Tax Law Services Portfolio Office
July 2011

EXECUTIVE SUMMARY

OVERALL OPINION

Overall we found that the TLS Portfolio Office is fulfilling all functional and operational responsibilities with respect to the CRA LSU and the TLS – Ottawa Section. The satisfaction of the client with the services provided by the Portfolio was ranked as excellent in terms of responsiveness, usefulness, and timeliness. Identified good practices related to the single point of contact with the client, the canvassing of other sections of the Department when preparing the business plan, and the monitoring of service standards. We noted, however, some areas for improvement: communicating to litigation counsel the role of the CRA LSU and the services it provides, and implementing the Management Sector recommendation regarding increasing the size of the BMS workforce.

BACKGROUND

The Tax Law Services (TLS) Portfolio provides legal services to a single client, the Canada Revenue Agency (CRA), through regional TLS sections as well as a legal services unit (LSU) co-located with the CRA. The TLS Portfolio provides integrated litigation and advisory services in all areas of tax law as well as other practice areas relevant to the CRA, such as administrative law, corporate governance, and civil litigation. Legal services support the CRA in administering tax and benefit programs and in ensuring compliance across Canada.

The TLS Portfolio Office, located in Ottawa, is headed by the Assistant Deputy Attorney General (ADAG), supported by two Associate ADAGs (Tax Assessment Matters, and Collections and Civil Matters), the Senior Counsel Advisor to the ADAG, and the Director of the Business Management Section. The TLS Portfolio Office has functional and operational responsibilities with respect to the CRA LSU and the TLS – Ottawa Section.

This audit focused on reviewing and assessing the adequacy of the leadership role played by the TLS Portfolio Office in relation to strategic, operational, and other issues affecting units in the Portfolio. The audit examined the appropriateness of mechanisms related to planning, communicating, and controlling the advice and direction provided by the TLS Portfolio Office to the regional TLS sections and the CRA LSU, and its interfaces with other sectors in the Department of Justice. The scope of the audit was limited to include the operations and activities of the TLS Portfolio Office as well as linkages with the CRA LSU, the TLS – Ottawa Section, and two regional TLS sections: the Prairie Region and the Ontario Region.

MANAGEMENT FRAMEWORK

Governance and Strategic Direction

The main governance and oversight body of the TLS Portfolio Office is the National Tax Board of Directors (NTBD), which serves as the primary forum of consultation and strategic decision making. Processes have been put in place to actively monitor the Portfolio integrated planning processes to support the key information documents used by the NTBD. The ADAG, TLS Portfolio chairs the NTBD and participates on departmental governance bodies, while NTBD members (including regional TLS directors) also participate on key departmental committees. This ensures that all aspects of departmental and Portfolio initiatives are considered in the governance of the TLS Portfolio.

Organizing

The Business Management Section (BMS) of the TLS Portfolio provides corporate services and reports on the full range of services (including cost recovery activities) provided by the Department of Justice to the CRA, not just those of the TLS Portfolio organizations. Continuing initiatives to reduce the volume and cost of legal services require the BMS to develop monitoring and management reporting procedures. Additional resources received by the BMS since 2006 have been largely devoted to addressing the increased requirements of accountability and have not addressed the workforce gap related to preparing the specialized reports to support the work of the Portfolio and the NTBD. A recent assessment of the resource requirements of the BMS undertaken as part of the Department’s corporate services “footprint” exercise recommended the creation of a senior position to meet the increased range of support requirements. Our review of the organization and workload of the BMS supports this recommendation.

Controlling

The TLS Portfolio has established service standards that set out the commitment of the TLS Portfolio to provide clear and practical guidance on resolving legal issues and the identification of opportunities to implement policies and programs by administrative rather than legislative or regulatory means. The service standards are detailed in the Department’s MOU with the CRA and have been published and disseminated in brochure format within the Portfolio and made available throughout CRA.

The TLS Portfolio Office is responsible for the processing and assignment of approximately 1,800 General Procedure files each year. The management processes established for these files are effective and coordinated, and enable information to be quickly disseminated throughout the TLS Portfolio, thereby ensuring the consistency of the Department’s legal position.

Leading, Communicating, and Professional Development

We found that communication is timely, accurate, and appropriate in achieving planned goals and priorities. In addition to the various committees of the Portfolio, which provide forums for discussion and decision, the ADAG and Associate ADAGs have an open-door policy and hold monthly one-on-ones with direct reports to provide an opportunity to discuss Portfolio matters and address specific issues.

A web-based application known as Fiscal Path developed for the TLS Portfolio is effectively serving as the main communication tool of the Portfolio. Fiscal Path provides access to all of the policies, procedures, and processes specific to the Portfolio as well as tax discussion blogs and links to pertinent sites used by Portfolio staff (e.g. GASPARD, the Federal Tax Court, the CRA).

