2021 Minister’s Transition Book 2: Core responsibility 2—Payments and accounting
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Payments and revenue collection
Receiver General for Canada
Mandate
The Public Works and Government Services Canada Act designates the minister as the Receiver General for Canada, and the deputy minister as the deputy receiver general.
The Receiver General for Canada is a central government service supporting both the treasury and accountant functions of the federal government. The mandate of the Receiver General is to safeguard the integrity of the consolidated revenue funds and the accounts of Canada as per the Financial Administration Act.
The majority of the staff supporting the Receiver General functions are located in the National Capital Region. Since 1976, the Receiver General operations in Matane, Québec have been responsible for a portion of the Receiver General treasury function, namely managing bank reconciliation and providing investigation, authentication and status verification services for Receiver General payments.
Key activities
Receiver General treasury functions
- Manage the Government of Canada’s bank account ($3.5 trillion in cash flow; over 444 million payments issued in 2020 to 2021, including 126.7 million COVID-19 related payments; 91% of payments issued electronically with a timely and accurate rate of 99.99%)
- Establish and manage all banking services on behalf of all departments and agencies for the collection of revenue and disbursement of public funds
- Provide investigative, recovery and custodial services for federal government payments
- Maintain and develop the government’s central treasury systems (standard payment system and government banking system)
- Reconciliation of all Government of Canada payments
- Ensure the safe storage of all cheques and electronic payments once the bank reconciliation is completed until their destruction at the end of the prescribed retention period
- Produce and send reports from bank reconciliation operations and financial institutions
- Provide telephone service for the authentication of government payments, fraud detection service and a cheque enquiry service on federal government payments
- Investigate opportunities for proactive fraud detection
Receiver General accountant functions
- Maintain the accounts of Canada which consist of centralized records of the government’s financial transactions
- Produce the annual Public Accounts of Canada, which include the audited consolidated financial statements for the Government of Canada
- Prepare the monthly statements of financial operations for the Department of Finance Fiscal Monitor
- Manage central accounting and reporting systems and the Common Departmental Financial System
The Auditor General of Canada has provided 22 consecutive years of clean audit opinion on Government of Canada consolidated financial statements. This opinion from the Auditor General provides assurance that all data included in the financial statements are reliable and that the government is properly reporting its overall financial performance to Parliament and to Canadians. The Public Accounts 2021 will be tabled in the House of Commons once Parliament resumes after the election.
Current status
The Receiver General function is a pillar of Canadian democracy. For over 250 years, it has evolved with changes in society and technology. The Receiver General has an opportunity to lead on:
- making financial information accessible to and for Canadians
- modernizing the Receiver General to meet needs of the government and Canadians for the next 5 to 20 years in light of emerging digital technology
Receiver General treasury and accounting modernization
Mandate
The Receiver General for Canada supports both the treasury and accounting functions of the Government of Canada. Both the treasury and accounting sides of the Receiver General are looking at modernizing their systems and processes to ensure the long-term stability of these critical functions.
Receiver General treasury
There are many interfaces and interdependencies on Canadian financial institutions working with the Receiver General to offer services to Canadian individuals and businesses for receiving money from and paying money to the federal government. The payments industry is undergoing significant change due to technological innovations; non-traditional financial service providers are disrupting the marketplace. The Receiver General treasury needs to revitalize the treasury systems and processes.
The objectives of the Receiver General treasury renewal initiative are to:
- revitalize the aging Receiver General treasury systems and processes
- ensure the Receiver General has adaptable and flexible applications and processes in place in order to implement payment industry innovations
- offer Canadians a choice of payment options
- enable more flexibility in offering value added services to support the departments and agencies in fulfilling their mandates
The treasury renewal initiative will use a phased approach and will be planned and executed over several years. The first phase of renewal projects has been initiated, which includes cheque imaging, payment reconciliation, and adopting the ISO20022 payment messaging standard. The next steps in the project are to:
- define program and project governance model for the overall treasury renewal program
- define a roadmap for transitioning key business functions to new technical platforms
- identify client service improvements and internal efficiencies; and
- engage with payment industry experts for strategic advice
A key to this approach is that the end state vision and governance framework will be developed collaboratively with all federal departments and agencies and industry stakeholders.
