Tax Law Services Ottawa Section
July 2011

Executive summary

Overall Opinion

Overall, we found that the practices, procedures, and activities relating to the framework within which the TLS – Ottawa Section delivers its services to clients were sound. Overall, the TLS – Ottawa Section has management and control structures in place to support the effective delivery of its services to clients; however, the audit identified some opportunities for improvement. These opportunities include the enhancement of business planning initiatives, the formalization of succession planning activities, the conduct of an organizational review to assess and support resource levels, the additional support of training related to financial administrative responsibilities, and the consideration of options to improve the reliability of related information systems.

Background

The Department of Justice Tax Law Services (TLS) Portfolio provides legal advice and litigation services to the Canada Revenue Agency (CRA) through regional TLS sections located across Canada. The Portfolio is responsible for representing the Crown in all tax-related matters before the courts.

The TLS – Ottawa Section provides a wide range of legal services to the CRA, including conducting litigation before the Tax Court of Canada, the Federal Courts and the Supreme Court of Canada.

The scope of the audit included the operations and activities of the Tax Law Services Section in Ottawa. The audit planning and on-site examination phases were carried out between May and November 2010.

Management Framework

The TLS – Ottawa Section has a sound management control framework that includes the following key management functions: governance and strategic direction; business planning; organizing; controlling; and leading and communicating.

The TLS – Ottawa Section has an appropriate oversight body in place effectively providing operational guidance and direction. The National Tax Board of Directors is the central oversight body for the TLS Portfolio. Senior management from the TLS – Ottawa Section are included in the membership composition of the National Tax Board of Directors. Its meetings serve as the primary forum for discussion and strategic decision making.

The Director and Deputy Director, TLS – Ottawa Section conduct semi-annual business planning sessions with the TLS Portfolio Business Management Section and the Assistant Deputy Attorney General (ADAG), TLS Portfolio, as well as regular weekly management meetings with the ADAG to discuss business planning initiatives. However, the TLS – Ottawa Section needs to develop a business plan to formalize the Director’s regular communications with the ADAG regarding the Ottawa Section’s objectives.

The organization of the TLS – Ottawa Section is appropriate and roles and responsibilities are generally understood. The TLS – Ottawa Section is located in close proximity to the TLS Portfolio Office, which facilitates regular communication and collaboration. TLS – Ottawa Section senior management hold regular meetings to discuss pertinent organizational and financial matters. Clear job descriptions define the responsibilities of each job category and classification level. We found that the organizational structure allows for management and staff to be clearly held accountable for the conduct of their duties.

The TLS – Ottawa Section has an appropriate legal file assignment process in place. The Associate ADAG (Tax Assessment) assigns a complexity level to a file and an initial risk level and then assigns the file to the TLS – Ottawa Section. Once the file is allocated to the TLS – Ottawa Section, the Director in consultation with the Deputy Director evaluates the initial file assignments and ensures that all files are assigned to lawyers having the appropriate skills and experience. The Director and Deputy Director meet with each lawyer personally to discuss caseload requirements and current workloads.

Effective communication exists in the TLS – Ottawa Section to provide the appropriate level of leadership, guidance, and direction for Ottawa Section personnel. The Director and Deputy Director communicate with staff through regular bi-weekly meetings and ongoing one-on-one communications. Also, the level and extent of the TLS Portfolio Office’s direction to and communication with Ottawa Section senior management assists the Director in providing effective communication and leadership to Ottawa Section staff. Regular meetings occur between Ottawa Section senior management and the TLS Portfolio Office and an open-door policy is maintained. In addition, the audit determined that the information system Fiscal Path facilitates the dissemination of necessary Portfolio information.

Human, Financial, and Materiel Resources

Formal succession planning documents are not in place in the TLS – Ottawa Section. Succession planning activities in the section focus on knowledge transfer activities rather than on the replacement of people. However, these activities have not been formalized in an official succession plan. Due to the highly technical nature of tax law casework, there is a need to maintain sufficient expertise to address workload capacities. In our opinion, the TLS – Ottawa Section should develop a formal succession plan and update it on a regular basis.

The TLS – Ottawa Section has an appropriate ratio of legal counsel to legal assistants to assist counsel in completing their case files. However, we were told that the number of administrative assistants in the TLS – Ottawa Section is insufficient to complete administrative workload requirements. The TLS – Ottawa Section Director should conduct an organizational review to determine the appropriate level of administrative assistants.

Both paralegals and legal counsel advised that legal counsel are relying more on the Ringtail system to manage legal documents, and consequently, legal support staff must be proficient in its use. We were told that in the TLS – Ottawa Section, paralegals in particular require additional training on using Ringtail. The audit team was advised that specific Ringtail training is planned for all TLS Portfolio staff beginning in the fall of 2010.

We also found a need in the TLS – Ottawa Section to provide administrative assistants with additional training on the software tools they use to conduct their financial administrative responsibilities.

An effective performance appraisal process exists to evaluate employees. TLS – Ottawa Section personnel complete individual learning plans and meet the five-day minimum requirement for training under the Department’s Learning Policy.

