ARCHIVED - TB Circular 1977-37: Pay Administration

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TB Circular 1977-37:
Pay Administration

Table of Contents

Introduction

Policy

Objective

Application

Implementation

Departmental response

ANNEX

A. The pay administration process

B. Financial aspects of pay administration process

C. Pay administration organization

D. Departmental organization for pay administration

l. Introduction

The Pay Study Task Force (PSTF) Phase 3 Report was sent to all deputy heads from the Deputy Secretaries, Personnel Policy and Financial Administration Branches of the Treasury Board Secretariat (TBS).

Generally, departments supported the new concept of pay administration as outlined in the report. There were, however, a few concerns, some of which were shared by two or three departments. These were in the areas of resources, the involvement of managers in the control of leave/extra duty and the inclusion of financial officers in the pay administration process.

2. Policy

A new pay administration policy has now been approved based on the PSTF Phase 3 Report and departmental observations on it, together with a program for its implementation throughout departments and agencies. The Treasury Board acknowledges the primary interest of departments and agencies in the administration of the pay and benefits of their employees; full responsibility will be delegated when departments establish their capability to implement pay within the constraints of the relative statutes, regulations, collective agreements, policies and procedures.

It is recognized that the multiplicity of authorities and the gaps and inconsistencies in the existing policies, guidelines and procedures have resulted in an excessively complex environment for pay administration. Therefore, Treasury Board Secretariat is carrying out an extensive review of pay policies; the results will be consolidated in one section of the Personnel Management Manual.

The role of the Department of Supply and Services in the operation of the Public Service Pay System has been re-assessed by the Pay Study Task Force as one of service rather than control.

The pay system is being reorganized on a regional basis and improved to furnish a more responsive pay processing service to departments. Particular attention will be given to improving the amount and quality of information provided to the employee, the department and the various central agencies.

The Treasury Board Guide on Financial Administration, as it relates to pay administration, will be modified to ensure that it is properly interpreted. All departments must review their arrangements for controlling the commitment and expenditure of funds for pay and allowances. Departments will be required to demonstrate effective control over their pay administration before full authority is delegated to them.

In order for departments to have responsibility for paying their employees, it is necessary that they be accountable for expenditure of their salary budget as required by the Financial Administration Act (FAA). This is not a new requirement but since there have been misunderstandings in the past, certain internal process controls must be implemented in departments to allow senior officers to ensure that they do have control over disbursements made through the pay process. These controls are detailed in Annex A. Departments will be able to make arrangements with the DSS Pay System for the use of more sophisticated media for the two-way transmission of pay data as appropriate. This will reduce present time-lags in processing pay transactions and also reduce to a minimum the number of decision points. It is considered that this improvement, together with this policy (which clarifies responsibilities) offers the best possibility of reducing the present work load of pay and benefits units.

To sum up: pay is primarily a departmental responsibility; pay must be administered within the constraints of policy and procedures which will be simplified; the data processing aspects of pay administration will be handled by an upgraded DSS pay system more closely attuned to departmental needs; and departments must be prepared to accept the accountability which accompanies the delegation of responsibility and authority for pay administration.

3. Objective

The objective of this policy is to clarify overall responsibility for pay administration, to restate areas of departmental and central agency responsibility and to identify proposed changes in processes and activities.

4. Application

This circular is applicable in all respects to those departments and agencies for whom Treasury Board is the employer, i.e. departments and agencies listed in Schedule 1, Part 1 of the Public Service Staff Relations Act (PSSRA).

Policies and practices regarding financial control of pay expenditures are also applicable to all departments and corporations covered by Schedules A and B of the Financial Administration Act (FAA) and all branches designated as departments by the Governor in Council in accordance with Section 2 of the FAA. Processing controls advocated herein apply to all pay systems operated within or on behalf of these populations.

Where a department is delegated responsibility under its enabling legislation for the payment of groups of its personnel, or is paying any of its personnel by means of local payrolls, the principles of this pay policy will be applied.