Receiver General accounting
There are several challenges in continuing to meet clients’ and stakeholders’ obligations with an aging technological architecture and highly manual processes. The foundational architecture and business processes have become outdated and inefficient. Consequently, the Receiver General’s increased requirement for manual interventions to collect, process and generate the information increases the risk for error. Critical areas for improvement currently reside in the modernization of its architecture, its information technology systems and current processes.
The objectives of the Receiver General accounting modernization initiative will enable the Receiver General to become more agile, efficient and responsive through:
- a new architecture that will revitalize the Receiver General accounting and reporting business model through new technology
- a data strategy that will improve data quality, analytics and reporting, and support for open government and increased transparency
- streamlining reporting processes to allow for a single point of entry
- reducing time for the production of key documents, such as the monthly statements of financial operations and the Public Accounts for Canada and increasing data quality
- amplifying automation to increase accessibility, efficiencies and data quality
- providing self-service tools that will enhance client experience when interacting with the Receiver General
The accounting modernization initiative will also use a phased approach and will be planned and executed over the next 5 years.
Receiver General for Canada and Phoenix overpayments
Mandate
The Public Works and Government Services Canada Act designates the minister as the Receiver General for Canada, and the deputy minister as the deputy receiver general.
The Receiver General has the authority to assist with the collection of Phoenix overpayments, and as such the Receiver General has taken on a role in the project and works with the Treasury Board of Canada Secretariat. The focus of the Receiver General’s efforts is on former public servants in receipt of a pension and former employees with no pension.
Key activities
The Government of Canada’s priority is to support employees, pensioners and former employees who are not in receipt of a pension and resolve public service pay issues as quickly as possible, including the recovery of overpayments.
Recovery of overpayments supports the government’s mandate to eliminate the backlog of outstanding pay issues for current and former public servants that resulted from the Phoenix pay system. The recovery is expected to rebuild their confidence in the integrity of their pay and pensions.
Salary overpayments impact current and former public service employees across departments and agencies and across the country. However, the majority of the affected employees would be located in the National Capital Region.
The Receiver General in collaboration with the Office of the Comptroller General has worked to establish recovery strategies:
- for current employees:
- priority has been given to overpayment recoveries with a particular focus in the first phase on 2,016 files as well as those of high value claims (over $40,000)
- for pensioners:
- the Receiver General has put in place a strategy to recover overpayments from pension funds through the Government of Canada Pension Centre
- for former employees who left without a pension:
- the Receiver General will provide initial guidance to departments and agencies
The Receiver General, in collaboration with the Public Service Pay Centre, has begun the collection of overpayments from pensioners previously employed by departments and agencies served by the Public Service Pay Centre.
For former non-pensioned employees who were served by the Public Service Pay Centre, 3 attempts are made by the Public Service Pay Centre to recover funds upon termination of employment. If unsuccessful in recovering through these attempts, the file is transferred to the employer department or agency for further action.
Departments and agencies not served by the Public Service Pay Centre are responsible for recovery of funds from their current and former employees. The Government of Canada Pension Centre will assist with recovery from pension recipients if requested.
The Receiver General will provide advice and guidance to departments and agencies to assist in the recovery of overpayments for former employees who left without a pension.
Current employees and pensioners facing financial hardship can have their recovery rate, traditionally set at a rate of 10% of their regular payment, lowered to a more manageable level if requested.
It is worth noting that collecting salary overpayments has always been part of the Government of Canada activities, even before the implementation of the Phoenix pay system. Numerous current and former federal employees have already reimbursed overpayments or have made arrangements to do so. Multiple measures have been put in place to support individuals experiencing financial hardship, including flexible repayment options.
Public Accounts of Canada
Mandate
The Public Accounts of Canada is the annual financial report to Canadians covering the fiscal year of the government, ending March 31. The Receiver General (the minister), as the government’s accountant, is responsible for preparing and publishing the report. Sections 63, 64, and 65 of the Financial Administration Act provide the Receiver General with the authority to maintain accounts, to prepare the Public Accounts report and to request financial information from departments and agencies.
