Tax Law Services Prairie Region
July 2011

Executive summary

Overall Opinion

Overall, we found that the practices, procedures, and activities relating to the framework within which the TLS – Prairie Region delivers its services to clients were sound. The TLS – Prairie Region has management and control structures in place to support the effective delivery of its services to clients; however, the audit identified some areas for improvement. These include the formalization of succession planning activities, the conduct of an organizational review to assess the appropriate number of senior counsel for the Winnipeg office, the capability for administrative assistants to view financial reports, 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) in various regions across Canada. The Portfolio is responsible for representing the Crown in all tax-related matters before the courts.

The TLS – Prairie Region provides a wide range of legal services to the CRA, including conducting litigation before the Tax Court of Canada, the Federal Courts, and the provincial superior courts in Alberta, Saskatchewan, and Manitoba.

The scope of the audit included the operations and activities of the Tax Law Services section in the Prairie Region, which consists of offices located in Edmonton, Winnipeg, Saskatoon, and Calgary. The audit planning and on-site examination phases were carried out between May and November 2010.

Management Framework

The TLS – Prairie Region 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 – Prairie Region 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 – Prairie Region 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 TLS – Prairie Regional Director conducts 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 bi-weekly conference calls (bi-laterals) with the ADAG to discuss issues relating to the TLS – Prairie Region. The TLS – Prairie Region has also developed a formal written business plan to guide TLS activities within the region. The TLS – Prairie Regional Director works with the senior management team in Edmonton and Winnipeg to update the plan each quarter and reflect developments related to each business planning initiative.

The organization of the TLS – Prairie Region is appropriate and roles and responsibilities are generally understood. TLS – Prairie Region senior management conduct regular meetings to discuss pertinent organizational and financial matters. The TLS – Prairie Regional Director reports to the Regional Director General (RDG) of the Prairie Region and communicates directly with the ADAG in the TLS – Portfolio Office on all significant tax law 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 – Prairie Region has an appropriate legal file assignment process in place. The Associate ADAG (Tax Assessment) ascribes an initial risk level and complexity to a file and then assigns the file to a TLS regional office. Once the file is allocated to the Alberta TLS – Prairie regional office, the Regional Director evaluates the initial risk assessment and complexity level and, in consultation with the Deputy Regional Director, team leaders and, where appropriate, senior cadre, 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.

Effective communication exists in the TLS – Prairie Region to provide the appropriate level of leadership, guidance, and direction for TLS personnel. The level and extent of the TLS Portfolio Office’s direction to and communication with TLS – Prairie Region senior management assists the TLS – Prairie Regional Director in providing effective, timely communication and leadership to Prairie Region staff. Regular meetings occur between TLS – Prairie Region senior management and the TLS Portfolio Office and open lines of communication are maintained. In addition, the audit team 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 – Prairie Region. Succession planning activities in the TLS – Prairie Region focus on knowledge transfer activities and informal succession planning considerations 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 – Prairie Region should develop a formal succession plan and update it on a regular basis.

The TLS – Prairie Region has an appropriate ratio of legal counsel to legal assistants to assist counsel in completing their case files. However, we were told that the current complement of senior counsel within the TLS Winnipeg office is inadequate to meet the demands of senior level work. The Director (Acting) has had to refuse complex files allocated to the office due to the insufficient number of senior counsel available to conduct the work. The TLS – Prairie Regional Director should conduct an organizational review to capitalize on efficiencies and to determine the appropriate number of senior counsel for the Winnipeg office.

An effective performance appraisal process exists in the TLS – Prairie Region to evaluate employees and it is operating effectively.

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 with its functionality. We were told that in the TLS – Prairie Region, 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 and that the TLS – Prairie Region has planned several Ringtail “Lunch and Learns” for early 2011.

We also found that TLS – Prairie Region personnel complete annual individual learning plans and are meeting the five-day minimum requirement for training under the Department’s Learning Policy.

