Public Accounts Committee on April 8th, 2008

[The Chair, Liberal, Shawn Murphy]

I'd like to call the meeting to order and welcome everyone here.

Bienvenue à tous.

Colleagues, pursuant to Standing Order 108, this meeting today is on chapter 5 of the May 2007 report of the Auditor General of Canada, “Managing the Delivery of Legal Services to Government”, in the audit of the Department of Justice.

Today the committee is very pleased to have with us the Auditor General, Ms. Sheila Fraser. She's accompanied by Assistant Auditor General Mr. Hugh McRoberts and Mr. Gordon Stock, principal.

From the Department of Justice, we have the accounting officer, Mr. John H. Sims. He's accompanied by the associate deputy minister, Yves Côté, and Mr. Terrance McAuley, the acting assistant deputy minister, management sector.

On behalf of the committee I want to extend to each and every one of you a very warm welcome.

I understand, Ms. Fraser, you have some opening comments. I turn the floor over to you now.

[Sheila Fraser, Auditor General of Canada, Office of the Auditor General of Canada]

Thank you, Chair.

We thank you for inviting us to discuss chapter 5 of our May 2007 report, entitled “Managing the Delivery of Legal Services to Government”, an audit of the Department of Justice. It should be noted that our audit work for this chapter was completed in December 2006.

Accompanying me today, as you mentioned, are Hugh McRoberts, Assistant Auditor General, and Gordon Stock, principal of the public safety and justice audit team responsible for this audit.

The Department of Justice can be characterized as Canada's largest law firm, with approximately 2,500 lawyers and a budget for the 2006-07 fiscal year of close to $1 billion.

The department provides legal services to the government and its departments and agencies. Many of its lawyers work on-site in the departments and agencies, providing legal advice and representing their clients' interests. They draft legislation and regulations and represent the government in court.

As noted in our report, our audit also included examining the management of prosecution services that were provided by the federal prosecution service, a branch of the Department of Justice at the time. The service was transferred to the office of the director of public prosecutions with the coming into force of the Federal Accountability Act. Our findings and recommendations relate to the work now carried out by the office of the director of public prosecutions as well as the department.

Our audit looked at three primary areas: whether progress had been made since our last audit on this topic in 1993, whether management had assurance that it was delivering quality legal services, and whether it was doing so in a cost-effective manner.

We found that the department had made progress since our last audit in its management of litigation risk. Its lawyers regularly assess the likelihood and potential impact of an adverse outcome, and use this assessment to determine the level of management involvement required. The department also showed progress in its screening and supervision of its legal (Crown) agents for the Federal Prosecution Service, and had demonstrated its progress towards completing an action plan in this area. However, this progress did not extend to its use of civil agents in other areas of the department.

We also found that departments and agencies were satisfied with the quality of lawyers assigned to them, and that the department puts considerable effort into ensuring the quality of the services it provides. However, the department has not defined what it means by quality, does not have an overall quality management system to ensure that it is delivering consistent quality to its client departments, and cannot assess whether it is meeting its overall quality objectives.

We found that, while the department was responsive to the needs of government, its financial arrangements with client departments and agencies provided few incentives to control costs and manage the demand for increasing legal services. We found more than 100 financial arrangements in the eight departments and agencies that we examined. In general, they were inconsistent, poorly documented and inefficient to administer.

The department lacked basic information on its volume of work and the amount of time its staff needed to deliver services requested by departments and agencies. As a result, we found that it was not in a position to know whether it was delivering legal services cost-effectively. Without good information on costs and time spent on requests, it is difficult to manage and control the growing demand for legal services and to find more efficient ways of providing them.

In this chapter we mention that the department would benefit from having someone in a senior executive position to lead planned improvements. This person could play the role of a chief operating officer, helping to “manage the law practice”.

I find it encouraging that the department appears to be making progress in addressing our observations and recommendations. In some cases these improvements were initiated before we tabled our report.

While we have not reviewed an action plan since we completed our audit, or performed any further review, I understand that the department has improved its financial arrangements for the services provided to departments and agencies. As well, it has organized a number of its corporate functions under the assistant deputy minister for the new management sector. I believe that the department is on the road to making positive changes in the way it manages the delivery of its legal services.