The division of responsibilities outlined in this circular will become effective with the full implementation of the regional pay system which is scheduled for January 1, 1979 and subject to departments demonstrating their capability of accepting this responsibility. The TBS Pay Administration Coordination Group (PACU) will coordinate the progressive implementation of the revised systems as and when agreed to by DSS and departments.

5. Implementation

Implementation of the set of recommendations of the Pay Study Task Force will be phased in. The major areas where changes will occur are:

(a) Pay policies will be reviewed, consolidated and rewritten: this has already been initiated within TBS; new pay policies will be distributed as chapter 510 of the Personnel Management Manual.

(b) The Public Service Pay System operated by DSS is being regionalized and upgraded. This is under way and is scheduled for full implementation by January 1, 1979.

(c) The Attendance, Leave, Overtime, Shiftwork System (ALOSS) is collecting much of the same information as is required for pay purposes. In fact, one of the major recommendations of the Pay Study Task Force was to design a simplified leave/extra duty reporting process to satisfy both systems. A study is being undertaken to find the best alternative to modify the ALOSS system and make it compatible with the pay system. This would relieve departments of a significant work load. The outcome of this study will be made known to departments in early 1978.

(d) The pay input forms will be reviewed with the intent to make these easier to use.

(e) Training schemes for Pay and Benefits clerks will be developed and made available to departments; information on this will be distributed.

(f) Chapter IX of the Treasury Board Guide on Financial Administration will be amended to reflect the requirements of the pay system. See Annex B for interpretation and details of the principles of Chapter IX as they relate to pay administration.

(g) The Treasury Board Personnel Management Manual, chapter 510, will incorporate the requirements of this circular and additions or modifications will be distributed through this manual.

(h) In order to implement the changes and new responsibilities provided here a new organizational group has been set up in TBS. See Annex C for details .

The schedule of changes to be made and the overall implementation plan to be followed are as given in Section C of the Pay Study Task Force, Phase 3 Report.

6. Departmental Response

To coordinate all aspects of this proposed modified pay administration system, TBS is asking that departments respond to this circular by October 1, 1977.

In general terms, the response should show how each department will be organized to incorporate the required controls and to accept the assigned responsibilities, within the timeframe contained in the Application Section of this circular.

It is not necessary to submit detailed procedures; only describe those areas within each departmental pay administration system which are impacted by this directive. The impact may be great or small, depending on the present organization and its capability; reorganization needs may vary from next to nothing to fairly broad changes to pay administration staffs; training needs should be identified. Whatever the outcome of internal deliberations, it is necessary that each department submit to Treasury Board its plans and proposed schedules to comply with the terms of this circular. The submission should also contain a description of the old and the new organizations together with assigned roles and responsibilities.

To sum up, each department must communicate to Treasury Board:

1. The identification of the office and officer to whom is delegated responsibility for pay administration in that department and similar offices and officers in regional units, if any (PACU will communicate with the officers so designated for detailed discussions).
2. A description* of the present pay administration organization.
3. A description of the proposed organization designed to meet new requirements with the responsibilities and accountabilities noted.
4. A general description of the present and proposed pay processes including assignment of responsibilities for:

   - verification of input

   - financial signing authorities

   - document and error control

   - verification of output

5. A general statement of the interfaces with other systems including the degree of automation in use or proposed.
6. A plan and detailed schedule for implementation of the required changes.

For further information, contact the TBS Pay Administration Coordination Group at 5-1270.

Maurice LeClair

Secretary

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Note

*This description should include at least the topics stated in Annex D. [Return]

ANNEX A

A. THE PAY ADMINISTRATION PROCESS

The following responsibilities are assigned to provide the framework for the pay administration process. It is not the intent of this circular to give step-by-step instruction, but rather to address those areas where deficiencies have been identified and corrective action has been recommended. Responsibilities for record-keeping to support the Superannuation processes currently carried out by departments and DSS must be maintained.

