Ferguson: The way I will answer that question is unfortunately we have seen this type of theme too often in reports, where departments are reporting publicly one measure, but that measure does not give the full picture.
What we’re trying to do is get departments to understand that when they are providing services and measuring performance of services, they need to look at it from the point of view of the person receiving the service.
One of the things the Canada Revenue Agency was measuring and reporting on was if your call got picked up and connected to the system, they wanted to make sure you didn’t wait any more than two minutes to speak to an agent. That’s what they were measuring; how long people were waiting to speak to an agent.
As soon as the call started to get to be two minutes or a little more than two minutes, in order to keep saying that people were not waiting more than two minutes, they blocked calls. So your call didn’t even count. They blocked 29 million calls, and therefore your call was not part of their statistics. They were able to report that over 80 per cent of people, or whatever it was, were connecting to an agent within two minutes because they were only measuring the ones who connected with the system and they didn’t include the ones that were blocked.
Too often we see that’s what departments do; they only report on one part. In fact, we did another audit about a year ago on tax objections and how the CRA was dealing with tax objections. Again, we found a similar thing. Some people with complex tax objections were waiting 900 days to get an answer to that.
So we’ve seen this issue more than once with the Canada Revenue Agency.
Back to your original question, there is nobody verifying. It’s all up to the departments to make sure they have their quality assurance, and then it’s us coming along later on doing audits on different areas. One of the things we look at is performance measurement and performance reporting. Unfortunately, we found these types of examples in too many places.
Senator Marshall: But for both of these issues, Phoenix and for the Canada Revenue Agency, paying employees is a pretty basic function, so that is not being done. And having a decent telephone system is a fairly basic function for a service provider, and that’s not being done.
I read an article the other day that the Minister of National Revenue was saying that now some taxpayers will be able to file their tax returns by phone. I’m thinking this phone system doesn’t work as it is, and now what they’re doing is adding to it. How practical is that? From your experience, how is that going to work, to have people file their tax returns by phone if the system is not working and people can’t get through to the Canada Revenue Agency?
Mr. Ferguson: We didn’t look at that part of the system. We were looking at people trying to connect and people trying to get an answer.
What we would have to do is look at whether it is part of the same telephone infrastructure or a different system, those types of things.
In this case, when they were blocking 29 million calls and you had a 36 per cent chance of getting through, clearly this system was not working the way it should have been working for people trying to get through.
What they are going to do with the other system, I don’t know what that’s going to be, but clearly on this one, they have a long way to go to get this system to work the way it should be working for people who need an answer to their question. People have to call multiple times to get through to an agent.
Canada Revenue Agency was also counting as a successful call if your call was directed to the automated system. So if your call was picked up by the automated system, that was determined to be a successful call. But we found that a large percentage of them didn’t even get through the menu. People hung up before.
Senator Marshall: Right. I’ve used the system myself. You can’t get through to the Canada Revenue Agency.
Mr. Ferguson: They considered that to be a successful call because it was picked up by the automated system. What we said was that a call has to last at least a minute on the automated system before you can even think that it might have been successful, but they were counting any call that connected.
I’ll ask Mr. Dompierre if he has anything to add.
Martin Dompierre, Principal, Office of the Auditor General of Canada: They also had calls at night, so if the service was not even operational, calling in and you were getting into the automated system and after 20 seconds you hung up, that was considered a successful call. Even during the weekend, when it is not peak season and there is no service provided, these calls were considered to be successful.
Senator Marshall: I think all of my calls would have been considered successful.
Mr. Dompierre: We estimated a minute. To listen to the automated message and to make a decision to pursue by pressing the next button takes about a minute, so we considered more than a minute would be reasonable to be considered to have received a service to make a decision from going forward or hanging up the phone.
Senator Marshall: For Phoenix, when you talk about the $295 million that the government is owed by its employees and the government says it owes its employees $228 million, how good are those figures? They’re not your figures; you’re getting them from Procurement Services Canada, aren’t you?
Mr. Goulet: We’re getting the information from the Treasury Board, who went out to all 101 departments and asked for that specific information. They did the exercise three times, so we have good confidence in the numbers they have provided, and they are doing it again.
Senator Marshall: But how reliable would those numbers be if they have all these pay requests that are still in the queue and are not dealt with yet?