Key activities
The Public Accounts report is prepared based on financial transactions that are maintained by departments and agencies in accordance with the direction of the Receiver General. It provides Parliament with the information that explains the nature and extent of the financial affairs and resources for which the government is responsible. Parliament uses the Public Accounts to ensure that appropriated funding is spent according to the amounts and the purpose authorized in the estimates.
The report is produced and published in 3 volumes:
- volume I presents the audited consolidated financial statements of the government, including additional financial information and analyses
- volume II presents the details of expenses and revenues by department
- volume III presents supplementary information and analyses
The Receiver General for Canada, the president of the Treasury Board, and the minister of Finance share responsibility for the preparation of the Public Accounts. The deputy receiver general, the secretary of Treasury Board, the deputy minister of Finance, and the comptroller general co-sign the consolidated financial statement on behalf of the Government of Canada.
The Receiver General has the responsibility to establish and maintain an effective system of internal control over the reporting of financial data. This system is essential for the preparation of consolidated financial statements that are free from material misstatements and that are prepared based on published accounting policies and standards.
The Receiver General is also accountable for making available all original accounting records and other relevant information to support the audits carried out by the Office of the Auditor General.
The Auditor General of Canada is responsible for the audit of the consolidated financial statements and for providing an independent audit opinion to the House of Commons. To date, the Auditor General has provided 22 consecutive years of unmodified opinions on the statements.
Current status
After the tabling of the Public Accounts by the president of Treasury Board, the House of Commons refers the documents to the Standing Committee on Public Accounts for review and reporting back to Parliament with any recommendations.
They are normally tabled in October but due to the election this year they will be tabled when Parliament resumes following the election.
Pension administration
In this section
Mandate
Public Services and Procurement Canada is accountable for the administration of multiple federal public sector pension plans (in whole or in part), serving contributors and retirees governed under the:
- Public Service Superannuation Act
- Royal Canadian Mounted Police Service Superannuation Act
- Canadian Forces Service Superannuation Act (Regular Forces and Reservists)
It also provides pension services for members of Parliament, federal judges, the diplomatic corps, and lieutenant governors.
The department is not accountable for the administration of other federal public sector pension plans, namely Canada Post, Bank of Canada, Via Rail, Canadian Broadcasting Corporation, and Canada Mortgage and Housing Corporation.
Key facts
- Over 908,000 active and retired members (all plans)
- Over 5 million payments annually, totalling approximately $14 billion annually
- Over 529,000 telephone calls per year (432,000 in 2020 to 2021 during the COVID-19 pandemic)
- More than 1,200 full time equivalent staff (National Capital Region and Shediac, New Brunswick)
- Public Services and Procurement Canada’s Pension Program Operating Budget more than $188 million
Legal authorities
Functional authority is stipulated in the Department of Public Works and Government Services Act. Oversight and policy/legislative authority for the plans remain with the responsible pension plan sponsors, namely the Treasury Board of Canada Secretariat, the Royal Canadian Mounted Police, and the Department of National Defence.
The department provides both pay and pension administration functions pursuant to authorities as stipulated under Section 5, 7(1) (d); Section 12; and Section 13 of the Department of Public Works and Government Services Act and pursuant to the following orders in council:
- P.C. 1969-655 (pension)
- P.C. 1982-6/3819 (pension)
- P.C. 2011-1550 (pay)
These authorize the minister to provide “such administrative and other services required for the disbursement of pay…” as well as to provide “such administrative and other services in relation to employee benefit plans and superannuation or pension plans…”
Key activities
Pension administration is stable and will continue to provide pension plan members with quality cost-effective pension services, including timely and accurate processing of pension payments within established service standards.
Important mitigation strategies will remain in place while Phoenix stabilization efforts continue to address critical pay issues impacting pension and improve the quality of pay and pension data. Over the past 18 to 24 months, the department has addressed some of the longstanding pay data issues impacting pension and continue their efforts to re-align and improve the quality of pay and pension data.
