$550 Million in Overpayments Due to Botched Phoenix System Yet to Be Recovered, Say Feds

Members of the Public Service Alliance of Canada affected by Phoenix Pay System errors protest on the three-year anniversary of the launch of the pay system, in Ottawa on Feb. 28, 2019. (The Canadian Press/Justin Tang)

More than half a billion dollars in overpayments to federal employees due to previous errors in Ottawa’s Phoenix Pay System are yet to be recovered, according to recently released federal records.

Cabinet disclosed a number of figures in an Inquiry of Ministry related to the failed payment system, which Ottawa launched in 2016 in an effort to consolidate a number of outdated payroll systems that were still being used for federal employees at the time.

“Since the launch of Phoenix approximately 389,500 employees have been identified as having received either an administrative overpayment or true overpayment totaling $3.08 billion as of April 24,” Cabinet wrote in the Inquiry tabled on June 9, as first reported by Blacklock’s Reporter.

However, it added that $553 million in overpayments are yet to be recovered.

“True overpayments usually occur when certain pay transactions are not submitted or processed promptly,” wrote Public Services and Procurement Canada (PSPC) in the Inquiry.

“Some situations are related to unforeseen work-life events,” it added. “Flexible repayment measures are in place to avoid, where possible, adverse impacts on employees with a true overpayment.”

PSPC also said that it had not written off any of the $553 million in overpayments because federal employees who have received them are meant “to acknowledge their debt or enter into a repayment agreement in order to have access to flexible repayment options.”

“Overpayments are a normal part of the pay administration process and they occur in all pay systems,” PSPC wrote.

Debt Written Off

However, the Department of Industry wrote that it had written off one overpayment totalling over $45,480 that was “related to a deceased employee.”

“Every effort is made to collect funds prior to considering writing off an amount owed to the Crown,” the department stated in the Inquiry.

The department added that it attempted to recover the overpayment from the deceased person’s estate, but “received confirmation that the estate was insolvent; meaning no funds were available to repay the debt.”

“Given that all collection efforts had been exhausted, we were required to seek Treasury Board approval to write off this debt,” it wrote.

According to Blacklock’s, cabinet tabled the Inquiry in response to an order paper question filed by Conservative MP Gerald Soroka on April 24, who asked for the number of federal employees who had received overpayments and how much taxpayers were still owed in unrecovered funds.

A previous briefing note prepared for Treasury Board President Mona Fortier in November 2022 also said that Ottawa had paid around $685 million to federal employees as compensation for payment errors.