Mr. Goulet: Because the department is aware of the issues as they pertain to their own specific employees, so they can go and investigate that information. It is also done through the financial system and not only through Phoenix or through the HR system.
Senator Marshall: Will that affect the opinion on the public accounts?
Mr. Ferguson: So it is estimates, but as you can see, by the time you say overpayments and underpayments and you offset those two things, it’s not a large amount from the point of view of the opinion on the financial statements. Our materiality is significantly higher than that, so it didn’t affect our opinion.
Again, we attached part of our comments to our opinion on the financial statements. We indicated the work we had to do. At the end of the day, you’re still talking about many people that were affected, even if the payroll expense in the financial statements was more or less correct. Those two things can totally offset, as you know, but the payroll expense can be found in the financial statements.
Senator Black: Thank you so much for the work you’ve done here and thank you for bringing to folks’ attention these particular issues.
The CRA behaviour is at best arrogant and misleading. What you have presented to us today is simply misleading, not from your point of view but from CRA’s point of view, and we should be demanding better than that.
When I look at your testimony today, sir, in paragraph 21, you say that the CRA, in this case, and also the Phoenix crowd, have committed to taking corrective action. So the CRA has committed to taking corrective action, in your view. Do you have confidence in that statement?
Mr. Ferguson: Well, what our process is from this point forward is CRA also prepared an action plan that they would have given to the Public Accounts Committee. This is part of why I am very pleased to have this meeting with this committee, for example, because I think the only way there is going to be true, corrective action is if there are committees of Parliament that are calling these departments forward and saying, “Tell us what progress you are making. Show us you are making progress. Tell us how we know you are making progress.”
It’s not going to happen because we did an audit. It’s not going to happen because they tell us they are going to do it. It’s only going to happen through committees like this providing the proper oversight of these departments to make sure they know they have to implement and correct them.
Senator Black: Thank you for making this so clear to us.
Senator Eaton: Gentlemen, CRA came before us, I think before Christmas. They kind of blew our questions out of the water because a lot of the facts that you outline so well — answers only one third of the calls; inaccurate information 30 per cent of the time — and they just gave us talking points, patted us on the head and did not really get down to it. We are very proud of the fact they’ve received more money to go after big companies or people who are big tax cheaters, but they did not answer our questions about why they were giving bad answers or why they weren’t answering the calls. It’s really shocking, when I read your report and the information.
How can we follow up? Are you going back to do another audit? Who is going to keep their feet to the fire? They come before this committee, and they don’t answer our questions. There doesn’t seem to be many repercussions. They get more money, sure, to go after companies like Loblaws in the Bahamas, but that’s not answering the small-business owners’ questions or the doctors’ with all these tax loopholes they are closing.
How do we keep their feet to the fire? Does it call for another audit? How to we make them pick up their socks?
Mr. Ferguson: I actually think this audit lends itself quite well to being able to track whether they are making progress or not. We have provided a lot of analysis. They blocked 29 million calls out of roughly 53 million or 54 million calls, so they should be able to tell you how many calls they are blocking now versus how many they are getting. What is the average number of times a person has to call in the course of a week? We have included a lot of numbers.
Senator Eaton: Will they keep those numbers, or will they just say, “Well, it has improved; we have hired three more people to take the calls”? How can we get them to — or have you set up systems that they have to calculate?
Mr. Ferguson: We have done all the work in terms of how to do these calculations. They have all of the data, so it would be very easy for them to just recalculate the types of analyses —
Senator Eaton: And keep track.
Mr. Ferguson: — on a regular basis and keep track, using exactly the same type of analysis we did. They should be able to use that to demonstrate to people they are actually making progress.
If I were in their shoes, that’s what I would be doing. I would be using all of these numbers —
Senator Eaton: I’m agreeing with you, but I’m laughing because I’m not sure that just because you have set up the system, they will bother to do it.
Mr. Ferguson: That’s what I think they should do. Let’s put it that way.
Senator Eaton: Thank you. That’s a very tactful reply.
Mr. Ferguson: Again, we have given them some ways —
Senator Eaton: The tools.
Mr. Ferguson: Right, for letting people know whether they are making progress. To me, that’s what they should be doing.
