Final Report

Corporate Audit and Evaluation Branch
October 2008

Table of Contents

• Executive Summary
• Introduction
• Focus of the Audit
• Findings, Recommendations and Action Plans
  
  
  • 1.0 Processing of Pay Actions
    • 1.1 Timeliness
    • 1.2 Accuracy
    • 1.3 Compliance
    • 1.4 System Access Controls
  • 2.0 Training and Support
  • 3.0 Workload Management
    • 3.1 Performance Measurement
    • 3.2 Workload Measurement
    • 3.3 Quality Assurance
• Conclusion

Executive Summary

Background : The Canada Revenue Agency (CRA) wants to ensure that employees are receiving the compensation they have earned in accordance with their respective collective agreement or Public Service Terms and Conditions of Employment Regulations.

In fiscal year 2002-2003, the Agency created a plan to modernize and centralize compensation services through its’ Compensation Service Delivery Renewal Project (CSDRP). One of the objectives of the new compensation model was to continue to improve the accuracy and timeliness of payments to employees. The Board of Management mandated the project, recognizing a need for standardized service levels. Employees and managers are now served from two Compensation Client Service Centres (CCSC), Ottawa and Winnipeg. Prior to the reorganization, there were 30 pay offices throughout the regions. The new compensation model will be fully operational by April 2009. A control framework was developed and implemented with the goal to improve consistency of compensation processes.

The Corporate Administrative System (CAS) continues to be used to process pay actions and Public Works and Government Services Canada (PWGSC) issues the payments through the Regional Pay System (RPS). The CCSCs are responsible for inputting compensation related transactions into CAS and ensuring that information is consistent with RPS transactions. As part of an approach approved by the Agency, some responsibilities for preparing compensation transactions have been shifted from the former 30 pay offices to CRA managers.

Objectives: The audit objectives were to determine whether the controls in place for managing and processing compensation transactions were adequate and operating as intended, and whether pay actions were timely, accurate, and in compliance with policies, regulations and relevant collective agreements.

The examination phase was carried out between July 2007 and March 2008 and covered pay actions from October 2006 to June 2007.

This audit was conducted in accordance with the International Standards for the Professional Practice of Internal Auditing.

Conclusion: The audit found that the majority of key management and processing controls are in place. A framework that identifies all processes and responsibilities has been put in place and its implementation has been reviewed regularly. However, processing pay actions in a timely and accurate fashion while implementing this significant organizational change has been a challenge.

The tests conducted as part of the audit showed that a large percentage of pay actions had not been processed in a timely manner with the most significant contributing factor being late paperwork submitted by CRA managers. The majority of these actions resulted in late payments to the employees. The tests also indicated accuracy rates that were at the maximum tolerable level of what management expected in terms of quality.

To address these weaknesses, Compensation will need to continue to train their staff, refine workload management processes and raise awareness among CRA managers regarding the timely input of pay requests. Any improvements in the initial capturing of data will have a direct impact on reducing timing delays in issuing final payments.

While progress has been made to the development and implementation of measures to assess some elements of performance, these monitoring measures do not give a complete picture of compensation activities. Compensation will continue to develop processing standards to assist in measuring performance.

Finally, improvements are also required in quality assurance procedures. A control framework was developed to support the controls for daily processing of transactions including elements of quality review but not all these elements have been effectively implemented. The review function must include direction on verification guidelines, a solid quality assurance program and a process for post payment review. These factors will contribute greatly to improving the accuracy of processing compensation transactions.

Action Plan: HRB agreed with the recommendations provided as a result of the audit and they have developed action plans to address the findings.

Corporate Compensation will continue to improve the functionality of the Compensation Help Line System (CHLS), a tool designed for tracking and monitoring pay actions, and determining workload volumes in the Compensation Centres.

Corporate Compensation has committed to regularly confirm with staff the use of verification checklists and how to reflect and correct errors to support improvements in accuracy levels.

Finance and Administration’s (F&A) Financial Reporting and Accounting Division has established a post payment review process. As of September 2008, F&A has agreed to accept the transfer of Section 33 activities. F&A will continue with the statistical sampling of pay actions, and the results will be reviewed by Compensation on a quarterly basis to identify trends, target high risk transactions, and take corrective actions where required.

Corporate Compensation is organizing and updating training material, and a training plan will be developed by December 2008. As well, a training package on compensation is being developed and will be added to the Compensation Web Resource Guide. The training package is also being considered for inclusion in the MG Learning Program (MGLP), one of the learning tools used to familiarize Agency managers on various human resources responsibilities. The target date for completion is March 2009.

