Legal Agent Account Verification Process
2. Observations – Financial control framework for account verification
2.1 Policies, Procedures, and Guidelines
LPMC procedures regarding legal account verification need to be reviewed and updated and the importance of complying with these procedures communicated to the regional offices.
LPMC has made great strides in developing policies and directives for procuring and appointing legal agents and have successfully conveyed the requirements to the regional offices. However, with regard to legal agent account verification, LPMC needs to expand on the procedures they have developed by providing forms and checklists that serve the needs of all regional legal portfolios and by prescribing the use of the standard forms and checklists by the regional offices.
We found that regional legal portfolios have developed their own operational manuals, and have developed and customized their own forms. For example, the ORO uses an Imprest Cheque Voucher as an invoice transmittal form to PPSC rather than the standard memo provided by LPMC. In the BCRO the Checklist for Agent Account Review is significantly different from the Compliance and Verification Checklist provided by LMPC. We note that the BCRO checklist is more comprehensive than the checklist provided by LPMC. It requires that the legal agent provide a quarterly progress report on the file; that a running total of invoices received and available balance on the contract be maintained; and that staff verify by signature that iCase has been updated and the checklist is complete prior to the file being closed. In requiring the completion of the checklist before closing the file, the BCRO has been more prescriptive than LPMC. In the ORO and the QRO, checklists developed by LPMC to assist in taxing legal agent accounts are not on the files. In addition, the checklists used in the ORO and QRO are not as extensive as either the LPMC checklist or the BCRO checklist. As a result, evidence of financial monitoring as well as monitoring for performance milestones varies among the regions.
LPMC has provided a standard memo for transmitting taxing information to the client departments as well as to PPSC for data entry. We found there is inconsistent use of the standard memo when transmitting the summary taxing information which could lead to errors in data capture and reporting. It is our opinion that LPMC should prescribe standard procedures, forms and checklists in relation to legal agent account verification that must be used by all regional offices. Regional compliance to these procedures would ensure that legal agent accounts are properly taxed; that data captured is complete and accurate; that reporting on the status of legal agent accounts is consistent; that file content is complete; and that a detailed audit trail is provided.
The audit team’s review of the legal agent account verification process disclosed inconsistent use of a taxing stamp. Instructing counsel in the BCRO do not use a taxing stamp. The Legal Agent Supervisor or Senior Counsel is signing the standard memo developed by LPMC, which confirms that the invoice has been taxed, and is attaching it to the invoice. The standard memo is generally not signed by the instructing counsel who is responsible for taxing the account. A copy of the memo is attached to the invoice when it is forwarded to the client department and to PPSC. In the ORO and QRO, we found that staff generally apply a taxing stamp to the invoice when processing an agent account. However, when we reviewed the accounts in our sample, we found some instances where the taxing stamp had not been used and instead a memo had been attached to the taxed account.
In our opinion, it should be mandatory for all legal agent accounts to have a standard taxing stamp applied to the account. Unlike a cover letter, a taxing stamp cannot be separated from the invoice. The stamp should be signed and dated by the instructing counsel who is responsible for taxing the account. The use of the taxing stamp should be set out as a mandatory requirement in the procedures provided by LPMC.
Recommendation and Management Response
1. It is recommended that the Director, LPMC, in consultation with the Chief Financial Officer, review and update procedures regarding account verification for use by all regional offices. (Medium Risk) Footnote 1
Agreed. The LPMC, in consultation with the Chief Financial Officer Branch (CFOB), will review the account verification (taxation) procedures within this fiscal year (2011-2012). This will include the revision of all existing guidelines, forms, templates, and checklists used in the taxation process. Once the procedures have been finalized, they will form the basis for an operational Directive that will be implemented in all regional offices and legal services units across the Department.
Review of the taxation procedures and drafting of the Directive: March 31, 2012
Implementation of the Directive and related training: June 30, 2012
Recommendation and Management Response
2. It is recommended that the Director, LPMC, in consultation with the Chief Financial Officer, mandate the use of a standard taxing stamp on all legal agent accounts. (Medium Risk)
Agreed. The LPMC will mandate the use of a standard taxing stamp on all legal agent accounts. The LPMC will design the stamp and draft the relevant procedures in consultation with the CFOB. The requirement to comply with the use of the taxing stamp will be implemented by June 30, 2011 and will be communicated to relevant stakeholders by the ADAG, Litigation.