Senator Neufeld: Thank you, gentlemen. Most of the questions have been asked. The part that still bothers me a lot is that when I see your tests for accuracy — they were inaccurate 30 per cent of the time, but they publicly say 6 to 20 per cent — the CRA answered only 36 per cent of the calls its call centres received between March 2016 and 2017. It reported publicly that it answered 90 per cent of the calls.
Actually, it’s a bit disgusting that you have a tax department that gives inaccurate information to people 30 per cent of the time. It’s unbelievable to me that there are poor people who find out their taxes are done wrong, then somebody comes back and does audit on them, and they are bad people. But nothing happens here.
You can say, “We’re answering 90 per cent of the calls.” No repercussions that I know of; at least, I have not seen in the paper where somebody has lost their job. What I did see in the paper is that they are getting big bonuses. That’s what I see.
I’m the public. My God, it’s unbelievable. Maybe it’s different people. Maybe they did fire some people, and maybe these are new people coming in. I have a sense that it’s all the same and that we would still, with something as bad as what this is about with CRA — lying to the public, lying to government, lying to the people responsible for government about how well they have done, and those kinds of things — and take their $35,000 bonuses and walk away, and they’re laughing. I agree with some of the things that have been said.
How do you stop that? I appreciate you say that it should continue to come to the committee. I’m okay with that, but the committee can’t say, “Well, you’re going to have to get rid of some people.” That’s usually what gets people on track and working at their job. But nobody loses their job.
The public has to be seeing the same thing and wondering, “What in the world is going on here? All I have to do is go to work for CRA. I cannot tell the truth or I can actually make the numbers look like I’m telling the truth. I’ll get a big bonus, and who cares?”
Do we have to take this and do this constantly, as you were saying with the committees? I appreciate you’re saying the committees have to do it, but how is this done? Their political masters have to do something. Maybe they need to be pressured, whoever they are.
The Chair: Any comments?
Senator Neufeld: I’m not saying this is something new with who is there now. Obviously, these kinds of things have been going on for probably a long time, because they are ingrained in the system by the look of it.
Mr. Ferguson: If I can, I’ll make just a couple of comments.
One of the things that disturbs me, system-wide, is that this type of problem about public reporting is not unique to this audit, as I said earlier on. We have seen other departments do it. What disturbs me is that departments aren’t learning from our other audits to say, “Well, look, when the auditors come in, they are looking at our performance numbers and doing so from the point of view of the customer being served, so we better look at what we are reporting.” They don’t seem to be learning that lesson yet. Hopefully, as departments start to hear some of these comments, they will start to learn the lesson that they need to be measuring their performance from the point of view of the person receiving the service.
The other thing I want to mention in terms of the 30 per cent error rate is that we couldn’t ask them very complex tax questions, because to do that, you would have to give them a social insurance number. As soon as they did that, they would know that it was a test.
So we asked them generic questions. We have one of them in Exhibit 2.6, just above paragraph 2.49, is:
I’ve read someplace that I have to keep my receipts and stuff on my rental property ... so how long do I have to keep the purchase papers for?
The correct answer should be “indefinitely,” or they should have referred the question to a more senior agent to answer it. Sixty-six per cent of the time, we got a wrong answer to that question.
So not only do they have a lot of work that they need to do in terms of being able to answer people’s calls, but they have a lot of work they need to do to monitor and make sure they are getting the right answers. Their agents knew, for the most part — many of them — because CRA did have a quality assurance program in place to test agents’ responses, but the agents often knew that they were being monitored. They recognized the voice of the person asking the questions, or the phone would light up and say that the call was coming from a testing number, and they knew what that testing number was. So they knew their answer was being monitored.
When their answer is being monitored, they are much more likely to go into the computer system to get the answer, to give the person an answer. Therefore, their accuracy rate goes up simply because they know they were being tested. That’s why CRA was coming up with an answer that it was an error rate of 5, 6 or 7 per cent when, in fact, when you do a test and they don’t know where the call is coming from and think it’s a taxpayer and not a test call, the error rate was 30 per cent. And we’re not the only ones that found a 30 per cent error rate. Other people doing a similar test have found that 30 per cent error rate as well.
Senator Neufeld: Well, it’s pretty disheartening that our system is broken. I call it broken. It’s broken. Thank you.
Senator Pratte: I very respectfully disagree with Senator Eaton. In fact, the CRA people did have one answer to all of our questions. They did answer, but it was always the same answer. That answer was that every one of those problems would be solved once they got this new magic phone system that they had just bought or that they would buy.