Finally, Corporate Compensation in consultation with the CCSCs, is developing a Quality Review program for compensation for implementation in 2009-2010. The Winnipeg CCSC has agreed to pilot it. The results will support error trending and standardization of service levels.

Introduction

Section 50 of the Canada Customs and Revenue Agency Act, April 1999, established the Canada Revenue Agency (CRA), as a “separate employer”, under the Public Service Staff Relations Act, with the authority to develop its own human resource management system. This authority enabled the Agency to develop its own compensation policies, systems, and procedures. The Agency wants to ensure that employees are receiving the compensation they have earned in accordance with their respective collective agreement or Public Service Terms and Conditions of Employment Regulations.

In fiscal year 2002-2003, the Agency created a plan to modernize and centralize compensation services through a project called the Compensation Service Delivery Renewal Project (CSDRP). Compensation services have been reorganized and centralized in two Compensation Client Service Centres (CCSC), one in Ottawa and one in Winnipeg. Prior to the reorganization, there were 30 pay offices throughout the regions. The new compensation model is organized around processing transactions by pay type (pay period sensitive, regular processing, and miscellaneous processing) as opposed to other government departments and agencies that continue to distribute workload by pay list. A control framework was developed and implemented with the goal to improve consistency of compensation processes.

Serving over 40,000 employees working across Canada, the CCSCs process an average of 282,000 pay actions each year, or 5,438 per week. For the fiscal year 2006-2007, the overall expenditure for personnel was $1.99 billion, which represents 74% of the Agency’s total operations expenditure. In the fiscal year 2007-2008, the SP Conversion and the salary updates following the new conditions of the collective agreements for approximately 16,000 employees added a considerable workload to compensation staff.

The Compensation Division, located in the National Capital Region, forms part of the Workplace Relations and Compensation Directorate, in the Human Resources Branch (HRB). Compensation Division is responsible for the development of CRA compensation policies, systems and procedures as well as monitoring the work of the two CCSCs.

The Corporate Administrative System (CAS) continues to be used to process pay actions and Public Works and Government Services Canada (PWGSC) produces the payments for the employees through the Regional Pay System (RPS). The CCSCs are responsible for inputting compensation related transactions into CAS and ensuring that information is consistent with RPS transactions. As part of an approach approved by the Agency, some responsibilities for preparing compensation transactions have been shifted from the former 30 pay offices to CRA managers.

Focus of the Audit

The objectives of the audit were to determine whether the controls in place for managing and processing compensation transactions were adequate and operating as intended, and whether pay actions were timely, accurate, and in compliance with policies, regulations and relevant collective agreements.

Methodology included a review and analysis of a statistically valid random sample of pay actions covering pay, benefits, deductions and allowances as well as a review of directed and targeted samples of high risk pay actions such as overpayments and emergency salary advances. Interviews were conducted in both CCSCs, Compensation Division, Finance and Administration Branch (Financial Reporting and Accounting Division), CAS Information Technology Branch (ITB), and PWGSC. Also a manager’s questionnaire was used to solicit their input on compensation issues.

The new Compensation Service Delivery model was implemented in July 2005 and a client satisfaction survey was administered in 2006. Although results indicated a low level of satisfaction, this topic was scoped out of the audit as there was an expectation that HRB would follow up on this issue. Executive Compensation, Shawinigan and Jonquiere files were not included in the scope of this audit as they were working within the pay list model during the audit review period.

The examination phase of the audit took place from July 2007 to March 2008. The period under review covered pay actions processed from October 2006 to June 2007. During the course of the audit, significant changes took place within the Compensation Program such as reorganizations of work processing, workload transfers and structure of reports. Although many of these changes occurred outside of the audit review period, relevant information is included in the body of this report.

This audit was conducted in accordance with the International Standards for the Professional Practice of Internal Auditing.

Findings, Recommendations and Action Plans

1.0 Processing of Pay Actions

One of the audit objectives was to determine how well the compensation area was processing pay actions. In order to make this determination, the audit was designed to assess whether the proper processing controls were in place and operating as intended. The audit was scoped to determine whether pay actions were timely, accurate, and in compliance with policies, regulations and relevant collective agreements. In addition, the audit reviewed system access controls to ensure they were in place and monitored.