The committee may wish to ask the department for further information on its plans for improving the management of its costs and on its plans to introduce a quality management framework.

Mr. Chair, thank you. This concludes our opening statement. We would be happy to respond to any questions the committee members may have.

Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you, Ms. Fraser.

Mr. Sims, I understand you have some opening comments, and I'd like you to present them now.

[John Sims, Deputy Minister and Deputy Attorney General of Canada, Department of Justice]

Thank you, Mr. Chairman.

I'm pleased to appear before the members of the Standing Committee on Public Accounts to discuss chapter 5 of the Auditor General's report on managing the delivery of legal services to the government.

Joining me today, as you indicated, Chair, are Yves Côté, associate deputy minister, and Terrance McAuley, the acting assistant deputy minister for the new management sector.

Today, I would like to report to the members of the committee on what the Department of Justice has done over the last year, and what we continue to do, to address the observations and recommendations that the Auditor General presented in her May 2007 report on legal services.

To put all this into context, Mr. Chairman, the Department of Justice had more than 66,500 active files related to the provision of legal services to government in fiscal year 2006-07. Of these, close to 38,000 were litigation files and more than 25,000 were advisory files.

Department lawyers drafted 58 bills that were tabled in Parliament and drafted almost 600 motions to amend bills. So perhaps it is fitting to characterize us, as the Auditor General just did, as Canada's largest law firm.

Despite constant growth in the demand for legal services since 2003-04, the department's operating expenditures have remained stable, growing at an average rate of 3% annually.

In 2005-06 these expenditures represented only about 1% of government spending on operations, excluding grants and contributions and debt service charges.

This leads, Mr. Chair, to a discussion of the state of the department's management.

As deputy minister, I believe that the department overall is doing well. My belief stems in part from the results and feedback from Treasury Board Secretariat in its annual assessment of my department's management accountability framework.

The department received positive feedback in 2007 and was commended for its work in improving management in a number of areas. I believe that these results helped respond to several observations and recommendations for improvement raised in the audit report. For example, the secretariat's assessment notes that the department has made substantial progress in the area of business and corporate planning and has made good progress in implementing more robust performance management practices.

I am satisfied with this assessment, as I believe that it reflects the levels of effort that my department has made over the last years, while, at the same time, I recognize that more is required.

In addition to the management accountability framework, I consider the Auditor General's report itself, of course, to be an important tool, a tool that helps us ensure that the management practices and departmental operations are sound.

Mr. Chairman, providing quality legal services to the government is one of my top priorities as deputy minister. I was therefore very pleased to see the audit report recognizing that the department has a strong commitment to providing quality legal services to the government and that the department puts considerable effort into ensuring the quality of the legal services it provides.

I'm also pleased to note that our client government departments and agencies, to whom we deliver legal services, are satisfied with the quality of counsel assigned to them as well as with the overall services we provide. We will build on the elements of quality management noted in the report, and in fact work is already under way to develop a more complete quality assurance framework.

At the same time, the Auditor General's report made clear that we need to improve in certain areas.

For example, the department needs to complete its work on improving the management of legal agents. Although we have achieved good results in this area with respect to federal prosecutions, we are looking to implement lessons learned from that initiative to improve the management of civil legal agents.

The department is also working to better support departments and agencies in managing the demand for legal services. While our department can't control this demand, there is work we can and should be doing to assist departments and agencies, as noted in the report. For example, at the time of the audit the department was making progress in working with Treasury Board Secretariat to put in place a more consistent approach to managing the department's financial arrangements with departments and agencies, including a cost-recovery formula to reflect the full cost of legal services.

With Treasury Board's approval, on April 1, 2007, a uniform cost-recovery approach, which is applied to all legal services provided to the departments and agencies, was implemented across government. As a result, cost-recovery arrangements are now more consistent, appropriately documented, and efficient to administer. We've also extended timekeeping to all types of legal services provided to government. As a result, the department will have more robust information on workload and on the cost of all legal services.

Another issue that clearly requires the department's attention is the provision and use of financial information related to legal services. Our new law practice management committee has identified this matter as an urgent priority, and the department is committed to addressing this issue. Work will commence to identify information needs and requirements in partnership with departments and agencies.