I ask you is that the only issue, that is, when they will get this new phone system that they will install I think in the spring or something, will that problem be solved? Is this only a technology problem or is there something deeper here?
Mr. Ferguson: Well, obviously, we identified that there were a number of problems, training being one of the problems, monitoring agents to make sure that they are responding the right way. Again, all of the agents were very courteous and there was no problem from that point of view. But the agency needs to make sure that the agents are getting the training that they need.
Fundamentally, to your question, as an auditor, we always wait to see, and we wait until we go in and look at what is done before we give an opinion. It’s very nice that they say this new system is going to fix the problem. We have seen other systems, I guess, that have been less successful at fixing problems. So hopefully they will be able, right from the very beginning, give you good information about how the system has improved their performance from the point of view of the person placing the call.
Senator Pratte: Thank you.
Senator Marshall: I notice in all your reports that the Canada Revenue Agency provided responses to your recommendations and so did the department for the Phoenix system. But when I read the responses sometimes, I have to roll my eyes because they say things like — and this is the one about the telephone system. You’re saying you should improve access, give them information on how long they have to wait. So the agency agreed and then they say that the Canada Revenue Agency’s aging call centre technology does not allow it to automatically route incoming calls. But when you read it, you think to yourself, well, that’s their responsibility to upgrade. They have this problem because they haven’t ungraded their system, but they make it sound like it’s not really their responsibility.
When you get their responses, do you roll your eyes at some of the responses too, like I do?
Mr. Ferguson: What I’ll tell you is that when we receive responses, we look at them and often we will go back and talk to the department about their response. If we feel that it’s perhaps not fulsome or clear, sometimes they will change it at our suggestion and sometimes they won’t.
Senator Marshall: And then you would put it in.
Mr. Ferguson: We put their response in as they want us to put it in.
Senator Marshall: You will be looking at the implementation of the Phoenix system. Are you going to be auditing the contract with IBM?
Mr. Ferguson: No, not the specific adherence to the contract. That’s not part of what that audit is going to cover.
Senator Marshall: Would you look at what they are paid? They are back in now providing additional services. It’s their system that was implemented. Now they are also in there helping to fix their system, and they didn’t deliver the good system to begin with. Will you be looking at that aspect of it?
Mr. Ferguson: Again, I just want to specify that the system was PeopleSoft. The PeopleSoft system is actually an Oracle product. IBM was the consulting company that put it in place, that implemented it, that got it all set up and running, but again according to what they were asked to do by the department.
Senator Eaton: Is that what you’re auditing, though? Are you going to look at what they were asked to do to see if that was the proper thing, that it covers everything?
Mr. Goulet: We are looking at what they are supposed to deliver in the confines of the contract. However, I’ll just refer back to what the deputy minister said in a presentation to the Public Accounts Committee where she specifically mentioned that IBM was only a service provider, but the project management of Phoenix was all controlled by the public servants.
Senator Eaton: That’s the problem.
Senator Marshall: Where is the money coming from that is paying for all these additional employees and all the additional consulting fees, all the additional costs? Is that budgeted for somewhere?
Mr. Ferguson: We identified that departments, including Public Services, had identified $540 million. Some of that had come from additional funding from the centre. Some of it was coming from departments’ own budgets.
Originally the intention was that this system was going to result in a reduction of costs of $70 million a year. So the Treasury Board decided they weren’t going to pull that money back out of departments’ budgets and they were going to leave that for departments. So there were a variety of ways, but it’s $540 million that wasn’t supposed to be spent on processing payroll that is being spent on processing payroll.
[Translation]
Senator Forest: My understanding is that, in your second audit, you will be examining the tendering process, in other words, the project specifications and the contractual obligations, as well as looking at whether the suppliers and companies met the terms of the call for proposals and fully discharged their responsibilities. Is that correct?
Mr. Goulet: We are looking at the contractual relationship between the department and IBM, but we are not examining each deliverable in detail, because there are literally thousands of deliverables involved.
Mr. Ferguson: As part of the audit, we are not examining the entire call for proposal process.
Mr. Goulet: No, not the call for proposal process.
Senator Forest: The contractual requirements that were defined in the project specifications and obligations.