The control framework implemented as part of the reorganization of the new compensation processes subjects all pay actions to a 100% verification. Although the new compensation service model was introduced two years ago and is not yet mature, it was expected that the error rates on pay actions would be low and the level of compliance high. HRB established a tolerable error rate of five percent. This represents the error rate they would expect to find on pay actions after they were processed and independently verified by compensation staff.

Audit tests were designed to assess the effectiveness in processing pay actions in terms of timeliness, accuracy and compliance to policy and procedures. These tests were performed on a statistically valid random sample of pay actions as well as a directed sample for higher risk transactions. Reviews were completed on the associated compensation pay files.

Random Sampling Test

To test whether post payment transaction errors were within limits expected by HRB, a random sample of 258 files from all pay actions was selected, covering the period from October 2006 to June 2007. This sample size was chosen in order to have a confidence level of 95% with a precision level of +/-4%. [Footnote 1] Compensation pay files associated with each sample were also reviewed to determine if they were in accordance with the policy on retention of employee information.

Directed Sampling Test

Information gathered during the planning phase of the audit indicated that there was a higher risk of errors occurring for actions that initiate, change, or stop the payment of regular pay and create additional payments or entitlements or deductions (e.g., overpayment recoveries, salary advances, terminable allowances and performance payments). Therefore, 132 directed samples that included such actions were selected for review.

Results

Overall, most controls for processing were in place and in compliance with various policies. Results indicated pay actions were not timely, and were at the upper limit of the tolerable expected error rate for accuracy. Challenges were noted in the tracking and resolution of overpayments and in the adherence to the guidelines for direct keying of pay transaction into the RPS.

Although the audit was not designed to identify fraud, there were no indicators of fraud identified during the review of pay actions.

The following table demonstrates the results of the random tests.

1.1 Timelines

There are several key steps in processing pay actions on time. At the front end, managers must send paperwork to the CCSCs in a timely fashion to initiate the pay action. Managers and employees of CRA must be aware of their responsibilities in submitting all appropriate documentation to the CCSCs within established time frames. All documentation must be complete and all approvals must be in place. Finally, the CCSCs themselves must be well organized in order to process the high volumes of work.

The audit work sought to determine whether there were any issues with the timely processing of pay actions and then, if the cause was due to receiving paperwork late from CRA managers or from delays within the CCSCs.

The audit results show that 41% (+/-4%) of the pay actions reviewed had timeliness discrepancies. The causes for these discrepancies were broken down between late paperwork sent in by managers and employees, late processing by the compensation centre and issues related to multiple touch points. For the multiple touch points, it was impossible to identify if the problem was internal to compensation or external as many different people and areas were involved in the transactions.

The largest contributing factor, at 23% of the pay actions, was late paperwork being submitted by managers and employees. Only 5% of the timing issues were directly attributed to late processing within the compensation areas. The multiple touch points accounted for 12% of the files reviewed; the remaining 1% was related to late transfers of paperwork from other government departments.

These delays had a significant impact on employees being paid on time. Further analysis determined that 65% of the pay actions with late processing issues (i.e. 26% of the total files reviewed) resulted in late payments to the employees.

To identify the issues faced by managers in the field, electronic questionnaires were sent to a sample of managers across the Agency as part of the audit. A total of 258 managers received the questionnaire and 152 of them responded. Some of the questions were directly related to the problems managers have in initiating the paperwork for pay actions. The results clearly showed that managers continue to be challenged with the complexities surrounding pay actions and more specifically the difficulty they have in finding information on the Compensation Web Resource Guide (CWRG). They stated that they had many competing demands and needed immediate access to clear and precise data. Almost 90% of the managers responding to the questionnaire indicated they were not using the CWRG. Other managers indicated where they did use the Web tool, they felt it was not meeting their needs. This could have a direct negative effect on submitting paper work on time.

HRB has been taking steps to improve the Web tools for both managers and employees, and more specifically, to improve the navigation and ease of finding relevant information. Standard input times for managers are posted in the CWRG for all pay actions. These standards identify the minimum times required by Compensation in order to process transactions on time.

In an effort to raise awareness about the timely processing of pay actions, HRB issued a number of communications to the Agency Management Committee (AMC) and its members. These included a memorandum in October 2006 to provide information on time standards in place to allow the CCSCs to process pay actions on time and communications in March 2007 to identify areas within the Agency that were responsible for high levels of late paperwork. The impact of these communications may not have been realized due to the timing of the audit testing.

In December 2007, Compensation Division released a new version of the Compensation Help Line System (CHLS) designed to help the CCSCs identify problem areas related to timeliness issues. This new functionality should allow them to identify and pay particular attention to the areas with the higher number of difficulties.

