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ARCHIVED - Audit of the Management of the Public Service Disability Insurance Plan


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Executive Summary

Background

The audit of the Management of the Public Service Disability Insurance Plan was part of the Secretariat's approved 2008–11 Three-Year Risk-Based Audit Plan.

What is the Disability Insurance Plan?

The DI Plan provides employees in the federal public service who are included in collective bargaining and who are members of the plan with benefits to replace a substantial portion of earnings lost as a result of extended periods of disability.

The DI Plan is intended to supplement other disability benefits available through other avenues such as, for example, the Public Service Superannuation Act, the Government Employees Compensation Act, the Canada Pension Plan and the Quebec Pension Plan. It assures a reasonable level of income during periods of long-term disability.

Objective and scope

The objective of the audit was to assess whether an appropriate management control framework is in place within the Secretariat to support activities related to DI Plan management.

The audit included all significant activities within the Secretariat related to the management of the DI Plan. Specifically, the audit focused on the activities in the Pensions and Benefits Sector (the sector responsible for management of the DI Plan) and how this Sector interacts with other stakeholders accountable for various elements of DI Plan delivery:

  • Public Works and Government Services Canada (PWGSC);
  • Sun Life Assurance Company of Canada, referred to as "the contractor";
  • Office of the Superintendent of Financial Institutions (OSFI); and
  • National Joint Council, Disability Insurance Board of Management.

The four areas of focus of the audit are as follows:

  1. Roles, responsibilities and accountabilities
  2. Monitoring and oversight
  3. Risk management
  4. Contract administration

Key findings

Roles, responsibilities and accountabilities

Roles, responsibilities, and accountabilities relating to DI Plan management are complex and formally defined in seven documents maintained by the Secretariat, PWGSC and the National Joint Council. While these were found to be communicated and generally understood, the audit identified areas in need of updating and/or clarification, particularly the roles, responsibilities and accountabilities relating to the Secretariat and PWGSC.

Similarly, the audit identified the need to update related authorities and delegations. An initiative is currently underway to review and draft new delegation instruments.

While elements of a process are in place to identify and maintain the knowledge and skills necessary for DI Plan management at the Secretariat, an enhanced approach to recruitment and succession planning is necessary given the complexity and specialized skills required to manage the plan.

Monitoring and oversight

The Secretariat undertakes a number of monitoring activities in support of DI Plan management, such as periodic analysis of the financial health of the plan and regular meetings with the contractor and with PWGSC. However, the process to monitor achievement of DI Plan objectives and compliance to relevant authorities, including key monitoring activities and responsibilities, is not formally defined.

Formal reporting requirements are in place between the contractor and the Secretariat. There is a need to formally define reporting requirements for other stakeholders involved in DI Plan delivery, including those internal to the Secretariat.

The audit team found that information provided by the contractor meets the requirements of the contract; however, this information has not been consistently verified for accuracy by the Pensions and Benefits Sector. Enhancements are also necessary for ensuring the accuracy of information relating to other DI Plan delivery stakeholders that is used for monitoring and decision-making purposes. This includes the verification of payments made to the contractor by PWGSC on behalf of the President of the Treasury Board.

Risk management

A comprehensive and systematic process has not been formally defined that captures all necessary risk management activities. However, some risks and issues that could impact DI Plan management are currently identified and managed through various means, such as the Business Continuity Plan, the annual business plan, and financial risk analysis performed within the Pensions and Benefits Sector.

Contract administration

File documentation regarding the day-to-day administration of the contract was found to be complete, including information provided by the contractor to the Secretariat as per the insurance policy (contract).

There is evidence of contract oversight activity; however, the current contract does not contain specific performance measures against which to assess the contractor. It should be noted that the Pensions and Benefits Sector is aware of this issue and has included specific performance measures in the recent retendering of another insurance benefits plan contract.

While file documentation regarding the day-to-day administration of the contract was found to be complete, some documentation in support of past contract changes was not available for review by the audit team. There is a need to ensure that key contractual documents and related justifications are retained on file in order to support decision making and to maintain corporate memory.

A formal process is not currently in place to verify the accuracy of Treasury Board's employer share of premiums and the claim administration fees against the information provided by the contractor.