Mr. Goulet: In the course of the audit, we are looking at that aspect, but that is not to say it will appear in the report. As the deputy minister mentioned, if the systems integrator had simply been a service provider, public servants would have been responsible for managing the project. For the purposes of the audit, what merits attention is their decision-making process, not the contractual relationship with IBM. At the end of the day, the department decided to fully assume the risks of the project, if that was the case.
Senator Forest: From your experience, when you look at the federal government, which is made up of some 300,000 employees — I have no doubt that the vast majority of them wish to provide high-quality service to the public. In terms of corporate culture, something that strikes me as basic is the seeming lack of accountability for the end result. At the end of the day, a new minister was appointed because of the tremendous problems. My sense is that, when recommendations are made, it is difficult to state clearly who is responsible for the end result.
Mr. Ferguson: All the departments look at the program from the standpoint of Canadians. Of course, the same kinds of problems have been identified in many departments as part of various programs. Our message to all departments is that it is important to examine and deliver each of those programs from the point of view of Canadians, in order to understand how they interact with the program. What matters is understanding those Canadians’ needs and taking their experiences into account.
Senator Forest: Thank you kindly for all the information you have provided to us. It is greatly appreciated.
[English]
The Chair: Before we close, I have a few questions to ask about both the CRA and Phoenix.
I come from a small town in New Brunswick called Saint-Léonard. I know that when people are not paid, it impacts their livelihood and their quality of life. I have had representations by numerous people during round tables that their little line of credit that they had at the bank is gone. They have gone back to try to increase it or have another one in order to just put food on the table or pay their mortgages, and it’s not happening. Some have emptied their bank accounts. Some have seen their fathers and mothers putting money on the table to help their siblings. I’ve had grandfathers and grandmothers ask me, “What are you doing?”
I know that Senator Neufeld has touched on this a bit. I want to share this with the Auditor General. I have had the private sector tell me, “If it would be the private sector, we would be in front of the courts and we would probably be blasted from coast to coast to coast.”
We see that.
[Translation]
Mr. Ferguson, 46 departments and agencies rely on the Miramichi pay centre, and 55 use Phoenix.
[English]
— inside their own shop.
It all came live in February of 2016. We were told it was going to be fixed in October 2016. We were told it was going to be fixed in June of 2017. We were told everything will be organized and finished and solved in November 2017. Now we’re starting February 2018, and where are we? We have more problems than solutions. It’s putting a lot of pressure on our people, on people working for our government. It represents almost 50 per cent of our workforce. It doesn’t take a rocket scientist.
[Translation]
That is 150,000 federal public servants out of 295,000, roughly half of the public service.
[English]
It’s roughly 50 per cent of our employees. They are professionals. They are hard-working. Sure, we have some questions in certain areas.
The 55 departments that are using Phoenix, and they have somewhat a handle on what is happening, could they not share their best practices so that for those employees in the other 46 departments could be part of solving the problem?
Mr. Ferguson: Even the 55 departments have problems with making sure that all of their employees are paid and paid on time. We are one of the 55 departments ourselves. We have some people that are overpaid and some people that are underpaid. We are still trying to resolve some of those issues ourselves in our own department. Now, our issues are fewer than many of the other departments, but we still have them.
I don’t know whether there is a clear understanding of what departments are doing that is working and whether that information is being shared from one department to another. Again, I think that is something that the department could explain to you: What they are doing in order to collect that type of information and share it, whether it’s within the 46 departments that are getting their information processed to Miramichi or whether it’s within the 55 departments or it’s from the 55 to the 46. I think that’s one thing they should be doing: making sure they know whether anybody has figured out a way to solve some of these issues. If so, are they making sure that all of the departments know about those things?
The Chair: With your experience, and from what you have seen in terms of the problems we have now, can you give us a guesstimate of the time frame, or will it ever be solved?
Mr. Ferguson: Again, if you go to the example of Queensland in Australia — by the way, they were not using the PeopleSoft software. They were using a different piece of software, and they still had similar types of problems. But if you look at that situation, in order to get most of their problems resolved, it took a long time.
As I said before, I think what the department, Public Services, is primarily working on is trying to get to the point where they can get people paid the right amount, on time, and get a pay request processed within a reasonable period of time. But to get there, they are not going to be able to generate the savings that the system was supposed to be generating. In fact, they will probably be spending more money to process pay than they were under the old system.