Recommendations

Corporate Compensation should solicit input from CRA managers and compensation agents to identify areas of improvement for the CWRG with specific attention to placement of tools, navigation of the website, and relevant information regarding timeliness of processing pay actions, within established standards and policies concerning the Agency’s intranet guidelines.

Corporate Compensation, in collaboration with the CCSCs, should use the new functionality in CHLS to analyze trends and problem areas surrounding timeliness, build in steps to correct identified deficiencies, and monitor their progress.

Action Plan

Corporate Compensation will ensure that issues regarding timeliness of processing pay transactions and other areas of improvement continue to be a monthly agenda item for the Operations Working Group (OPWG) comprised of senior managers from HQ and both CCSC sites. Compensation will solicit feedback and suggestions for improvement to the CWRG from regular outreach sessions with managers. The CCSCs will continue to conduct a minimum of 10-15 outreach sessions per year.

N ew CHLS functionality was introduced allowing the tracking of late paperwork for priority transactions. Corporate Compensation will develop a quarterly report to help identify non-compliance. Corporate Compensation will report late paperwork statistics as part of its monthly performance reporting starting in September 2008. In June 2008, reporting and workload measurement tools were implemented to assist compensation managers in the CCSCs to assess workload capacity. Enhancements scheduled for fall 2008 will improve the ability to manage specific transaction types and ensure employees receive pay within prescribed timeframes.

1.2 Accuracy

As part of the control framework, Compensation Division has established specific controls to prevent errors while processing pay actions. These controls are designed to identify and correct errors while entering information and to identify and correct system conflicts prior to issuing payments.

One of the controls for preventing errors is the verification function in the CCSCs. Prior to posting transactions for payment in the PWGSC system, verification officers review 100 percent of the pay actions entered into CAS by compensation agents. Errors are recorded on correction sheets and sent back to the originating agents for re-entry.

After transactions are verified and corrected in CAS, they are sent for processing in RPS. System edits then identify any conflicts and an error analysis report (EAR) is sent back to compensation agents for correction. The audit noted that system controls for the EAR reports are in place and operating as intended.

However, even with 100 percent verification and the system checks, audit test results showed that the rate of errors was at the maximum tolerable limit established by HRB. The random file review identified that 13 of 258 samples or 5% of the pay actions selected between October 2006 and June 2007 had errors that resulted in incorrect amounts being paid to employees. Nine of these actions were in the amount of $500 or less, and four were greater than $5,000. The majority of these errors were found in pay actions for leave with income averaging, maternity/parental leave, and changes to rates of pay. File review also indicated that 17 of 258 samples, or 7% of the files selected had errors for pay actions outside of the review period. These were not included in the overall test results.

One factor noted during the file review was the inconsistent use of the verification checklist by verification officers. The checklist is used to ensure that agents have completely and correctly processed pay actions. Results from the file review indicated that they were not always being used to confirm mathematical accuracy of transactions or completeness of all actions. Some verification officers were using the checklists to confirm that the compensation agent had followed the necessary steps but not that the calculations were correct. Consequently, mathematical errors may not be detected.

At the time of the audit, F&A, with the assistance of Compensation Division, had begun plans to analyze completed pay actions to identify error trends. This would allow them to identify error free and low risk transactions. Compensation Division would then be able to reduce the amount of verification on these actions and increase verification on higher risk areas. The audit results from the directed sample test support this analysis - of the 132 high risk files reviewed, 7.5% contained errors that resulted in inaccurate payments to employees.

Recommendations

Corporate Compensation, in collaboration with the CCSCs, should confirm the use of the verification checklists and communicate this to all compensation staff.

Corporate Compensation should continue to work with F&A to establish and implement a formal post payment review process that includes error trend analysis and steps to identify and target high risk transactions.

Action Plan

In September 2008, Corporate Compensation’s Operations Working Group will communicate to staff on how to reflect and correct errors and will confirm with staff on a monthly basis the use of the verification checklists.

A formal post payment review process has been established by F&A. In January 2008 the CCSCs and Corporate Compensation began quarterly reviews of the F&A statistical sampling results in order to identify trends and target high risk transactions for more detailed quality review and corrective action. Effective September 2008, F&A has agreed to accept the transfer of Section 33 responsibilities from Corporate Compensation and they will continue to conduct the statistical sampling reviews. Corporate Compensation will conduct a review of the 100% verification process of transactions in the 4th quarter of 2008-2009 to determine if certain transactions should be reduced from the established 100% verification process.