Departments will have responsibility for the integrity of the overall pay process. In particular:

• Departments will be responsible for the accuracy and validity of pay input data sent to DSS;
• Departments will monitor their own pay administration system to ensure adherence to the prescribed performance standards described in section (e);
• Departments will initiate and maintain control of batches of pay input documents, or alternatively of punch cards or tape inputs;
• Departments will be responsible for resolution of input errors or anomalies detected by DSS edits. (DSS will discontinue manual verification of pay inputs from Departments.)
• Financial officers in departments will certify pay input in accordance with section 26 of the Financial Administrative Act.

These statements highlight the areas of significance and the following paragraphs give details of some of the processes required to implement the recommendations of the Pay Study Task Force.

(a) Verification

The purpose of verification is to obtain a correct and consistent application of the various pay regulations, and to ensure the accurate completion of pay documents input to departmental or DSS segments of the pay system.

Because the responsibility for the accuracy of pay input will rest solely with departments, DSS will no longer perform manual verification. Only the department has the authority to requisition pay cheques or changes to an employee's pay and only the department has the data required. Nevertheless, as a service to departments, the DSS pay system will edit documents for validity and accuracy as far as practicable. DSS has no authority to change departments' instructions, and any incorrect or incomplete input which reaches DSS will not be completed or changed there but returned to the originator. Such returned inputs will create a delay in processing for which the department must be held responsible.

Departments will clearly identify who has the responsibility for verification and certification under Section 27 of the FAA. The person delegated this responsibility will ultimately be accountable to the Deputy Head for these activities.

It must be emphasized that the primary responsibility of the person authorizing the input should not be obscured by introducing duplicate verification processes which may lead to confused responsibility and, in effect, leave no-one truly responsible.

(b) DSS System Edits

Although departments will be responsible and accountable for accuracy and validity of pay input, DSS will design and install computer edits to safeguard the integrity of the pay records, to assist departments in their control role and to provide quantitative data to Treasury Board Secretariat to assist in determining the effectiveness of pay administration.

Input transactions which fail to meet the edit specifications fall into two categories: either they will be deemed non-processable and be returned to the department, or they will be processed through the pay system and a message returned to the department drawing attention to a possible anomaly. Anomalies or unusual transactions will be processed but, since there is a probability they may be erroneous, the department will be required to verify these transactions. Details of edits and definitions of conditions to be classified as rejects or anomalies will be specified by DSS, with departmental advice, approved by TBS and communicated to departments as a part of the input procedures.

(c) Batch Control

Pay input documents must be grouped into batches and the batches controlled from their point of origin through subsequent manual and computer processing steps.

The batch control document should be originated prior to or at the time of certifying under Section 27 of the FAA to give the person with this responsibility a means to ensure that all information gets into the system and that unauthorized information is not added. DSS will provide the details of the batch control process as part of the pay input procedure. These principles of document control apply whether documents are being input to the DSS pay system or to a departmental system which will send data to DSS via magnetic tape or some other means.

The batch control document should contain a Section 26 certification for cheque requisition for the batch. The department is responsible for ensuring that individual documents have been properly certified and DSS need only verify the signature on the batch control document. All data for transmission via magnetic tape must be accompanied by a document certifying the transactions on the tape. Data may also be transmitted to DSS via direct electronic transmission lines; in these cases, other control methods must be introduced to replace batch control.

The DSS data processing systems will use the departmental batch control information to control their own processing. The batch control data should be returned to departments for reconciliation purposes together with the listings required to identify transactions which have been processed, transactions which have been returned as non-processable or transactions which have been processed but flagged for some anomaly or peculiarity identified by the system edits. This information will assist in ensuring an adequate audit trail.

(d) Error Control

Departments will be required to design and implement internal procedures to monitor their own pay administration and ensure the timeliness and accuracy of pay input. One of the features of such a system should be a control to ensure the prompt correction and re-submission of any transaction returned or flagged as a possible error. This control will be supported by the DSS system, which will maintain a control record to ensure resolution of each returned item.

The TBS Pay Administration Coordination Group will develop means to monitor the total pay administration process. Among the techniques used will be the gathering of statistics on the number and types of errors, and the length of time taken to correct them.