The department will continue to upgrade pension digital services and redefine the user experience for pension web tools with expanded functionality and more self-service options for active and retired members. This includes external access to members’ pension information via internet (outside the government network).
Partners and stakeholders
Federal public sector pension plans are the responsibility of a Cabinet minister supported by the Treasury Board of Canada Secretariat with day-to-day administration carried out by Public Services and Procurement Canada.
The Treasury Board Secretariat provides an overarching governance role to the different employee pension plans and to the Public Service Investment Board while also being the stakeholder for the Public Service Pension Plan.
The Royal Canadian Mounted Police and the Department of National Defence are stakeholders for their respective pension plans and manage their governance separately.
The Office of the Auditor General performs annual audits on the pension plans financials and pension valuations by the Office of the Chief Actuary.
The Office of the Chief Actuary within the Office of the Superintendent of Financial Institutions provides actuarial advice and pension plan valuations which are then tabled in the Parliament.
Key considerations
The department will continue working with Shared Services Canada and the Office of the Chief Human Resources Officer (Treasury Board Secretariat) to ensure pension data requirements are taken into account in the new human resources (HR)-pay system.
Federal pay administration
In this section
Pay administration overview
Mandate
Under Section 12 of the Department of Public Works and Government Services Act and order in council P.C. 2011-1550, the minister of Public Services and Procurement Canada is mandated to administer the disbursement of pay to employees of the federal public administration. Within the department, key partners in pay administration include the Pay Administration Branch, the HR-to-Pay Program Office and the Pay Solutions Branch.
Key activities
The Pay Administration Branch is accountable for administering payroll for nearly 380,000 federal employees (as of August 2021). This includes all federal public servants working in 104 departments and agencies and members of Parliament and their staff. These employees are paid through the Phoenix pay system.
The branch is also responsible for the provision of compensation advisor services for approximately 250,000 employees within 48 departments through the Public Service Pay Centre. Equally, it serves as the first point of contact support to employees through the Client Contact Centre and provides support to the compensation community across government through training and communications.
The HR-to-Pay Program Office is accountable for the monitoring and oversight of activities and initiatives to stabilize HR-to-pay. The branch manages the Client Service Bureau, which handles escalations and hardship files. It supports the holistic project management of all initiatives impacting HR-to-pay through functions, such as integrated planning, governance, analytics, change leadership, administrative services and strategic engagement. Departments and agencies, and bargaining agents are key partners in the management of these initiatives.
The Pay Solutions Branch is accountable for the information management and information technology functions and solutions in support of the stabilization of the pay system. Another key role played by the branch is to lead the work on a web-based human resources platform called MyGCHR. It also manages contractual arrangements related to in-service support. The current vendor, IBM, is on contract until March 2022.
Key considerations
Although fulfilling a key role on the pay file, Public Services and Procurement Canada is neither responsible for human resources policy nor the administration of the terms and conditions of employment, as set out in collective agreements. Under section 7 of the Financial Administration Act, the Treasury Board, as the employer of the public service, is responsible for human resources management in the federal public administration. Treasury Board is supported by the Treasury Board of Canada Secretariat in direction and regulation for issues such as pay, hours of work, terms and conditions of employment, and the establishment of collective agreements; and deputy heads are accountable for the delivery of human resources services. As the service delivery partner in compensation and benefits administration, strong collaboration with the Treasury Board Secretariat has proven key to ensuring successful implementation in many initiatives, including collective agreement implementation.
The pay stabilization mandate includes the elimination of the backlog of outstanding pay transactions as well as improving employee confidence in pay. The HR-to-pay teams are managing a number of key risks to project success. These include a recent and sustained increase in new intake to the pay centre that puts an emphasis on efforts to eliminate the backlog, network-wide retention issues as qualified compensation advisors are recruited to other departments for promotional opportunities, and associated scrutiny and public criticism of project efforts. For example, key files such as the recovery of overpayments from employees affected by Phoenix implementation are expected to generate public interest and reaction from key stakeholders including employees and bargaining agents.