1.3 Compliance

Appropriate policies, regulations and relevant collective agreements should be in place and followed. Key relevant information on the HRB website as well as existing policies and regulations for Corporate Compensation and the CCSCs were reviewed as part of the audit. The documentation in place is complete and compliant with the directives that CRA adopted from Treasury Board Secretariat (TBS).

The random file review results show that most pay actions are compliant with the rules. A compliance discrepancy of 9% (+/-4%) was noted during the review. However, the majority of the problem, at 6%, was related to the late issuing of the Record of Employment for staff temporarily or permanently struck off strength. This is a timing issue and is addressed in the recommendations under section 1.1 Timeliness. The remaining 3% was within the tolerable error limit set by Compensation.

The random file review was also used to examine basic information in employee files. Specific rules exist for the capturing of relevant tombstone information during the initial hiring. This information is used to support transactions throughout the career of employees and becomes increasingly important while processing transactions for staff that are leaving the Agency. Severance pay and retirement calculations are just two examples of the need for accurate information in the employee file. During file review, information such as birth certificates and marriage certificates were often missing from employee files. It was also noted that employee personnel information is not kept as a single unit and that different Human Resource areas were responsible for different components of the files. Proper location of file content was not clearly identified or easily tracked and could cause difficulties on employee departures from the Agency.

Another area reviewed was whether or not Compensation was following the guidelines established for directly keying transactions into RPS, the system used by PWGSC to issue all compensation payments. Specific rules are in place that allow compensation agents to access RPS directly in order to initiate pay actions (on-line pay), thereby by‑passing entry in CAS. These requests are monitored and approved by F&A. Compensation staff must fill in a template and select one of the listed reasons for generating the request. The audit found that compensation staff were using on-line pay for reasons other than those listed on the template. This placed undue pressure on F&A to approve transactions that were not within the guidelines and increased the risk to the Agency that inappropriate payments may be occurring. The use of RPS also requires parallel entries to be made in CAS which could lead to potential errors and time consuming analysis if the two systems are not properly reconciled.

The audit also reviewed the processes in place for tracking and clearing overpayments. Overpayments generally occur when employees leave the Agency and through errors or omissions their pay is not stopped on time. The audit performed an analysis of the historical data being tracked by F&A. The total number of overpayments for the fiscal year 2005-2006 was 1922 with a value of $2.2 million. Overpayments increased in 2006-2007 to 2258 with a total cumulative value of $2.7 million. As of February 2008, the cumulative total was over $3.0 million. Although the amount of overpayments represents a small fraction of CRA’s total payroll costs, a 36% increase over two fiscal years is significant. In addition, there are overpayment records that date back to 1999. Corporate Compensation has taken some steps to address this issue. For example, end dates for all pay actions that have specific termination dates must now be entered and Corporate Compensation is currently attempting to identify the older amounts with the intent of writing off any uncollectible balances. However, Compensation Division was not performing any analysis of trends or factors contributing to the overpayments.

Recommendations

Corporate Compensation, in collaboration with the CCSCs, should follow established guidelines for collection and retention of required employee documentation. This should cover all aspects of retaining permanent documents in the employee pay file.

Corporate Compensation, in collaboration with the CCSCs, should revisit the policy regarding the direct access to RPS by compensation agents, clarify the conditions for its use, communicate the results to compensation staff and F&A and monitor its implementation.

HRB should continue to work with F&A to establish a process to clear outstanding overpayments and to identify measures to prevent them from occurring.

Action Plan

Corporate Compensation will review the filing requirements by March 2009 and confirm adherence with the CCSCs.

By March 2009, Corporate Compensation through the OPWG will complete a review of the existing policy and in consultation with F&A will update the policy to clearly define exception circumstances when RPS should be used to complete pay transactions. The Winnipeg CCSC has provided Corporate Compensation with recommendations to amend the current RPS policy to expand the use of RPS in certain situations to avoid overpayments or to ensure that employees are paid on time.

The CCSCs have created specialized teams to manage overpayments. Corporate Compensation is reviewing progress on outstanding overpayments and will be analyzing data for trends to determine if any solutions can be found to reduce or minimize overpayments. By March 2009, Corporate Compensation will identify an acceptable percentage of overpayments. The acceptable overpayment percentage will be communicated to the Assistant Commissioner, HRB and approved by the Director General, Financial Administration Directorate in April 2009. F&A will continue to work closely with Compensation on the review of progress of the outstanding overpayments. Beginning in 2009-2010, Corporate Compensation will review overpayments on a quarterly basis to assure they remain within acceptable limits.