I think that, again, there are going to be two aspects to this. The first aspect of getting people paid the right amount on time is what will get the Phoenix system out of the news, but it won’t mean that the Phoenix system is delivering what it was supposed to be delivering in the first place.
The Chair: That brings me to this question: What did you learn from these meetings with the Australian officials that we could recommend to the providers here in Canada?
Mr. Goulet: We have passed on that message to the department.
I went to Australia with one of my directors. They were very swift to react; they were very proactive. So we indicated that within four months they had a comprehensive plan in place. Within two months, they were fully seized of the problems.
They had a lot of individual measures. For example, although it didn’t happen right away, the Department of Health decided to forego all overpayments of $200 or less. This reduced considerably the number of pay action requests that had to be processed and also provided some well-deserved moral boost to the employees that were suffering.
They had a formal engagement with the union where the government committed itself to making sure that the employees would not suffer financial consequences, regardless of whether they occurred now or they occurred after tax season or whenever.
There were some very strong messages sent by the Queensland government to its staff. When you compare it to what is happening in Canada, this is where we see a little bit of discrepancy.
The Chair: We would appreciate it if you could send us more information, in addition to the answer to the question we have asked.
I’m going to finish with two little questions. Do you think that some of the problems with Phoenix could have been avoided had the Canadian government consulted with Australian officials?
Mr. Ferguson: For us to best reflect on that, we will have to look at the whole project from beginning to implementation and what has gone on since implementation. One of the critical events after the problem started to arise was that, again, Public Services and Procurement Canada didn’t recognize the size of the problem they were facing. Their original message was they were going to have it all fixed by October of 2016. If they had recognized it earlier and gotten in touch with the Queensland folks at that point, perhaps they would have started preparing a more comprehensive plan earlier on.
It wouldn’t have meant that they would have gotten the problem solved within six months or a year because the extent of the problems was going to be such that it was going to take a long time. But fundamentally they fell further behind by not recognizing the size of the problem they were facing early enough.
The Chair: Therefore, we know there are some financial consequences and there is hurt out there among almost 50 per cent of our employees in the federal government.
The steering committee and all senators will certainly look into the problem of Phoenix and the CRA. In your experience, if we pursue, within a reasonable time frame, to try to get some information on what caused the problem, and if there will ever be a solution for paying our employees, who should we ask to come to this table to give us answers?
Mr. Ferguson: I think the two departments that we specifically identified in the audit were Public Services and Procurement Canada, who was responsible for the implementation and Treasury Board Secretariat in terms of their being part of the governance process. You might also want to ask one of the large departments or one that is most affected by it; I’m not sure which one. We would have to go back and think about that, but they might be able to give you their point of view of what their experience is and what they are going through to try to get their employees paid the right amount. Whichever department that would be, they weren’t responsible for the project, the implementation, but they might be able to give you a better idea about what departments are going through to try and resolve these issues for their employees.
Those would be my suggestions.
The Chair: Thank you, Mr. Ferguson.
Before we close, honourable senators, does the chair have consensus with the recommendation we have made to the steering committee that we continue for a reasonable number of meetings so that we can bring in additional witnesses on Phoenix and on CRA?
Hon. Senators: Agreed.
The Chair: Thank you.
[Translation]
Senator Forest: I agree with that, given how important the issue is. I think we should get more information once the second audit is complete. That would give us a better sense of the overall situation. We could then invite the appropriate individuals, those responsible for identifying and implementing solutions, to appear before the committee. The second audit would provide some valuable insight.
The Chair: That’s not until May. We could probably plan for the near future.
[English]
When we get the second audit from the Auditor General, we could bring them in again.
[Translation]
Senator Forest: We could then focus on the Auditor General’s report and look at the measures taken further to the recommendations.
The Chair: Precisely. There would be two parts.
[English]
There will be a two-pronged approach on this.
I will be accused of making a personal comment, but Mr. Ferguson, I’ve read that you were not bilingual but I want to tell you something, sir.
[Translation]
It was nice to see you. You are fluently bilingual, in my view. You’ve done a wonderful job.
[English]
Thank you very much to you and to your team. There will certainly be another opportunity to call you back as we progress on the two subject matters that you identified this evening.
(The committee adjourned.)