Report on the Audit of Cost Recovery Process Improvement (CRPI) Initiative - Phase 1 - March 2015

1. Executive Summary

Justice Canada provides litigation and legal advisory services to federal government departments, agencies and Crown Corporations across Canada.  The Department uses a hybrid model to fund its operations, relying on a mix of A-base funding to provide a certain level of legal services, and Net Voting Authority (NVA) to recover the costs of legal services from client organizations over and above this base level. NVA (cost recovery) is an important source of funding for the Department, providing more than a third of the operating budget. The Treasury Board (TB) Common Services Policy sets out a strategic direction and outlines key requirements with respect to cost recovery.

The Cost Recovery Process Improvement (CRPI) Initiative commenced in August 2010 to examine and re-engineer Justice’s end-to-end cost recovery processes and reporting, and in so doing respond to deficiencies noted in the 2010 Internal Audit of the Cost Recovery Framework. The objectives of the CRPI Initiative included improving business processes and enhancing corporate systems with a view to reducing administrative effort, supporting timely cash collection, meeting central agency policies and directives as well as better leveraging established Government of Canada best practices to track and invoice professional services.

The changes flowing from the CRPI Initiative were implemented on April 1, 2012. To support the implementation, CRPI guidance was developed, roles and responsibilities were documented and communicated, and staff from across the Department received training. There is cost recovery reporting and monitoring at the individual client level, namely within Legal Services Units (LSUs) and portfolios. While there is some strategic cost recovery reporting and oversight via the Financial Situation Reporting and year-end financial reporting processes, the frequency and nature of in-year cost reporting does not support senior management in actively monitoring cost recovery and taking corrective action on a timely basis as may be required.

Soliciting feedback from clients following the implementation of major changes to the cost recovery system is critical to ensuring that clients’ needs have been sufficiently considered and addressed. This is particularly the case in regards to Justice’s invoicing processes for legal services. While ad hoc feedback is sometimes received by LSUs in this regard, there is no mechanism in place to systematically solicit and capture information on client satisfaction with respect to CRPI.

The Department has recently embarked on a review of its legal services funding model. While this may lead to changes in the model by which the Department recovers legal service costs from clients, the importance of sound governance processes and practices, recommendations for which are addressed as part of this report, will remain.

Management Response

Management is in agreement with the audit findings, has accepted the recommendations included in this report, and has developed a management action plan to address them. The management action plan has been integrated in this report.

Submitted by:

Original signed by Linda Saunders
March 19, 2015

Linda Saunders
Chief Audit Executive
Department of Justice Canada

Recommended for approval by:

Original signed by Doug Lewis
March 19, 2015

Hon. Doug Lewis
Departmental Audit Committee Chair
Department of Justice Canada

Approved by:

Original signed by William F. Pentney
March 19, 2015

William F. Pentney, Q.C.
Deputy Minister
Department of Justice Canada

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