(e) Departmental Monitoring Systems and Pay Administration Performance Standards

It will be the responsibility of departments to design their pay administration process so that it will be capable of meeting the following target standards on a continuing basis. (Obviously, this responsibility can only be met if the DSS system is also capable of processing within specified time limits.)

• on initial appointment, the first cheque, covering the entitlement for the first pay period, should be available (except for employees paid in arrears) within 10 working days;
• employees paid in arrears should receive the first cheque, covering the entitlement which is based on time worked in the first pay period, at the end of the second pay period;
• on being struck off strength, the last cheque should be available within 10 working days of the SOS effective date;
• all changes should be reflected in the two-week pay period following the one in which the change is authorized.

This capability can be assured by means of the internal monitoring system that the Pay Study Task Force recommends be implemented within each department. Section 5.4 of the Phase 3 Report gives a description of the techniques of such a monitoring system and may be used as an implementation guide.

(f) Verification of Outputs and Other Process Controls

The department's responsibility for pay processing does not end with the reporting of input data to the Department of Supply and Services for processing and cheque preparation. The Pay process differs from the processing of other expenditures in that the authorizing input document sent to Department of Supply and Services does not contain the amount of the cheque to be produced. Rather, the input document, already certified under Section 27 and Section 26 of the FAA for payment normally contains only the components required for calculation purposes such as annual salary or hours worked; the DSS pay system calculates the gross/net pay. It follows that the persons delegated the authority under Section 27 and Section 26 must ensure that the pay transactions they have authorized are actioned. Pay output should be reconciled with input. Treasury Board Secretariat will ensure that the DSS pay system is designed to provide departments with whatever data is necessary to effect this reconciliation.

Managers should review charges being made against their budget. This is not to suggest that the manager (or delegate) calculate the amounts of pay but that a review be made for reasonableness of amounts and to ensure that transactions such as TOS, Transfer and SOS have been implemented. Such reviews also apply to extra duty pay and allowances.

In addition, a number of other controls should be in place in the pay process. These are defined in an amendment to the Guide on Financial Administration which has been issued on "Control of Receiver General Cheques". This amendment along with a letter of guidance was sent to departments and clearly stated that the responsibility for ensuring these controls are operating properly rests with the senior financial officer of the department.

The requirement of this letter and the amendment to the Guide are not changed by the contents of this circular. Some additional comments can however be made.

The amendment to the Guide sets out certain principles relative to the distribution of cheques, and states:

These statements do not mean that a financial officer must be responsible for cheque distribution but rather that whoever is responsible must be independent of the preparation and signing of pay input and this, therefore excludes persons with Section 27 and Section 26 authority, with regard to payroll, whether they be in Finance or Personnel. Because cheque distribution is seen as a vital financial control, the person responsible must take functional direction from the senior financial officer of the department.

ANNEX B

B. FINANCIAL ASPECTS OF PAY ADMINISTRATION PROCESS

(a) Delegation of Financial Authorities

The pay system is both a personnel and a financial system. In accordance with the Guide on Financial Administration, the senior financial officer in the department is responsible for ensuring that proper accounting controls are in place and operating within the departmental portion of the pay process. Similarly, the processing of pay and issuance of cheques within the Department of Supply and Services should incorporate adequate financial controls.

(b) Interpretation of the Guide on Financial Administration as it Relates to Pay Administration

(i) Spending Authority

principles Contained in Guide

Spending authority is subdivided into two elements, before and after an expenditure; that is

The authority to initiate an expenditure is given to the Minister and deputy head of a department by the Financial Administration Act, the Government Contract Regulations, Travel Directive, Removal Expense Regulations and a host of similar regulations made under authority of the Act. Section 27 of the Act requires the certification of contract performance and price by the deputy or other person designated by the Minister.

Spending authority has been defined in this way in an attempt to allow responsibility centre management to work. It gives primary responsibility to operational managers for authorizing expenditures charged to their budgets and they are accountable for the prudence and propriety of each individual transaction.

The initial control point is where a decision is made to expend funds for staff, supplies or services. The second control point is where the manager (or delegate) confirms that the goods or service was satisfactorily provided in accordance with the contract and that the price is correct.