Overall conclusion

A number of management control framework elements are in place to support the Secretariat's accountabilities in managing the DI Plan. Further improvements are required in order to:

  • clarify and update roles, responsibilities, accountabilities and authorities;
  • ensure that monitoring, reporting, and risk management processes are formal, systematic and comprehensive; and
  • enhance and formalize recruitment and succession planning processes.

Recommendations

The following recommendations are directed to the Assistant Deputy Minister of the Pensions and Benefits Sector.

1. Roles, responsibilities, accountabilities and authorities for the Secretariat and its DI Plan delivery stakeholders should be reviewed, clarified, adjusted where necessary, and summarized in a consolidated manner.

2.  Existing monitoring and reporting activities should be enhanced and formally defined to support DI Plan management. The monitoring aspect of such a framework should include the following:

  1. Definition of monitoring objectives, key activities and related responsibilities;
  2. Analysis of the accuracy and completeness of information provided by delivery stakeholders;
  3. Verification of payments related to the DI Plan;
  4. Measures to assess performance; and
  5. Documentation and retention requirements relating to DI Plan activities.

3.  Existing risk management activities in support of DI Plan management should be enhanced, formally defined, and implemented to ensure that risks are regularly identified, assessed, and mitigated in a comprehensive and systematic manner.

4.  Recruitment and succession planning processes should be enhanced and formalized to ensure that the necessary knowledge and skills related to insurance benefits programs are maintained.

A management response and action plan has been developed by the Secretariat and is presented in Appendix 3.

1.  Background

1.1  What is the Disability Insurance Plan? 

The DI Plan provides employees in the federal public service who are included in collective bargaining and who are members of the plan with benefits to replace a substantial portion of earnings lost as a result of extended periods of disability.

The DI Plan is intended to supplement other disability benefits available through other avenues such as, for example, the Public Service Superannuation Act, the Government Employees Compensation Act, the Canada Pension Plan and the Quebec Pension Plan. It assures a reasonable level of income during periods of long-term disability.

1.2  Who is responsible for the Disability Insurance Plan?

The ultimate responsibility and accountability for the DI Plan rests with Treasury Board[1] as the employer of the core public administration.[2]

The Secretariat in its role as the administrative arm of Treasury Board oversees the management of the DI Plan.

Within the Secretariat, the Pensions and Benefits Sector, which is part of the Office of the Chief Human Resources Officer, is responsible for managing insurance benefits plans such as the DI Plan on behalf of Treasury Board.

Pensions and Benefits Sector officials are responsible for the following:

  • Reviewing and monitoring DI Plan activities; and
  • Providing analytical and policy advice to senior management and to Treasury Board.

1.3  How is the Disability Insurance Plan delivered?

Beyond Treasury Board and its Secretariat, there are a number of other key stakeholders involved in the delivery of the DI Plan. The following provides a brief description of their respective roles:

  • Sun Life Assurance Company of Canada (Sun Life)—is the contracted underwriter and plan insurer for the DI Plan with the Government of Canada. In this document, Sun Life is referred to as "the contractor."
  • Public Works and Government Services Canada (PWGSC)—is responsible for remitting monthly premiums to the contractor; providing employee information, when necessary, to the contractor and the Secretariat; and providing advice, information, and training on insurance benefits plans to Human Resources offices within government departments and agencies.
  • Office of the Superintendent of Financial Institutions (OSFI)—is responsible for providing advisory actuarial services through the Office of the Chief Actuary to the Pensions and Benefits Sector to manage the financial aspects of the DI Plan.
  • Disability Insurance Board of Management—is responsible, as part of the National Joint Council,[3] for providing advice to the President of the Treasury Board on the financial and administrative matters of the DI Plan and is part of the claims appeals process.

1.4  What is Treasury Board's employer share cost of the Disability Insurance Plan?

The cost of the DI Plan is comprised of monthly premiums paid to the contractor, which are shared between the employer (85 percent) and the employee (15 percent).

On behalf of the President of the Treasury Board, PWGSC calculates and remits Treasury Board's employer share of premiums to the contractor along with the employees' share. Treasury Board's share is then recovered by PWGSC and is ultimately charged to Treasury Board Vote 20—Public Service Insurance.

In fiscal year 2008–09, the employer share of the DI Plan was approximately $219 million and represented the third highest total expenditure of all Treasury Board insurance benefits plans.