Pay stabilization update
Mandate
With the support of the minister of Digital Government, Public Services and Procurement Canada has been mandated to eliminate the backlog of outstanding pay issues for public servants as a result of the Phoenix pay system to rebuild confidence in the integrity of the pay and pension systems.
The department has also been mandated to support the minister of Digital Government on the next generation pay and human resources system to replace the Phoenix pay system and support the president of the Treasury Board to actively engage Canada’s major public sector unions.
Key activities
A list of key activities that are underway, to reach pay stabilization, are articulated as follows:
- backlog reduction strategy:
- The department’s phase 2 of the strategy is progressing ahead of schedule, with over 96% of in-scope cases completed to date. Phase 3 is underway, and the department is currently analyzing the best approach to prioritize case processing (age, type, etc.)
- priority work:
- Based on consultations with client departments and the Treasury Board of Canada Secretariat, overpayments, terminations with severance, and recovery of prior-year pension arrears were identified as priorities for the Pay Centre, beginning in fall 2020
- PeopleSoft 9.2:
- The department has applied a technical upgrade to the Phoenix pay system and has moved from PeopleSoft 9.1 to 9.2. This upgrade was made to mitigate operational risks and provide a more stable and secure environment
- collective agreement implementation:
- Collective agreement implementation 2014 was completed in February 2021. The department is currently processing cases requiring manual work for the collective agreement implementation 2018 using the new retro redesign solution and is on track for completion in line with negotiated timelines
- accelerator project:
- The department is introducing new ways of working at the Pay Centre to improve quality and increase productivity, resulting in more timely and accurate pay for employees. The department is rolling out the accelerator project with the balance of pay teams, with a target date of July 2022 for the finalized roll out at the Pay Centre
Partners and stakeholders
The department awarded contracts to Accenture Inc. and KPMG LLP in March 2019 for “automation innovation” and to IBM Canada and Deloitte LLP for “lowering the queue innovation” in May 2019. McKinsey and Company worked with the department to assist in the development of a forward-looking strategy for the stabilization initiative. This work has been completed.
The department and the Treasury Board of Canada Secretariat are working with other departments and agencies to improve the timeliness and accuracy of human resources data submitted to Phoenix. The department is responsible for reporting monthly to other departments and agencies on the timeliness of transactions. Departments and agencies are then asked to match these reports with their own HR system data to develop an understanding of the business practices and challenges that affect employees’ pay files.
The department also works with the Treasury Board of Canada Secretariat to minimize the impact of future collective agreements on pay.
Key considerations
Processing and delivering public service pay requires ongoing support across the entire pay ecosystem. It is critical that departments participate in program oversight and review their HR practices to ensure stabilization is achieved, especially when it comes to timeliness of HR data entry.
The ongoing complexity of the “machinery” of HR-to-pay, including negotiated provisions in collective agreements and legislated processing requirements, continues to pose challenges to overall pay administration, from both a stabilization and service provider perspective. If left unaddressed, this will continue to be a challenge for any future pay system.
The department continues to reconcile employee pay files, including overpayment recoveries. More than 215,000employees have entered into recovery agreements for a total of $2.3 billion. As of March 31, 2021, there are approximately $519 million in outstanding overpayments that impact roughly 324,000current, retired and former employees.
These recoveries are subject to statute limitations of 6 years from the date of the overpayment. As recovery work advances, continued public reaction is expected from current and former employees as well as from bargaining agents.
IBM: Phoenix
Mandate
As Phoenix’s designer and prime implementer, IBM’s expertise and operational support are critical to long-term stabilization of the system. IBM provides functional and technical support by managing the daily administration of pay. In addition, IBM assists with strategic initiatives designed to contribute to stabilization such as advanced analytics, the implementation of robotic process automation, and the automation of business processes.
Key activities
In June 2011, after a competitive process, IBM was awarded the contract for the new pay system. Under this contract, the department paid $170 million to IBM Canada (2011 to 2018) towards the design and implementation of the Phoenix pay system. There have been 49 amendments to the original contract for a total contract value of $545 million.
