Report on the Audit of Compliance with Financial Policy in Departmental Legal Services Units - September 2014

1. Executive Summary

The Department of Justice Canada (the Department) provides an integrated suite of high-quality legal advisory, litigation, and legislative services to the Minister of Justice and to all federal departments and agencies to support them in meeting the Government of Canada’s policy and programming priorities and to advance the overall objectives of the Government. One way services are provided is through a network of Departmental Legal Services Units (DLSUs) and legislative Departmental Regulations Sections (DRSs) co-located with client departments and agencies, principally within the National Capital Region but also throughout the regions.

The DLSUs and DRSs employ 883 Full-Time Equivalents combined which represents 20% of the Department’s workforce. The total annual expenses represent approximately 22% of the overall Departmental budget, excluding grants and contributions. In fiscal year 2013-2014, this amount consisted of $111.9 million for salaries and $1.9 million for operating and maintenance (O&M) expenses.

The Heads of most DLSUs or DRSs manage a budget from the Department and a budget from the client department. Memorandums of Understanding between the Department and client departments are in place to define accountabilities and the cost recovery rates for legal services. O&M expenses that are excluded from the cost recovery rates, such as direct O&M, are typically paid from the budget of the client department. Expenses that are included in the rates, such as training, are often initially paid by the client department and subsequently recovered from the Department in the form of an interdepartmental settlement (IS).

The audit assessed the extent to which the DLSUs and DRSs complied with financial management policy instruments of the Government of Canada and the Department.

The scope included a review of financial governance as well as a review of sample financial transactions from 2013-14. The sample of financial transactions covered at least one DLSU from each portfolio and two legislative departmental regulations sections. This included IS transactions which were primarily training expenses recovered by client departments from Justice Canada. In addition, samples of acquisition card, travel, conferences, events and training transactions were also analyzed. Contracting, as well as IS transactions involving the recovery of legal services costs by Justice Canada from client departments, were excluded from this audit.

Based on the audit findings, our opinion is that, overall DLSUs and DRSs are in compliance with financial management policy instruments of the Government of Canada and the Department. However, there are improvements that should be made with respect to the processing of IS transactions to ensure compliance with the Financial Administration Act and Government of Canada financial management policy instruments. The improvements that should be made are as follows:

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
September 22, 2014

Linda Saunders
Chief Audit Executive
Department of Justice Canada

Recommended for approval by:

Original signed by Doug Lewis
September 22, 2014

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

Approved by:

Original signed by William F. Pentney
September 22, 2014

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