1.4 System Access Controls

System access controls should be in place to prevent and detect inappropriate use of the systems used to initiate and approve pay actions. Compensation Division has taken steps to ensure that system access controls are in place. They have established specific rules for segregation of duties with respect to approvals, input, processing and verification of compensation transactions. A manual spreadsheet is produced by Corporate Compensation and used to track dual roles in both CAS and RPS.

Most compensation staff are assigned either a role to allow them to input pay actions or a role to verify pay actions. There are, however, special occasions where individuals are assigned both roles in CAS. This occurs when compensation staff must address backlogs for a specified period of time. Compensation Division approves, assigns and monitors the dual role access. The dual role should never be assigned for the same pay list.

During the audit, it was determined that 65 compensation employees had dual roles in CAS and were able to input and verify pay actions for the same pay lists. Compensation Division acknowledged the error and immediately removed the dual access. Further audit tests of a representative sample of the individuals determined there were no instances of inappropriate use.

Some compensation staff have direct access to RPS to initiate on-line pay actions. They are assigned the role to either key or verify. Analysis of these roles determined that there were no conflicts.

Without formalized processes for monitoring all system access, a risk of improper segregation of duties exists where individuals may be in a position to use the systems inappropriately and therefore pay out incorrect amounts.

Recommendation

Corporate Compensation, in collaboration with the CCSCs, should put a formal process in place to identify and track conflicting roles in CAS. Procedures should specifically identify areas of responsibility as well as monitoring and periodic review rules.

Action Plan

As of September 2008, a monthly report will be generated to monitor system access. In December 2008, OPWG will review, approve and distribute to the CCSC management teams a procedural document outlining roles and responsibilities regarding system access.

2.0 Training and Support

To efficiently and effectively process pay actions, the compensation area must have fully trained, competent and knowledgeable staff. Training goals and objectives, including orientation for stakeholders, must be well defined and a comprehensive training plan in place to achieve them. The stakeholders would include PWGSC compensation staff and CRA managers that initiate pay actions.

Compensation pay actions cover a wide range of pay activities and require a broad knowledge base. It is the intent of Compensation to have all their processing agents fully cross trained and able to work different workflows to handle shifting priorities. Although agents are currently receiving or are scheduled to receive the necessary training, there are obstacles that may impact the achievement of this goal.

Studies conducted by HRB and other government bodies have identified that it takes a minimum of eighteen months to fully train compensation advisors. The size of the challenge is increased when combined with the high turnover of staff in one of the centers and changing guidelines and collective agreements. To manage these challenges, the compensation area must have a fully functional and up to date training plan to track and monitor progress. The plan should address the training of new employees as well as ongoing training for more experienced staff.

Currently, a clear and comprehensive plan is not in place. Compensation Division has developed training profiles for the compensation agents and many of them have received the cross training but there is little evidence of a training strategy to monitor and report back on progress.

Although Compensation Division had prepared training documents for Compensation Division staff at the outset of the new service delivery model, some of the material is outdated. This was confirmed during interviews with compensation agents at both CCSCs.

CRA and PWGSC staff involved in compensation were interviewed to assess the level of understanding of and relationships between CAS and RPS. The results from the interviews confirmed that there were gaps in understanding the different systems and their interactions, contributing to delays and potential difficulties. Entries in one system were causing errors to occur in the other. This added to existing workloads for CRA compensation agents and PWGSC staff.

Finally, responses from the manager’s questionnaire indicated some issues with training efforts directed to them, in particular when initiating pay actions. Approximately 40% of the managers stated they had not received compensation training and more than half of those that had received training rated it as fair to poor. While guidelines on the CWRG for initiating pay actions exist, difficulties faced by CRA managers must be addressed given the importance of receiving timely and accurate source documents. The compensation area would benefit from any improvements to the knowledge base of those that initiate pay transactions.

Recommendations

Corporate Compensation, in collaboration with the CCSCs, should develop a complete training plan that includes a strategy for initial and ongoing training for compensation employees. The plan should include a methodology for tracking progress to ensure they meet all their training goals.

Corporate Compensation should develop orientation packages for PWGSC with particular attention to guidelines concerning actions between CAS and RPS.

Corporate Compensation should prepare an orientation and training package for CRA managers that includes all aspects of initiating pay actions and navigation within the CWRG.