Since the original contract was issued, the Crown has moved towards an application managed service model. Under this outcome-based model, IBM has taken on an enhanced role in delivering more of the day-to-day operations and that has allowed the department to focus on strategic improvements and processes. Below is a list of benefits to date:
- the end-to-end process to operate the Phoenix pay system is now fully documented; this documentation contributes to the stabilization of payroll processing
- the number of IBM staff dedicated to the operations has increased. It has 159 functional staff and 41 technical staff providing 24-hour support, 365 days a year. As part of the fixed-price contract, IBM ensures continuous onboarding and training of staff to meet the outcomes identified
- improvements have been made to backend system processes by introducing automation, database processing performance, and pay processing
- more performance metrics are measured and tracked. Some of the metrics hold a financial penalty
In February 2019, the department received funding and contracting authority for the IBM operational support contract for a 3-year period, ending on March 31, 2022.
The contract includes services for:
- technical and functional support under a managed services model for Phoenix
- implementation of the PeopleSoft 9.2 upgrade and additional activities to help stabilize the pay system
- software maintenance
To ensure ongoing pay operations and support beyond 2022, the department initiated a process to re-tender the operational support contract.
In May 2019, a request for information was posted on buyandsell.gc.ca to gauge industry interest and capacity to provide ongoing operational maintenance and support services. This was followed by an industry day in June with private-sector vendors. Ongoing industry engagement was key to ensuring fair and equal opportunity to all interested suppliers and a successful procurement process. To maximize the market response, the department incorporated lessons learned from previous industry consultations in this area.
Following the request for information, an invitation to qualify was issued in May 2020 on buyandsell.gc.ca. Based on the results of this process, the department will establish and implement a new application managed services contract.
This contract aims to provide support for functional, technical and payroll processing functions via an application managed services model for the Phoenix pay system starting in April 2022. This new contract would also include stabilization activities and advisory support services as required for a successful transition to a next generation HR and pay system.
Litigation: Class action lawsuits
Mandate
Over the last 4 years, 2 class actions were filed in 2 different provinces to seek compensation for damages federal employees incurred as a result of the Phoenix pay system. The court has allowed the Bouchard versus (v.) Attorney General of Canada class action to proceed whereas the Delorme v. Her Majesty the Queen in Right of Canada, IBM Canada Limited has not yet received the green light. The Department of Justice leads these matters and Public Services and Procurement Canada supports when requested.
Ezmie Bouchard v. Attorney General of Canada (Bouchard)
In 2017, an application to institute a class action was filed by Ezmie Bouchard in the province of Quebec. The class action seeks to represent any individual who has worked for the Government of Canada at any point in time since February 2016 (the individuals who fit this description are referred to as “members” of the class). The plaintiff alleges that the Government of Canada failed to fulfill its obligation to effectively manage employees’ pay by negligently managing the crisis generated by the failure of the Pheonix pay system. Through this class action, the plaintiff seeks to obtain damages for the pain and suffering sustained by members and amounts owing to members as well as interest and additional indemnity where applicable.
Renée Delorme v. Her Majesty the Queen in Right of Canada, IBM Canada Limited (Delorme)
In 2018, an application to institute a class action was filed by Renée Delorme in Alberta on behalf of all individuals who have worked for the Government of Canada at any point in time since 2014 (the individuals who fit this description are referred to as “members” of the class). As opposed to Bouchard, the Delorme class action names both the Government of Canada and IBM Canada Limited as defendants. The plaintiff alleges that the 2 defendants failed to exercise their due diligence in the project and did not take reasonable measures to address pay issues swiftly when they arose. The plaintiff is seeking $1 billion in damages and compensation, payment of amounts owed to members, and punitive damages of $5 million or any other amount appropriate to the court, among other things.
Key activities
On April 3, 2018, the Superior Court of Quebec allowed the Bouchard class action to proceed but excluded from the class employees who are subject to the grievance process in accordance with section 236 of the Federal Public Sector Labor Relations Act. On May 3, 2018, the plaintiff filed an appeal contesting the definition of the class. This application was rejected by the Supreme Court of Canada in April 2020.
