Legal Agent Account Verification Process
April 2011

Executive summary

Overall opinion

Overall we found that the verification process for paying legal agent accounts is adequate. The process of entering into contracts using letters of appointment as well as the taxing of legal accounts is understood and consistently applied throughout the Department. We did, however, note areas for improvement in making LPMC guidelines more directive to encourage the standardization of legal agent files through the use of forms and templates; in reviewing and modifying the hourly rate guidelines and delegated approval authorities; and in establishing additional reporting procedures related to the processing and recording of legal agent financial transactions.

Background

“Legal Agent” is the term used by the Department of Justice to refer to private sector law practitioners who are retained to provide legal services and to act on behalf of the Minister of Justice. The Policy on Contracting for Legal Services and Legal Agent Appointments (July 2008) establishes the principles and requirements associated with contracting for legal services by the Government of Canada. The contracting is to be conducted in a diligent and accountable manner. Departmental implementation of the policy is the key responsibility of the Litigation Practice Management Centre (LPMC) through the Agent Affairs Program in support of the Assistant Deputy Attorney General (ADAG), Litigation Branch.

This audit focused on reviewing and assessing the adequacy of the verification process for paying legal agent accounts. Since the approval of the policy, LPMC has primarily focused on establishing the contracting procedures and directives for procuring and appointing legal agents. This aspect of the Agent Affairs Program is robust, but with respect to the processing, financial monitoring, and reporting of legal agent accounts, additional improvements and efficiencies are possible.

Financial control framework for account verification

Policies, Procedures and Guidelines

We found that procedures for verifying legal agent accounts in the regional offices audited lack consistency. While LPMC has developed forms and a Compliance and Verification Checklist to assist in taxing legal agent accounts, it is not used by all regional legal portfolios. Most regions use a variety of forms and templates that they have developed for the account verification process. LPMC should prescribe standard procedures, forms and checklists for legal agent account verification that must be used by all regional offices.

We found that the use of the taxing stamp varies across regions. The taxing stamp on the legal agent invoice serves as the certification of the legal agent account by the instructing counsel. The taxing stamp should be signed and dated by the instructing counsel who is responsible for verifying the account and its use should be made mandatory.

Rates and Delegation

We found that hourly rate guidelines for legal counsel have not been increased since 1991/92 and are well below current market rates. This affects both the time it takes regional legal portfolios to find and acquire a legal agent, and the priority the legal agent subsequently gives the file. At the time of audit, a review was under way to revise the hourly rate guidelines paid to legal agents.

While the approval to enter into contract with a legal agent vests with the Minister, all legal agent rates in excess of $125 are approved by the ADAG Litigation, the Associate Deputy Minister, or the Deputy Minister. In our opinion, the contracting process could be streamlined if delegated approval authorities at each level were adjusted.

Processes for verifying and determining accuracy of legal agent accounts

Financial Monitoring of Legal Agent Accounts

LPMC has not been prescriptive enough in the written guidance on the financial monitoring of legal agent accounts. While it is required that instructing counsel conduct a substantive review or “tax” each account rendered by a legal agent, regional legal portfolios do not use a standardized approach to monitor accounts according to the terms of the contract or the progress of the file. In our opinion, written guidelines provided by LPMC for financial monitoring of legal agent accounts should emphasize the importance of regional compliance with the guidance pertaining to financial monitoring.

We found that from the time the legal agent account is received by Justice Canada to the time the account is paid by the client department, it typically takes more than the 30 days stipulated by the Treasury Board Directive on Payment Requisitioning and Cheque Control. As client departments require on average 15 to 20 days to process a payment, payment is often late, resulting in Justice Canada receiving overdue account notices. LPMC needs to establish standards for instructing counsel to tax and forward the legal agent accounts to client departments. These standards should take into consideration the average time taken by client departments to process a payment. Such standards would provide greater assurance that the requirements of the Treasury Board Directive will be met.

Reporting on Legal Agent Accounts

LPMC uses the IFMS to obtain financial and statistical information on legal agent accounts. However, LPMC acknowledged that the IFMS may present incomplete information when reports are generated, given that IFMS data is not validated for completeness or accuracy. We were told that account reviews conducted by LPMC found that not all taxed accounts sent to client departments for payment were entered into the IFMS. Additionally, regions do not provide routine reports to LPMC on the status of the legal agent contracts that they are managing. LPMC is taking steps to address these issues and advised the audit team that there are plans to develop, over the next fiscal year, a regional reporting system that will meet the needs of both regional legal portfolios and LPMC.

Use of iCase for Financial Monitoring and Reporting

Several regional legal portfolios use the disbursements module of iCase to monitor and prepare reports on legal agent account disbursements and fees activity. They supplement the routine iCase report with additional information from locally developed spreadsheets. During the audit, instructing counsel noted that several improvements to iCase would eliminate the need for these spreadsheets. In our view, consideration could be given to using iCase for the financial monitoring and reporting of all legal agent accounts.

Taxing legal agent accounts

Consistency in Taxing Legal Agent Accounts

We found that legal agent accounts are being taxed in a consistent manner. We surveyed four client departments and found that all taxed accounts were accepted as rendered. Instructing counsel were knowledgeable in taxing legal agent accounts and were experienced in verifying that the time charged by legal agents was appropriate to the work accomplished. Our review of a sample of legal agent contracts indicated that the verification of the legal agent account included such tests as compliance with contract terms and conditions, and computational correctness of charges. Where adjustments to the account were required, appropriate documentation was retained on file.

File Structure for Legal Agent Account Files

We observed that the regions audited retained a variety of documents on file. Although LPMC has developed a Compliance and Verification Checklist for financial transactions, it is not used by all regional legal portfolios and it is not comprehensive. A requirement exists to stipulate the contents of a structured file in terms of the use of checklists for transactions and the information, both contractual and financial, to be maintained in the legal service portfolios.

Processing of legal agent accounts for payment

Account Processing

The payment process of legal agent accounts could be improved. The invoices submitted by legal agents are those commonly used by their firm; there is no requirement to use a standard invoice form when billing for services rendered. Therefore, the invoices received have differing presentation and level of detail. Some invoices may include as many as 30 pages of detailed charges. A copy of each invoice is provided to PPSC for data entry into the IFMS and to the client department for review prior to payment. In our opinion, the regional legal portfolio should use the standard transmittal form that presents the key information from the transaction to simplify data capture by PPSC and improve data integrity.

We also found that there are no procedures in place to confirm that data in the IFMS is complete and timely. Establishing a procedure that would allow regional offices to routinely confirm that information sent for data entry into the IFMS has been entered into the IFMS would provide assurance that the information in the IFMS is complete and timely.

Memorandum of understanding

The Public Prosecution Service of Canada (PPSC) provides services to Justice Canada pertaining to legal agent appointments transacted by Justice Canada. These services vary depending on whether Justice Canada or another government department is the client paying the legal agent account. Justice Canada has a Memorandum of Understanding (MOU) with PPSC for the services the Department provides to the PPSC, but a similar MOU for work PPSC performs for Justice Canada has not been developed.

When Justice Canada is the client for legal agent work, PPSC enters the legal agent account information into the Justice Canada IFMS for tracking purposes and for payment of the account. The audit team found that neither Justice Canada nor PPSC is performing FAA Section 33 payment authority. In our opinion, an MOU is required that describes the specific responsibilities PPSC will perform on behalf of Justice Canada and assigns responsibility for FAA Section 33.

The management responses to the recommendations contained in this report were provided by the Director, Litigation Practice Management Centre.

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