Public Accounts

The House of Commons Standing Committee on Public Accounts met to study the Auditor General of Canada's report on modernizing the federal government's pay system. Appearing were Auditor General Karen Hogan; Deputy Minister Arianne Reza and Assistant Deputy Minister Kim Steele from the Department of Public Works and Government Services (PSPC); and Chief Human Resources Officer Jacqueline Bogden and Senior Assistant Deputy Minister Vidya ShankarNarayan from the Treasury Board Secretariat (TBS).

Auditor General Karen Hogan stated that the audit found both TBS and PSPC were managing the HR and pay transformation project to ensure accurate pay once the new Dayforce system launches, but identified three key risks. She noted that TBS's progress on simplifying pay rules has been slow, forcing PSPC to customize Dayforce at an estimated additional cost of nearly $4 million per year, and that over 233,000 pay transactions remained unresolved as of September 2025, affecting over 133,000 public servants. She also warned that PSPC cut three years from the project schedule in January 2026, shortening the time to fix existing issues and prepare for transition, and recommended external oversight and that the cost estimate for Dayforce, currently $4.2 billion, is missing the costs for all departments and agencies to transition.

Deputy Minister Arianne Reza acknowledged that the failure of the Phoenix system was due to underestimating the challenge of simultaneously changing the service delivery model and implementing a new system, but assured the committee that PSPC is on track with Dayforce. She reported that the total number of outstanding pay transactions has decreased by 66% since its peak in January 2018 and that pay accuracy has reached 98.6%, and stated that PSPC agrees with the Auditor General's recommendations to improve backlog elimination, address service standard gaps, and develop key performance indicators. She explained that the shortened three-year schedule aims to reduce the cost and complexity of running two systems in parallel, but that the final cost of the project is still being determined, and she could not provide a specific date for clearing the backlog of cases over a year old, though the goal is to have zero backlog before transitioning to Dayforce.

Chief Human Resources Officer Jacqueline Bogden stated that TBS welcomes the Auditor General's recommendations and is working to simplify pay rules, but noted that a significant portion of this work requires negotiation with 17 bargaining agents representing 28 collective agreements. She acknowledged that progress has been slow but said TBS is making changes within its own authority and is discussing four specific areas with unions in the current round of collective bargaining. She disagreed with the suggestion that a lack of sustained ministerial attention caused the slow progress, stating there is 100% ministerial support, and emphasized that TBS is also leading efforts to standardize HR and pay delivery across departments and to support readiness for the transition to Dayforce.

Senior Assistant Deputy Minister Vidya ShankarNarayan explained that the new Dayforce system uses an agile approach, testing standardized processes with three vanguard departments before full implementation, unlike the waterfall approach used for Phoenix. She described the accessibility passport as a new digital tool that allows employees to request workplace accommodations once, which then follows them when they switch departments, with 55 departments already onboarded. She also noted that standardizing HR processes across the government is a significant culture change, requiring training and readiness efforts in each department to ensure managers and employees understand their HR and pay responsibilities.

Assistant Deputy Minister Kim Steele stated that the plan for transitioning to Dayforce involves a phased, wave-based approach, starting with a very small organization and testing before moving to larger departments, with the ability to pivot if things are not going well. She explained that every piece of functionality will be tested and that parallel pays will be run in both Phoenix and Dayforce for all employees to ensure accuracy before onboarding. She also noted that PSPC is consolidating 30 separate HR systems into one, MyGCHR, to increase standardization and clean up data in advance of the transition to Dayforce.

During the meeting, members questioned witnesses on cost overruns, the backlog of pay cases, and the risks of the shortened timeline. A member noted that the $1.5 billion allocated in budget 2025 for pay modernization raised questions about whether costs would exceed the $4.2 billion estimate, and the deputy minister offered to provide a written breakdown of expenditures. Another member asked about a $29 million contract with McKinsey to streamline pay centre operations, and the assistant deputy minister defended the contract, stating it improved consistency and accuracy. The committee also debated and voted on a motion to invite officials from Employment and Social Development Canada, TBS, and PSPC, along with former technical lead John Ostrander, to discuss the management of benefits payment modernization, which was adopted.