Flexible work arrangements within the TLS – Prairie Region are appropriate and made available to all staff. TLS – Prairie Region 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 – Prairie Region 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. We were told that the Law Practice Model limits management’s ability to both promote capable 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 – Prairie Region 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 – Prairie Region personnel refer to both departmental and Treasury Board Secretariat policies and procedures manuals when assistance is required. Personnel at all levels communicate with the appropriate groups, such as the Portfolio Business Management Section and Prairie Regional Corporate Services, to obtain further guidance and direction when required.

Regional Corporate Services in the Prairie Region provides TLS – Prairie Region senior management with regular financial reports. TLS – Prairie Region administrative assistants regularly review these reports and reconcile expenses. This review helps ensure the accuracy of accounts being used for expense allocation and validates expenditures that originate within the TLS – Prairie Section. However, the audit team found that administrative assistants are unable to produce financial reports on demand from their workstations and must rely on the monthly reports provided by Regional Corporate Services. Greater efficiencies would result if administrative assistants in the TLS – Prairie Region were provided with the capability to view financial reports from their workstations.

The audit team determined that intellectual and physical assets are appropriately protected in the Edmonton and Winnipeg offices, the two Prairie Region offices that the audit team visited. Access to the Edmonton and Winnipeg office buildings is restricted and controlled by valid security identification cards. Computer workstations are password-protected and access to files maintained on iCase is only granted to TLS – Prairie Region staff.

Information Systems

TLS – Prairie Region personnel stated that the search function of the TLS Portfolio system known as Fiscal Path is not user-friendly. Rather than rely on Fiscal Path, TLS – Prairie Region 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 – Prairie Region is appropriately managed through the use of iCase. TLS – Prairie Region senior management are satisfied with the information contained in the reports produced by iCase and they effectively use these reports in monitoring workload, identifying trends, overseeing employee timekeeping records, and formulating management decisions.

Compliance with Key Legislation

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

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 – Prairie Region’s risk management activities. The Associate ADAG (Tax Assessment) ascribes an initial risk level and complexity to a file and then assigns the file to a regional office. Once a file is allocated to the Alberta TLS – Prairie Region, the Regional Director evaluates the initial risk assessment and, in consultation with the Deputy Regional Director, team leaders and, where appropriate, senior counsel cadre, 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. The Director (Acting) initially assesses all files allocated to the Winnipeg office from the Associate ADAG. The Director (Acting) allocates files based on his knowledge of the skills and experience level of his legal team. During the life cycle of each client file, the ratings are monitored and revisited to ensure that they remain relevant as the case develops. Continual communication with the client supports the TLS – Prairie Region legal counsel in determining each rating’s significance. There are dedicated meetings with the client to address high-risk files and to regularly review litigation risk. The audit team determined that risk management in the TLS – Prairie Region is appropriate.

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

The TLS – Prairie Region conducts litigation primarily concerning tax decisions made by the CRA. As this litigation is reactive, forecasting future demand for TLS legal services is challenging. Although there is no formal forecasting process in place, to the extent possible, TLS – Prairie Region is effective in forecasting and managing the demand for future legal work through effective, ongoing communication and numerous meetings 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 – Prairie Region personnel effectively utilize both formal and informal means of communication with other sectors of the Department. The deputy regional directors from all portfolios within the Prairie Region meet monthly to discuss issues facing the Department. When tax matters encroach on other areas of the Canadian legal system, the TLS – Prairie Region effectively seeks guidance and direction from legal counsel in other portfolios who have the appropriate specialized skills in the required area.

Interfaces with the CRA are appropriate. There is ongoing, continuous communication through regular 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 – Prairie Region’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 – Prairie Region is the CRA. Both the TLS – Prairie Regional Director and the Director (Acting) separately conduct regularly scheduled meetings with the CRA to discuss ongoing case matters and any issues that may exist. In addition, they hold ad hoc meetings as required to seek guidance and information. We determined that the CRA is satisfied with the TLS – Prairie Region’s level of service. The 2008 TLS Portfolio client feedback survey indicates that CRA satisfaction levels are high.

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

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