Flexible work arrangements within the TLS – Ottawa Section are appropriate and made available to all staff. TLS – Ottawa Section senior management grant approvals for flexible work arrangements on a case-by-case basis. All management decisions appropriately consider client obligations and court deadlines prior to the approval of flexible work arrangements.

TLS – Ottawa Section senior management advised the audit team that the implementation of the Law Practice Model is a significant factor impacting all facets of operations including hiring and retention of counsel. We were told that the Law Practice Model limits management’s ability to both promote capable legal staff and offer appropriate compensation to top recruits. TLS Portfolio senior management advised the audit team that the Portfolio has made a formal submission to the Deputy Minister Team to staff senior counsel for new complex and high-risk legal files.

The audit team determined that the TLS – Ottawa Section effectively manages its financial resources and has an appropriate planning and budgeting process. There are no formal TLS-specific procedures manuals in place to help guide administrative personnel. However, TLS – Ottawa Section personnel refer to both departmental and Treasury Board policies and procedures manuals when assistance is required. Personnel at all levels communicate with the appropriate groups, such as the Portfolio Business Management Section, to obtain further guidance and direction when required.

Regular financial reports are generated to provide senior management with a financial overview of the TLS – Ottawa Section. Also, the Director, TLS – Ottawa Section and the Director of the Portfolio Business Management Section meet regularly to discuss various transactions and key general ledger accounts. These meetings help to ensure proper coding of expenses and help validate all expenses charged to the TLS – Ottawa Section.

The audit determined that intellectual and physical assets are appropriately protected. Access to the TLS – Ottawa Section building is restricted and controlled by valid security identification cards. Computer workstations are password-protected and access to files maintained on iCase is granted only to the TLS portfolio staff.

Information Systems

TLS – Ottawa Section personnel stated that the search function of the Fiscal Path system is not user-friendly. Rather than rely on Fiscal Path, Ottawa Section personnel will revert to other sources of research when preparing legal factums and other relevant documents for court proceedings. Fiscal Path is a TLS Portfolio system and options for improving its search functionality should be pursued.

Timekeeping information and legal file administration within the TLS – Ottawa Section is appropriately managed through the use of iCase. Ottawa Section senior management is satisfied with the information contained in the reports produced by iCase and they effectively use these reports in formulating management decisions.

Compliance with Key Legislation

The TLS – Ottawa Section is in compliance with key legislation and policies. The Portfolio Business Management Section conducts random spot checks of the TLS – Ottawa Section and reviews sample transactions throughout the year to verify the appropriateness of the transactions and compliance with policies. Management procedures are in place to ensure compliance is maintained within the TLS – Ottawa Section.

Risk Management and Legal File Management

The early identification and continual monitoring of legal file risk and its potential impact on the client is a fundamental aspect of the TLS – Ottawa Section’s risk management activities. The Associate ADAG (Tax Assessment) provides an initial risk of loss and client impact rating and ascribes the file to a specific TLS regional section. Once a file is received in the TLS – Ottawa Section, the Director reviews the initial risk assessment and the related impact, and in consultation with the Deputy Director, determines which legal counsel should be assigned to the file based on an assessment of the knowledge, skills and experience level of counsel, and the capacity of counsel. During the life cycle of each client file, the risk is monitored and revisited to ensure that the rating remains relevant as the case develops. Continual communication with the client supports the TLS – Ottawa Section legal counsel in determining the appropriateness of the ratings. There are dedicated meetings with the client to address high-risk files and to regularly compare risk reports. The audit team determined that risk management in the TLS – Ottawa Section is appropriate.

The TLS – Ottawa Section is efficient in managing and administering the legal files assigned to the section. The audit team determined that the client is consistently satisfied with the management of legal files by TLS – Ottawa Section personnel and that the TLS – Ottawa Section consistently meets court-appointed deadlines and procedures.

The TLS – Ottawa Section conducts litigation primarily concerning tax decisions made by CRA. As this litigation is reactive, forecasting future demand for TLS legal services is challenging. To the extent possible, the TLS – Ottawa Section is effective in forecasting and managing the demand for future legal work through effective, ongoing communication with the CRA and persistent monitoring of current client files.

Interfaces with other Justice Sectors and Client Departments

There is an appropriate level of communication with other Department of Justice sectors. TLS – Ottawa Section personnel effectively utilize both formal and informal means of communication with other sectors of the Department. When tax matters encroach on other areas of the Canadian legal system, the TLS – Ottawa Section effectively seeks guidance and direction from legal counsel in other portfolios who have specialized skills in the required area.

Interfaces with the CRA are appropriate. There is ongoing, continuous communication through regular committee meetings. We found that the number of committees in place, each with its own specific purpose, objectives, and expected outcomes, as well as the TLS – Ottawa Section’s membership and direct involvement in these committees increases efficient communications and effective direction in the normal day-to-day course of business.

Client Satisfaction

The central client of the TLS – Ottawa Section is the CRA. We determined that the CRA is satisfied with the TLS – Ottawa Section’s level of service. The 2008 TLS Portfolio client feedback survey indicates CRA satisfaction levels are high.

The management responses to the recommendations contained in this report were provided by the Director, Tax Law Services – Ottawa Section.

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