Action Plan

The CCSCs have implemented a training matrix in which all training for CCSC employees is tracked (including PWGSC training). Corporate Compensation is organizing training material currently available in the CCSCs. The material will be updated and a training plan will be developed. The target date for completion is, December 2008. On a yearly basis, Corporate Compensation will review and ensure the training plan is kept up to date.

Corporate Compensation has contacted PWGSC to develop training specific to the CRA; however, due to resource constraints at PWGSC, this action has been delayed (at this point, PWGSC is unable to confirm a timeframe for this project.) Corporate Compensation will continue to lobby PWGSC to complete this project in 2009-2010 at the latest. Meetings have been held between the CCSCs and PWGSC pay offices to discuss each others’ systems. These learning opportunities have been beneficial to both organizations.

Corporate Compensation is preparing a training package in collaboration with the CCSCs. The package will be added to the CWRG and there is consideration to include this type of information in the manager’s tool kit, making it part of the MGLP or taking advantage of other initiatives to support managers in learning about compensation. The target date for completion is March 2009.

3.0 Workload Management

The other objective of the audit was to determine whether adequate controls were in place and operating as intended to manage and process compensation transactions. The audit expected that sound performance measurement tools would be in place and used by Compensation Division and the CCSCs. These measurement tools would assist in workload distribution and quality assurance in order to assign work efficiently and enable management to track how well the program was operating.

3.1 Performance Measurement

Well developed performance measurement tools would support management in making decisions related to areas such as resource requirements and allocation of staff. More specifically, “time to process” standards allow compensation managers and agents to track, evaluate and make necessary adjustments to workload management issues. The audit focused on performance measurement tools that would have an impact on timeliness, accuracy and compliance.

Some of the building blocks for performance measurement were under development at the time of the audit. Tools such as verification checklists, job expectations and evaluations existed and were being used. However, standards to monitor the timeliness of compensation processes or quality of the work of the CCSCs were not fully developed or implemented.

One factor that can be used by the CCSCs to monitor the quality of the work and to support continuous improvement is the level of errors found and related trends in the verification process. In order for this performance standard to work effectively, a common accepted definition for an error is required for both CCSCs. Such a definition would allow verification officers to consistently identify errors and then communicate deficiencies back to the agents. Compensation managers would be able to use the results to assist in performance evaluations and training or coaching activities. During the audit, it became clear that both centers had different definitions for what constituted an error. This limited the usefulness of tracking this performance measure and did not enable the comparison of levels of errors between the two centers for continuous improvement purposes.

The CCSCs have two separate groups that process pay actions, processing services which is responsible for handling less complex pay action types and consultative services which is responsible for administering more complicated transaction types such as retirement and disability. At the time of the audit, Compensation Division was in the final stages of developing “time to process” standards for the processing services area. The standards developed and agreed to by the CCSCs took into account the complexity of the pay actions and allowed time for associated research and review activities. Compensation Division was planning to develop standards for the consultative service team.

Recommendations

Corporate Compensation, in collaboration with CCSCs and other stakeholders, should revisit the definition of an error and apply it consistently to the verification process in order to support performance measurement.

Corporate Compensation should finalize the time to process standards to support workload management for both the processing services area and the consultative services area.

Action Plan

By the end of March 2009, Corporate Compensation, in collaboration with the CCSCs, will review the definition of an error and ensure consistency in its’ application on a quarterly basis. Tracking errors through the verification process is an indicator of employee performance that provides management with feedback on training gaps.

Time standards for processing services developed in 2007 will be reviewed by Corporate Compensation in collaboration with the CCSCs and adjusted where necessary by the end of fiscal year 2008-2009. Workload management reports have been implemented in CHLS to allow volumes and resource allocations to be monitored. As well, employee performance reports ensure management can monitor agent output. The nature of each file actioned by the consultative service area is different in nature and time for resolution is difficult to predict. Once the Quality Assurance program has been implemented in the third quarter of 2009-2010, Corporate Compensation will verify the workload outputs of consultative agents ensuring that actions are completed in reasonable timeframes.

3.2 Workload Measurement

In addition to having performance measurement standards developed and in place, managers need to be able to effectively manage the day-to-day workload. This would be accomplished by having good workload management tools and a comprehensive monitoring framework to track and assess program delivery.