As for the Delorme class action, it has not yet been allowed to proceed. The court invited Delorme to bring its certification motion, or Canada to apply to strike the action. No such steps have been taken by either party. IBM has brought an application to strike but the court has not yet scheduled the motion for hearing.
Partners and stakeholders
- Department of Justice – leads the file and provides legal advice to Public Services and Procurement Canada
- Treasury Board Secretariat – represents the defendant (Government of Canada)
In Public Services and Procurement Canada, the HR-to-Pay Program Office and the Digital Services Branch collaborate closely to ensure that the associated litigation hold is duly implemented.
Payments in Lieu of Taxes Program
In this section
Mandate
The Government of Canada contributes to the cost of local government in communities where it owns real property. While the Government of Canada is not subject to tax under the Constitution Act, it makes voluntary payments under the Payments in Lieu of Taxes Act (akin to property taxes). The Payments in Lieu of Taxes Program is administered by Public Services and Procurement Canada on behalf of all custodian departments. The payments are based on the principle of fairness and are intended to be equitable in comparison to other property owners. Across Canada, payments are made on approximately 14,000 federal properties located in almost 1,100 taxing authorities. For the 2020 tax year, the department made payments totalling more than $556 million.
Key activities
Under the Payments in Lieu of Taxes Act, the minister of Public Services and Procurement may make payments in lieu of:
- real property taxes
- frontage and area taxes (local improvements)
Payments may be supplemented if delayed.
Under certain circumstances, the minister may also make payments in lieu of taxes on federally owned properties occupied by third-party occupants who have defaulted on their property taxes. The values and rates used in the calculation of payments for federal departmental property are set at the discretion of the minister of Public Services and Procurement.
The minister is also responsible for the valuation of unique properties, such as military bases, prisons, national parks, national historic sites, and historic and heritage properties. Unique properties represent approximately 40% of the payments paid to taxing authorities across Canada.
Partners and stakeholders
Taxing authorities
Taxing authorities are the program beneficiaries, and departments’ payments are made to municipalities, school boards, provinces and Indigenous governments. The Federation of Canadian Municipalities represents the interests of municipalities at the national level.
Federal custodial departments and agencies
The minister is responsible for making the payments on all Crown-owned property under the administration of custodian departments and agencies and is accountable to Parliament for the program. Since 1997, departments have been financially responsible for payments made on their properties and are required to reimburse Public Services and Procurement Canada the amounts paid on their behalf.
Assessment authorities
Assessment authorities determine assessed values on which taxing authorities base their applications for payment in lieu of taxes.
Crown corporations
Independent of the minister’s authority, each Crown corporation manages its own payment in lieu of taxes program under the Crown corporation’s regulations on the Payments in Lieu of Taxes Act. This includes calculating and issuing payments to taxing authorities and making their own decisions based on advice provided by the Dispute Advisory Panel on property held by the Crown corporation.
Dispute Advisory Panel
The Dispute Advisory Panel has a mandate to provide advice to the minister on how to resolve disputes between the federal government and taxing authorities regarding property values, property dimensions or effective rates used in the calculation of payments.
The composition and term of the panel is set in the act. The panel includes at least 2 members from each province and territory, who are appointed by the governor in Council and with terms not exceeding 3 years (renewable).
The governor in council names one member as chair. The same panel also provides advice to the heads of Crown corporations who exercise discretion regarding their respective corporation’s payments.
Key considerations
There have been many advances in the domains of property taxation and assessment across Canada over the past 25 years, and the Payments in Lieu of Taxes Act may not be aligned with these changes. The act underwent some limited amendments in 2000 to expand the types of eligible federal property and to establish the Dispute Advisory Panel. However, the last significant amendment to the act took place in 1980; therefore, many of its clauses and wording have not been updated in more than 40 years.
Furthermore, assessment authorities across Canada have moved to a market value assessment methodology for property tax. Although this methodology is effective for most properties, it creates challenges for unique federal property (that is, national historic sites and military bases), which have limited comparability to the taxable sector and real estate market.
The challenges regarding unique properties and outdated wording in the Payments in Lieu of Taxes Act have contributed to increased disputes with taxing authorities both at the Dispute Advisory Panel and at the Federal Court.
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