Application Pertinent to Pay Administration

In the application of these principles to pay administration, the initial stage of authorizing expenditures should be delegated to the manager. The second stage of authorizing expenditures requires a certification under FAA Section 27 by the manager (or delegate).

For appointment and revision type transactions, each of which would have been authorized by the manager, Section 27 can be certified by Pay and Benefits on behalf of the manager. This certification is made under Section 27(b) which allows for advance payment because, in fact, no services have been provided at the time of pay input, but controls applied subsequently in the departmental system must ensure entitlement to cheques requisitioned on a recurring payment basis before individual cheques are released to employees.

For extra duty payments or payments in arrears, the certification is being made under Section 27(a) because services have been provided. Wherever possible, such as where departments input leave and extra duty pay documents to a departmental system on an occurrence level reporting basis, Section 27 should be certified by the manager.

Current practices concerning bulk salary revisions initiated by Treasury Board, e.g. collective bargaining agreements, will be reviewed for consistency with the principles of this circular.

It should be emphasized that whoever is delegated this Section 27 authority, is responsible to ensure accurate input to the pay system; errors subsequently identified by manual verification or computer edit within DSS will be returned for correction to their source.

(ii) Payment Authority

Principles Contained in Guide

Payment authority is the authority delegated by the Minister, under Section 26 of the FAA, to financial officers of the department. Officers with payment authority are responsible for:

The guide also states that spending authority and payment authority must not be exercised by the same person in respect of a particular payment. This principle recognizes the need for a division of duties in order to maintain probity.

Application Pertinent to Pay Administration

In the previous Section, it was recommended that spending authority be delegated to managers and that certification be made by the manager (or delegate) according to the type of transaction. Because of the need for independent control and to ensure that all the requirements for the control of funds and the requisitioning of payments are met, payment authority should be vested with financial officers. An important factor in recommending that financial officers certify under Section 26 is that the certification required under this section includes the statement that the payment will not result in an expenditure in excess of the appropriation and will not reduce the balance in the appropriation to the extent that it would be insufficient to meet the commitments charged against it.

Certain pay-related data, such as status changes which are input to the pay system, do not require certification under the FAA. For control purposes, however, these documents should be approved in the same manner as other documents to ensure that changes other than pure status changes are not being input without proper approval.

(iii) Commitment Authority and Man-year Control

Principles Contained in Guide

Authority to give commitment certificates is delegated by the deputy head to appropriate officers. Before a commitment is entered into, a commitment certificate is required under Section 25 (l) of the FAA that there is sufficient unencumbered balance available in the relevant appropriation. This authority, which is basically a sub-division of spending authority, may be delegated to the some officers having spending authority or to some central organization, as best suits the department.

Application Pertinent to Pay Administration

The pay administration process has two major responsibilities relative to commitment control. Firstly, it must ensure that the Section 25 certification is obtained where required before any further processing is carried out. Secondly, the pay administration process must supply the required information to finance for the maintenance of the commitment control system.

Commitment control over extra duty pay and certain allowances must be handled in a different manner. In this case, the commitment is made when a manager instructs or gives permission to an employee to work extra duty. After the overtime has been worked and an extra duty report is prepared resulting in a pay input, an expenditure situation exists and a Section 25 certification should not be required by the pay process.

The control here should be based on financial reports which show the manager the amount expended against the amount budgeted.

Application to Man-year Control

Treasury Board Circular 1970-131 sets out the requirements for man-year control within departments, including a quarterly report to Treasury Board Secretariat. The Circular indicates that man-year utilization may be measured using information from paylists. Many departments have much more sophisticated systems which get their man-year utilization data from special reports prepared by managers, time sheets or management information systems, which perhaps use the 2517T for input.

Nevertheless, the need for man-year control within the department may require a combined certification for the availability of man-years and dollars on the staffing action request documentation.

The certification of availability of man-years would be a departmental requirement in response to a TBS control; it is not statutory or pay requirement unless used as a basis for certification of availability of funds in departments where salaries are held in a single departmental allotment.