Mr. Chairman, while I recognize that more work needs to be done, I'm very pleased with the progress the department has made since the tabling of the Auditor General's report last May, and I look forward to a discussion with this committee.

Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Sims.

We're going to start now with the first round. That round will be seven minutes each, and we're going to start with Mr. Holland.

[Mark Holland, Liberal, Ajax—Pickering, ON]

Thank you, Mr. Chair.

Thank you, Madam Fraser, for coming before committee again, and to the witnesses.

I want to start, if I could, Mr. Sims, with one of the last issues you were talking about, which is the standing agents. The Auditor General's report found there have been improvements to the procurement and management of standing agents hired for federal prosecution on an interim basis. But the Auditor General also found you were unable to provide any formal evaluations or any formal documentation of corrective action for poor performance.

I want to understand: on that basis, what procedures does the justice department have in place to evaluate standing agents who are hired for federal prosecutions? In the Auditor General's report we're left to wonder if there are any, so perhaps you can comment on that to start.

[John Sims]

Thank you.

I'll address my remarks, if I can, to the management of civil agents, which is now the responsibility of the Department of Justice, as opposed to agents on the criminal side.

In the last year we have spent a great deal of effort to put a framework in place that respects open procurement practices for the evaluation and finding and selection of agents, an approach that accords more with how banks and insurance companies do it, other big consumers of legal services. We make assessments at the front end on hiring such agents or recommending the retaining of such agents.

We do not yet have a formal evaluation system in place after the fact for civil agents. However, the nature of the agents we tend to hire in the civil matters makes this a bit difficult. I can explain that at greater length if you'd like, but we have taken many steps to improve the overall process for hiring civil agents since the report of the Auditor General.

[Mark Holland, Liberal, Ajax—Pickering, ON]

You say a formal evaluation would be important, and I understand it might be difficult. Can you tell us what your plans are to put that in place, to ensure that an evaluation does take place, and if you have a timeline for resolving that concern?

[John Sims]

We're working on that now. Our priority has been to address first the items the Auditor General had identified--namely, that although we had a fairly robust management system in place for the criminal side, we didn't have anything resembling that on the civil side. So over the past year we've addressed the front end of that process: how to respect modern procurement principles; how to ensure an open, accessible, fair, and transparent process; value for money; and so on.

Now it's time to move to the later stages of that process, and that's on our work plan. I don't know whether we have a timeframe formally decided, but it's in the next tranche of work to be done on that side.

[Mark Holland, Liberal, Ajax—Pickering, ON]

Madam Fraser, how essential or important do you see that as being? We're hearing that they don't have a timeline on this. How important do you think it is, and in what kind of timeframe would you like to see them take action on this?

I know that's difficult to answer, but I'd like to get some sense of the importance you attach to this review process.

[Sheila Fraser]

Obviously, Chair, we believe that the evaluation of the performance, be it for agents who are there for prosecutions or for civil cases, is important. We noted in the report that there had been a great deal of improvement in the management of the agents for prosecutions, and the department has committed to doing the same thing for the civil agents. But in both cases the evaluations of performance was lacking.

We note in the report as well that there was no requirement to have a documented evaluation on the files. We would, of course, like to see in the action plan that there be consideration given to having a formal policy that evaluations should be conducted and that then there be a reasonable timeframe put in place to bring this into practice.

We believe it is an essential part of ensuring that the services that were rendered were appropriate, that the department was satisfied with the services, and if not, that there be some consequence or some remedial action taken afterwards.

[Mark Holland, Liberal, Ajax—Pickering, ON]

I agree, and I think the committee would as well.

I want to move on to the issue of alternative dispute resolution. I commend the Department of Justice for incorporating alternative dispute resolution as a method of reducing costly litigation.

Unfortunately, the Auditor General's report found that these initiatives lack clear objectives and estimates around potential savings, and also that there was no project management structure or even a formal review of the outcomes.

In light of those findings, can you tell us how we can ensure that these alternative dispute resolution initiatives are effective in achieving favourable results for the government? How are we measuring this, and what plans do you have to begin measuring it on a go-forward basis?

