Ottawa's Phoenix overpayment bill climbs to $295M as government expects not to recover it

The federal government now estimates $295 million in Phoenix pay overpayments may never be recovered, up $131 million from the year before. That is money that went out to public servants who were paid too much, and the government has written it off as a doubtful account in its audited financial statements, released Friday, Nov. 6. Auditor General Karen Hogan's office published its commentary on those figures Monday, Nov. 9.

The last time Phoenix's errors came up in an audit, in March, the backlog was at its peak. The pay centre's backlog as of March 31 stood at 181,649 transactions, with 110,867 more than a year old.

The government still expects to recover $137 million of what is outstanding. It has six years to claw back an overpayment; after that it cannot force repayment without the employee's agreement. The auditor general's analysis says roughly 8 per cent of the backlog was already older than six years.

Phoenix is being replaced by Dayforce, a human resources system with a preliminary estimate of more than $4.2 billion. The auditor general warned in March that Phoenix's pay errors could carry over into Dayforce if they are not dealt with first, and this week her office repeated it: "These issues should be address before organizations transition to Dayforce so that long-standing problems are not carried over to the new system." Her office also recommends departments focus on recovering outstanding overpayments before they move.

Treasury Board, which oversees the pay rules, has made "slow progress" in simplifying and standardizing them, the audit found.

A January 2026 decision by Public Services and Procurement Canada shortened the schedule for moving departments to Dayforce by about three years, from a planned 2034 completion, and vendor support for Phoenix could end as early as 2036. The government has not said how it will respond to the $295 million estimate.