Directed Audit of Departure Incentive Programs March 1997

Executive Summary

Background

Program Review and general resource reductions created the need for departments and agencies to reduce total expenditures. To facilitate the achievement of resource reductions, the government established special programs called the Early Departure Incentive (EDI) and the Early Retirement Incentive (ERI). These programs were in effect for a three-year period with the EDI ending June 22, 1998 and the ERI ending March 31, 1998.

Treasury Board directed that departments and agencies complete an internal audit of their use of the departure incentives programs and associated expenditures around the midpoint of the three-year Program Review implementation period.

Overall Findings

Industry Canada achieved a significant workforce reduction of approximately 770 FTEs in 1995-96. Although this was lower than originally forecasted, it still represents an achievement of two thirds of the Department's overall Program Review Full time equivalent (FTE) reduction target within the first year alone.

Despite the overall positive findings of this audit in terms of planning, infrastructure, monitoring and compliance, the Department's net results in terms of employee population reduction, salary expenditure reduction and payback provide the appearance of a more negative message. In large part this is because, at the corporate level, the impact of reductions is obscured by the normal migration of employees and the addition of new resources for new initiatives such as Technology Partnerships Canada. The Department has not explained its reductions well in the context of its original resource budget and newly approved incremental resources.

Planning

According to the Treasury Board Secretariat, a guiding principle and a key result indicator of cost effectiveness of the departure incentive programs is a 12-month payback for employee departure expenditures. Payback refers to the period of time necessary to recoup the departure incentives' expenditures through savings in salaries and benefits. Industry Canada's payback for 1995-96 exceeds 12 months. Based on a preliminary forecast in early 1996 it was expected to rise to almost 18 months by 1997-98. A revised forecast in early 1997 indicates that the payback result will be less than 16 months. The primary reason for the payback in excess of 12 months is the high proportion of ERI cases among the departing employees. For each ERI case TBS estimates a cost to the government of the equivalent of two years salary for the ERI pension penalty waiver, in addition to pay in lieu of surplus notice (usually six months). While the auditors observed that reduction forecasts and results are fluctuating, it must be recognized that changes in numbers are to be expected insofar as the Department is still in the midst of implementing the Program Review reductions. Plans and forecasts are being adjusted based on emerging experience.

The Department has attempted to minimize the impact of workforce adjustment situations on employees by identifying persons interested in the departure incentives programs. This has permitted the Department to meet its operational requirements and workforce reduction objectives simultaneously, while supporting employee interests. In this context, the Department has had little control over the proportion of ERI cases that negatively contribute to the payback result. In fact, 420 of the 540 packages Industry Canada achieved in 1995-96 had already been issued prior to receiving a letter, dated December 13, 1995, from TBS to departments relating to the guiding principle of a 12 month payback.

Overall, Industry Canada's planning for its workforce reductions and its administrative infrastructure for implementation were found to meet Treasury Board expectations and criteria. The only notable administrative deficiency is the lack of a reliable planning and forecasting system for the Department's FTEs as a result of the 1993 amalgamation of four organizations and four different systems into the current Department. These events were immediately followed by the February 1995 Program Review initiative which had significant impact on Human Resources Branch's (HRB) ability to dedicate the appropriate number of resources to the "building of an HR database". PeopleSoft, the new human resources information system gives accurate information on staff but does not currently provide for FTE forecasting.

Program Management

In general, Industry Canada has managed its workforce reductions well to date. It has sound monitoring and reporting mechanisms in place such that departmental management is informed of the pace and degree of progress of reductions as well as other pertinent information.

Compliance

Compliance testing indicates few substantive problems with individual departure cases.

Update on Management Action Taken (July 2000)

Workforce adjustment results were monitored, summarized and reported to senior departmental management during the three years. The Human Resources Branch (HRB) Brokerage Unit prepared a departmental Employment Adjustment Plan (EAP) which was updated monthly for the period 1995-96, 1996-97 and 1997-98. A semi-monthly Employment Adjustment Report was also created showing the Work Force Adjustment reductions to date, by type and by sector/branch, and was provided to department managers and employees' union representatives. In addition, the Brokerage Unit maintained a one page summary entitled Industry Canada Priority Employees which was circulated to the sectors/branches human resources units.

The Department currently manages its numbers of full time equivalent staff (FTE's) more efficiently through the implementation of PeopleSoft, a centrally-accessible human resources information system. The system is now fully operational allowing access to demographic data for both managers and HRB staff. HRB publishes annually an analysis of the Industry Canada workforce. The department will conduct a detailed analysis of its major job classification groups in 2000-2001 so as to be better able to forecast turnover and retirement/departure rates.

Through the departure incentive programs and the opportunity to exchange positions with another employee wishing to take advantage of the incentive program, the department was able to meet its workforce reduction targets without a single involuntary lay-off.

TOTAL ERI/EDI/PIL for the period of April 1, 1995 to September 30, 1998 was as follows:

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Date Modified: 2005-12-13 Important Notices