[John Sims]

We agree with the Auditor General that it is important to have an evaluation process in place for alternative dispute resolution. It's too easy to talk favourably about ADR without knowing, necessarily, that it works.

We've taken that recommendation to heart. We in fact have plans to do a pilot project to evaluate some of the ADR processes we have underway now. We are also studying whether a mandatory mediation model could produce some benefits for the government—one form of ADR, of course—and as we study that, we're building in an evaluation component for it as well.

So I agree with the question and I agree with the report. We are taking it to heart and are starting to design the evaluation programs that need to be done to give us the data so that we can measure and see what—

[Mark Holland, Liberal, Ajax—Pickering, ON]

Do you have a timeline on this at all, or an idea of when we can expect that kind of analysis to be available?

[John Sims]

I don't know the date. I'll get it for you.

[Mark Holland, Liberal, Ajax—Pickering, ON]

Perhaps you could get back to me.

I only have one other question. Do I have time for it?

[The Chair, Liberal, Shawn Murphy]

You have time for one, but a very brief one.

[Mark Holland, Liberal, Ajax—Pickering, ON]

It will be very brief.

The other issue the Auditor General's report found that gave me a great deal of concern is that the Department of Justice is not reporting to Parliament the overall costs that are incurred across the government for legal services. This is of concern because it leaves Parliament in the difficult position of not knowing what these costs are.

I think it's extremely important that we know what your plans are to improve the reporting that is done to Parliament so that we can have a clear understanding of what these costs are. That's an information gap that causes me a great deal of concern.

[John Sims]

I agree it would be better if such information were available to Canadians and to parliamentarians. We now report fully on all the information that is within our control. Some of the information that I think the question addresses and that the Auditor General's report addresses is not within our control. It's money spent by departments in support of the on-site legal services that we have at all the departments and agencies across the system.

We agree, though, that it would be good to have that information available, and we stand ready to work with Treasury Board, which I think is probably the agency best placed to ensure that a system-wide system like that can be put in place.

[The Chair, Liberal, Shawn Murphy]

Thank you.

Monsieur Laforest, sept minutes, s'il vous plaît.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Thank you, Mr. Chair.

Ms. Fraser, in your opening statement, you said that one of the three objectives of your audit was to have assurance that quality legal services were being delivered. Later, you say that the Department of Justice has not defined what it means by quality services, that it has no overall quality management system and that it cannot assess whether it is meeting its overall quality objective.

How do you go about evaluating whether services are of appropriate quality, which is one of your objectives, while, inside the department itself, it seems that the mechanism does not exist? It must be more difficult for you. Can you say with some assurance that the services delivered are in fact quality services?

[Sheila Fraser]

In any system delivering professional services, whether they be legal or even auditing services, there first must be a definition of what is meant by quality. It could involve things like the time taken to respond to clients' needs, or knowing whether decisions were made that went counter to the advice given. There are different ways of doing it.

We noted in the report that the Department of Justice had several elements of a quality system. It devotes a lot of attention to the quality of the services it offers. We are looking for an overall system that can assure senior management specifically that its quality system is being followed up and that processes are in place. For example, it could involve reviews by senior personnel, or an assessment of the level of risk in each file. Systems must therefore be in place that consider the risk and the level of supervision required, and so on, as well as a system to check that the system is working as intended.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Without that in place, are you able to say that the services provided by the Department of Justice are quality services?

[Sheila Fraser]

We conducted interviews with clients, who told us that they were satisfied with the services. We also noted that several parts of a quality system are in place, but it must be improved. There must also be an overall system.

The department agrees with that and is working on it. It is to provide consistency above all, given the size of the department.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Thank you.

Deputy Minister Sims, in the pages that follow the Auditor General's report, in the departmental response, you say that you subscribe to each of her recommendations. Soon, in a month, it will have been a year.

Your statement that you subscribe to the recommendations aside, where are you with respect to quality, to appointing a person to be responsible for finances, to a better vision? Have you moved forward? Do you take this seriously?

People often come and tell us that they support recommendations, but, five years later, nothing has been done. Is it your intention to move more quickly?