The mandatory use of the taxing stamp will also be referenced in the updated taxation procedures and integrated into the operational Directive described in our response to Recommendation 1.
Implementation of the new taxing stamp: June 30, 2011
2.2 Rates and Delegation
The hourly rate guidelines and the delegated approval authorities need to be reviewed and modified.
Guidelines for the hourly rates legal agents may be paid are set out on the Agent Affairs Program site on JUSnet. We found that these rates are well below current market rates, even for routine work. We were told that the low rates are affecting both the time it takes to engage a legal agent and the priority the agent subsequently gives the file.
Instructing counsel in the Public Safety, Defence and Immigration Section (PSDI) of the BCRO, who have a high volume of legal agent files, indicated that procedures require them to contact a minimum of three firms per file before selecting an agent. Typically, however, they must contact five or six firms before they can find an agent willing to undertake a file. The week prior to the audit interview, they had contacted approximately 15 firms for one file. Counsel also advised that legal agent rates are well below market rates and that this appears to be resulting in more junior counsel being assigned to files. Instructing counsel in the Advisory Section of the Aboriginal Law Division in the ORO noted difficulties in engaging real estate counsel to act as agents because of the current fee guidelines. They advised that they could not obtain approval for an hourly rate higher than $125 for real estate work, which is far below the normal market rate. As a result, they have difficulty engaging experienced real estate counsel to act as legal agents or, once appointed as agents, to complete the work in a timely manner. LPMC advised us that the regional perspective concerning the current hourly rate guidelines seems to point to a misunderstanding of how to apply competitive process and guidelines. Regional offices have been advised that the hourly rate guidelines serve only as a point of reference in establishing remuneration. Remuneration is determined on a case-by-case basis by taking into consideration a number of factors, such as complexity of the work, area(s) of expertise and level of experience required of counsel, urgency, and regional market in which services are required. Other factors may include: level of risk; level of effort required for counsel to become sufficiently familiar with key issues; political sensitivities and/or high public profile surrounding work in question; and remuneration paid in the context of previous agent appointments for the provision of similar services. LPMC indicated that, in moving forward in recent years with the introduction of competitive approaches for the identification and selection of legal agents, the fee guidelines have become a secondary factor in establishing remuneration.
Senior General Counsel have delegated authority to approve hourly rates for legal agents up to $125/hour. Rates in excess of $125 must be approved by the ADAG Litigation Branch, the Associate Deputy Minister, or the Deputy Minister. From our interviews we found that the process of sourcing and engaging legal agents could be streamlined if rates in excess of $125 could be approved at the local level.
At the time of the audit, a review was under way to revise the hourly rate guidelines that assist in the establishment of legal agent remuneration. We were told that the hourly rate guidelines have not been increased since 1991/92. It should be noted that delegated approval authorities will need to increase accordingly.
Recommendation and Management Response
3. It is recommended that the Director, LPMC ensure that the hourly rate guidelines and the delegated approval authorities are reviewed and modified. (Low Risk)
Agreed. With the introduction in recent years of competitive processes for the selection of legal agents, the hourly rate guidelines have become a secondary factor in establishing remuneration as market forces come into play through the proposal process. The guidelines remain relevant in the few cases where the work is assigned to an agent on a sole-source basis or further to a referral to the Minister of Justice.
The LPMC has started to work on the review of the hourly rate guidelines and the delegated approval authorities, and has also initiated consultations with relevant stakeholders with a view to finalizing recommendations for approval this fiscal year. We expect that amendments to the Department’s Supporting Notes to the Delegation of Financial Signing Authorities Chart, and perhaps to the Chart itself, will be required by CFOB.
Review and recommendations: December 31, 2011
Amendments to Delegation Chart and Supporting Notes by CFOB: March 31, 2012
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