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

2. Background

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 contained 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.

In support of these objectives, eleven new standards were put in place effective April 1, 2012 to standardize the five business processes that collectively make up the CRPI Initiative, namely:

  1. Memorandums of Understanding (MOUs), including Annex Bs that support planning and forecasting;
  2. Timekeeping;
  3. Reimbursable Disbursements;
  4. Invoicing; and
  5. Accounts Receivable Settlements.

In 2013-2014, the Department recovered legal service costs of $330.2M as well as $8.6M (2%) of reimbursable disbursements.

In accordance with the Departmental Risk-based Audit Plan 2014-2017 which was approved by the Deputy Minister on June 5, 2014, Internal Audit Services undertook an audit of the Cost Recovery Process Improvement (CRPI) Initiative. Given the complexity, risks and magnitude of the cost recovery system, this audit was split into two phases. This report represents the results of Phase 1 of the audit which is focused on Governance. Audit results associated with Phase 2 are scheduled for tabling at the September 2015 Departmental Audit Committee (DAC) meeting. The latter phase focuses on efforts undertaken by management to streamline and standardize cost recovery business processes.

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