Appropriate levels of monitoring are in place for the Compensation program delivery. In February 2007, the Financial Reporting and Accounting Division of the F&A Branch, in collaboration with HRB and ITB, developed and published a complete Accountability Framework for CAS Payroll. This framework identified all key controls and responsibilities in the payroll function. Further to this, the Compensation Division hired an external public accounting firm to perform an independent assessment of the implementation of framework in order to identify any areas of improvement. To date, three reports have been written and several recommendations have been made. Compensation Division has taken steps to implement the recommendations.

Information from interviews and results of file reviews showed that several reports are produced by the CCSCs to track program delivery. One area of concern was the absence of a fully functional workload management tool. Without such a tool, the CCSCs tend to be more reactive and are not realizing the full benefits of properly managing the workloads and the associated resources.

CHLS is the main workload management tool being used to monitor the performance of the two centres. A revised version of CHLS was implemented in December 2007. One of the new functionalities allows the system to produce reports to managers based on pay period rather than by calendar. This link of workflows to pay periods should provide CCSC managers with an improved method of identifying peak periods and forecasting their resource needs. However, interviews with managers and team leaders at the CCSCs indicated that there were inconsistencies in the use and understanding of the reports available in CHLS.

To allocate resources appropriately, managers need to be able to understand the aging of work in the centers and identify areas of processing difficulty. Monitoring of aging and late processed transactions is not facilitated with the December 2007 version of CHLS. These reports can only be produced at the team level making it difficult to produce overall summaries. Consequently, managers may not have sufficiently comprehensive data to make informed decisions. Plans are in place to correct these system limitations by implementing a CAS solution in 2009.

Recommendation

Corporate Compensation, in collaboration with the CCSCs, should establish formal guidelines on the use of CHLS reports in order to plan and support the workload.

Action Plan

Procedures for the use of CHLS reports will be developed in consultation with the CCSCs by December 2008 to plan and support the workload.

3.3 Quality Assurance

In order to assess whether the workload is being processed effectively and efficiently constant monitoring of payroll transactions is required. This would include, in addition to the work performed by verification agents, a quality assurance program with quality reviews.

The CCSCs have created and staffed positions for quality assurance and training officers (QATs). Their role is to review new policies and procedures, to assist in training needs for agents and to provide quality assurance support. Comments from interviews with QAT officers and managers indicated that the quality assurance portion of their job is not being fully performed. The QAT officers are performing their other duties related to training and support.

The audit did not find any other evidence of a formal quality assurance program; however, Compensation Division did indicate that a quality assurance framework was under development.

Quality assurance reviews may contribute to reducing workload by allowing attention to be placed on existing problem areas, training agents and preventing errors from occurring.

Recommendation

HRB should continue to develop and implement a Quality Assurance program to effectively monitor performance and determine if compensation goals and objectives are being met.

Action Plan

Corporate Compensation, in consultation with the CCSCs, is developing a Quality Review program that will include elements of quality assurance and monitoring. The target date for implementation is the third quarter, 2009-2010. The Winnipeg CCSC is piloting a quality review of errors (i.e. real time checking of employee errors and error trends as well as a post review of high and low risk transactions to determine their accuracy and adherence to service standards.

Conclusion

The audit found that the majority of key management and processing controls are in place. A framework that identifies all processes and responsibilities has been put in place and its implementation has been reviewed regularly. However, processing pay actions in a timely and accurate fashion while implementing this significant organizational change has been a challenge.

The tests conducted as part of the audit showed that a large percentage of pay actions had not been processed in a timely manner, the majority resulting in late payments to the employees. The tests also indicated accuracy rates that were at the maximum tolerable level of what management expected in terms of quality.

To address these weaknesses, Compensation will need to continue to train their staff, refine workload management processes and raise awareness among CRA managers regarding the timely input of pay requests. Any improvements in the initial capturing of data will have a direct impact on reducing timing delays in issuing final payments.

While progress has been made to the development and implementation of measures to assess some elements of performance, these monitoring measures do not give a complete picture of compensation activities. Compensation will continue to develop processing standards to assist in measuring performance.

Finally, improvements are also required in quality assurance procedures. A control framework was developed to support the controls for daily processing of transactions including elements of quality review but not all these elements have been effectively implemented. The review function must include direction on verification guidelines, a solid quality assurance program and a process for post payment review. These factors will contribute greatly to improving the accuracy of processing compensation transactions.

Footnote

[Footnote 1]

This means that 19 out of 20 times a random sample would produce the same results within a range of plus or minus 4%. These criteria are in line with the Finance and Administration Manual policy for the Finance and Administration Directorate’s (FAD’s) statistical sampling for post-payment review to determine the level of accuracy and for compliance requirements.