ANNEX C

C. PAY ADMINISTRATION ORGANIZATION

The present organization for pay administration is made up of parts of TBS, DSS and the departments. A total organizational structure operating within the present government structure will be identified to ensure the operational integrity of pay administration. This organization will include means of advising policy makers of potential operational problems, methods of communicating required changes to all the departmental units at the same time, a training and self-teaching scheme, a monitoring system to ensure all parts are working together, and an accountability process.

In order to do this, the major pay administration* responsibilities assigned to each area will be:

Treasury Board Secretariat

• establishing pay administration objectives including policies and regulations;
• providing guidelines and performance standards;
• establishing an accountability system which will include monitoring the accuracy and integrity of pay administration;
• ensuring the recommendations of the Pay Study Task force are implemented.

Department of Supply and Services

• developing and operating the pay processing system according to prescribed standards;
• providing timely application direction to departments, including operating manuals and related training schemes when necessary.

Departments

• paying employees;
• accuracy, integrity and timeliness of their pay administration processes;
• counselling employees;
• accountability for internal pay administration.

(a) Treasury Board Secretariat

A Pay Administration Coordination Group (PACU) has been established within the Personnel Policy Branch of TBS, initially to coordinate the implementation of the PAY STUDY TASK FORCE recommendations and thereafter to continue in the following functions.

(i) Pay Policy Coordination

PACU will coordinate the administrative processes related to pay policy and its application with pertinent divisions of the Treasury Board Secretariat, DSS and departmental personnel. An example of this coordination role is that PACU has a representative on the Pay Policy Project Team which will create policy and write the pay subchapters in the 510 series of the Personnel Management Manual.

This involves:

(ii) Coordination of Central Systems Requirements

There is a need to coordinate the requirements of the many central systems. A structured approach to this coordination role is now being made.

Examples are:

The further analysis of leave and extra duty reporting. In order to carry out this analysis, participation is required by PAY, ALOSS, Data Collector and Departments to ensure that requirements are met.

A "Superannuation/Pay Relationship Study" to review the close alliance between the present responsibilities of the pay offices, superannuation division and departments, given the anticipated changes in pay and superannuation administration.

(iii) Training

PACU will work with DSS and the Public Service Commission in the development of a training program for departmental pay administrators.

(iv) Monitoring

PACU will design and implement a system to monitor and review the total pay administration process. This will include the assessment of all available data in cooperation with other TBS review groups in Personnel, Finance and Administrative Policy Branches.

(v) Future Pay Systems Development

PACU will work with DSS and Departments to evaluate future systems needs, carry out cost/effectiveness analyses and coordinate future changes to pay administration.

(b) Department of Supply and Services

DSS will provide a coordinated national pay service through its Regional Pay Offices. These regional offices will be supported by the Compensation Services and Data Processing Branches who will continue to develop the pay system and provide training, direction on the application of pay policy, and user instruction and procedures manuals.

(c) Departments

It is known that departmental organizations for pay administration vary widely according to the particular role, system of management, size and geographical dispersion of the department. For this reason each department is requested to submit to PACU a description of its current and proposed organization for pay administration.

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Note

*Other "pay-related" responsibilities such as support for Superannuation and central personnel systems are unchanged by this circular.[Return]

 

ANNEX D

D. DEPARTMENTAL ORGANIZATION FOR PAY ADMINISTRATION

Present Organization

Senior Departmental Pay Administrator:

• Reporting relationship to Deputy Head
• Line or functional relationship to Pay & Benefits Units.

Structure for the pay function:

• Number and location of Pay & Benefits clerks
• Number and location of Pay & Benefits supervisors
• Management and administration
• Financial personnel associated with Pay
• Number of pay accounts by location and which DSS Pay office maintains them.

Responsibilities

• Operations
• Monitoring
• Training
• Other (department to specify).

The inclusion of organization charts and flow charts of the pay operation would be of considerable assistance in reviewing this submission.

Proposed Organization

Topics as for present organization.