With respect to professional development, the TLS Portfolio has entered into an MOU with the CRA (Compliance Programs Branch) that provides counsel and CRA tax professionals access to the training opportunities provided by each organization. Three specific programs have been implemented to support the TLS Portfolio’s strategic focus on professional development including the National Tax Training and Development Program, the Twinning Program, and the Mobility Program.

In our opinion, the TLS Portfolio Office is providing effective leadership, communication, and appropriate professional development opportunities.

COMMUNICATIONS WITH LSU AND REGIONS

The CRA LSU’s role is to provide the client with legal advisory services and corporate counsel. The CRA LSU has 20 active service teams addressing specialized tax issues such as GST, Excise, Trusts, International Tax, and Tax Collections. We reviewed the Fiscal Path information regarding the LSU and found that more detailed descriptions of the role and services the LSU provides is needed. In addition, the topic areas addressed by the LSU’s service teams require elaboration and should highlight the specific areas of expertise of LSU counsel.

ADVISORY SERVICES

A Pilot Project with the International and Large Business Directorate (ILBD) of the CRA’s Compliance Programs Branch seeks to expand the use of advisory services prior to litigation. The MOU and Operational Guidelines for the pilot project provide for legal advice and legal assistance for significant cases, issues, and trends, and establish the arrangements for consultation and formal review. Such advisory services ensure that appropriate evidence is collected, that substantive and procedural matters are addressed, and that tax assessments are correct in law.

We support the direction of the pilot project in encouraging an expanded use of advisory services as a significant measure to avoid litigation costs.

STRATEGIC AND OPERATIONAL PLANNING

The TLS Portfolio Office has published a Strategic Business Plan for fiscal years 2010-12. The plan sets out the priorities and key factors to ensure that the Portfolio evolves to meet the CRA’s current and future demand for legal services. The NTBD, in conjunction with the other governance committees within the TLS Portfolio, ensures that strategic and operational issues are consistently addressed in managing the law.

In addition to participation in the major management exercises of the Department of Justice, the TLS Portfolio has a well-developed Performance Management Framework capable of assisting senior management in the decision-making process. The regular two-way flow of information between CRA and the TLS Portfolio Office and regional TLS sections ensures that TLS Portfolio management are quickly able to identify and address issues and trends that provide context for strategic and operational planning.

Based on the audit interviews and materials reviewed, we found that strategic and operational planning is documented and understood within the Portfolio.

OBSERVATIONS – APPROPRIATENESS OF INTERFACES WITH OTHER DEPARTMENT OF JUSTICE SECTORS

Management Sector

The TLS Portfolio Office participates on Department-wide Management Sector committees and provides advice and assistance in Management Sector initiatives such as the development of iCase and Echo, the departmental business intelligence tool.

Chief Financial Officer (CFO) Branch

The TLS Portfolio Office’s interface with the CFO Branch in terms of financial and resource management was reviewed during the audit. In the Annual Financial Situation Report for the year ending March 31, 2010, issued by the CFO Branch Resource Management Directorate, the TLS Portfolio ranked first in the Department with a budget variance of 0.5% on a budget of $56 million and was one of five direct reports that consistently provided the CFO Branch with the certified Financial Situation Report within the established timelines.

Public Law Sector and Legislative Services Branch

The Public Law Sector and the Legislative Services Branch provide legal services to the CRA, which is invoiced on a cost recoverable basis by the TLS Portfolio’s Business Management Section. We found that the TLS Portfolio Office promptly settles these sectors’ accounts through the interdepartmental settlements process as soon as the funds are received from the CRA. Each year the TLS Portfolio Office canvasses these two sectors for a forecast of workload and cost estimates of legal services for the next fiscal year for input into the TLS Portfolio Business Plan.

In our opinion, the use of a single point of client contact for all financial matters along with the canvassing of a forecast by legal service providers outside the TLS Portfolio for business planning purposes are considered good practices.

SATISFACTION WITH PORTFOLIO OFFICE LEGAL ADVICE AND DIRECTION

The TLS Portfolio’s Strategic Business Plan clearly sets out the strategic priorities and direction the Portfolio is taking to improve the legal services provided to meet the evolving needs of the CRA. Along with the service standards and the work undertaken by the national coordination teams and LSU service teams, a consistent position has been voiced on tax law. The 2008 Client Feedback Survey scored the work of Portfolio counsel and staff as excellent in the areas of responsiveness, usefulness, and timeliness.

In our opinion, the TLS Portfolio Office’s provision of legal advice and direction to the LSU and regional TLS sections is adequate and effective.

The management responses to the recommendations contained in this report were provided by the Assistant Deputy Attorney General, Tax Law Services Portfolio.

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