2010-02-12 Agenda - Audit Committee

Audit Committee

Councillor Doug Holyday, Chair

Councillor Chin Lee, Vice-Chair

Councillor Mike Del Grande

Councillor Rob Ford

Councillor John Parker

Councillor Anthony Perruzza

Members of Council and Staff: Please keep this agenda and the accompanying material until the City Council meeting dealing with these matters has ended. The City Clerk’s Office will not provide additional copies.

Special Assistance for Members of the Public: City staff can arrange for special assistance with some advance notice. If you need special assistance, please call (416-392-8021), TTY 416-338-0889 or e-mail rmacken@toronto.ca.

Closed Meeting Requirements: If the Audit Committee wants to meet in closed session (privately), a Member of the Committee must make a motion to do so and give the reason why the Committee has to meet privately. (City of Toronto Act, 2006)

Notice to people writing or making presentations to the Audit Committee: The City of Toronto Act, 2006 and the City of Toronto Municipal Code authorize the City of Toronto to collect any personal information in your communication or presentation to City Council or its committees.

The City collects this information to enable it to make informed decisions on the relevant issue(s). If you are submitting letters, faxes, e-mails, presentations or other communications to the City, you should be aware that your name and the fact that you communicated with the City will become part of the public record and will appear on the City’s website. The City will also make your communication and any personal information in it – such as your postal address, telephone number or e-mail address – available to the public, unless you expressly request the City to remove it.

The City videotapes committee and community council meetings. If you make a presentation to a committee or community council, the City will be videotaping you and City staff may make the video tapes available to the public.

If you want to learn more about why and how the City collects your information, write to the City Clerk's Office, City Hall, 100 Queen Street West, Toronto ON M5H 2N2 or by calling 416-392-8021.

Declarations of Interest under the Municipal Conflict of Interest Act.

Confirmation of Minutes - December 16, 2009, Meeting 14

Communications/Reports

The Auditor General recommends that:

1. The City Manager review the recommendations contained in the Bellamy Report on the Toronto Computer Leasing and Toronto External Contracts Inquiries in order to ensure that all recommendations pertaining to ethics training are addressed. Further, training required as a result of the Bellamy recommendations be required to specifically address conflict of interest issues, and be made mandatory for all City staff.

In June 2000, Audit Committee requested that the Auditor General submit an annual report on the status of fraud and related matters. This report represents the Auditor General’s ninth report on the activities of the Fraud and Waste Hotline program for the period of January 1, 2009 to December 31, 2009.

During 2009, the Fraud and Waste Hotline received 677 complaints, an increase of nine per cent from the 619 complaints received in 2008. This amount represents an increase of 184 per cent from the initial 238 complaints received by the Hotline in 2003, its first full year of operation.

In 2009, there were a number of complaints received which related to contraventions or potential contraventions of the City’s Conflict of Interest Policy. There continues to be a less than clear understanding of circumstances which may constitute a real, potential or perceived conflict.

In 2006, the Auditor General’s Office made a recommendation regarding expediting the implementation of formal ethics training to all City staff. While ethics training, including training on conflicts of interest has been introduced, it has not been provided to all management staff. Further, ethics training continues to be outstanding for all non-union staff.

Madame Justice Bellamy in her report relating to the Toronto Computer Leasing Inquiry and the Toronto External Contracts Inquiry made specific recommendations in relation to staff training. This staff training needs to be extended to all staff and at the same time evaluated to ensure that it is effective.

There are no direct financial implications resulting from the adoption of this report.

The City’s Hotline Program has helped reduce losses and resulted in the protection of City assets. Investigations or reviews conducted by both Management and the Auditor General’s Office as a result of various communications to the Fraud and Waste Hotline have resulted, in certain cases, in the recovery of funds to the City.

There are additional benefits of the Hotline Program that cannot be quantified, including the deterrence of fraud or wrongdoing, strengthened internal controls, improvements in policies and operational efficiencies. These benefits may in turn assist in the detection and prevention of future wrongdoing involving City resources.

The Auditor General recommends that:

1. The Treasurer, in consultation with the City Solicitor, request amendments to provincial legislation pertaining to the issue of parking tickets related to drive-away vehicles. The requested amendments allow parking tags to be mailed directly to registered vehicle owners.

2. The Treasurer review the practices currently adopted by 407 International Inc. in connection with the collection of out-of-province receivables. Such a review also include the practices of other jurisdictions. Further, the Treasurer review the potential use of collection agencies. If required, requests for amendments to provincial legislation be made in order to facilitate the collection of out-of-province receivables.

3. The Treasurer re-evaluate the criteria supporting the discretionary cancellation of parking tags. Policies and procedures concerning the preparation and retention of documentation in support of cancellations be developed. Supporting documentation be randomly reviewed by supervisory staff. In addition, management reports be developed and reviewed on an ongoing basis to identify anomalies and trends.

4. The Treasurer, in consultation with the Chief Information Officer, review the potential of automating certain aspects of the documentation requirement process as it pertains to pre-court filing documents and request for trials. Such a process should be conducted in consultation with the City Solicitor in order to ensure that the automation of certain processes is not contrary to legislation and, if required, amendment to the provincial legislation be requested.

5. The Treasurer review the parking enforcement process as it relates to the issue and cancellation of parking tags for delivery and courier vehicles. Such a review include an evaluation of best practices in other Canadian and US jurisdictions. If required, amendments to provincial legislation be requested.

6. The Treasurer direct all staff that parking tag adjustments processed through the Parking Tag Management System are appropriately documented and that each adjustment be accompanied by an appropriate audit trail. Such documentation be reviewed on a random basis by supervisory staff.

7. The Treasurer review the current plate denial process. Such a review take place in consultation with the Ministry of Transportation and focus on the reasons why significant receivables continue to be outstanding beyond the two-year licence plate renewal period. Improvements identified be implemented in order to maximize the effectiveness of the plate denial system.

8. The Treasurer review the parking tag collection process, prioritise those receivables which relate to individuals and entities who have significant receivables owing on multiple plates and consider conducting corporate searches to identify these entities. Once identified the appropriate follow-up process be conducted including the use of collection agencies specifically directed to these accounts.

9. The Treasurer review the possibility of providing collection agencies with specific information including the names and addresses of individuals and companies with outstanding parking tags. Amendments to provincial legislation be requested, if required.

10. The Treasurer review the extent of receivables submitted to collection agencies such that collection agencies are provided information on entities who have parking tags owing on more than one vehicle. Finally, the Treasurer consider providing collection agencies with more up to date receivable information.

11. The Treasurer, in consultation with the Chief Information Officer, review the current cheque processing system so that payments relating to tags in plate denial status and payments which have previously been made are identified more easily by those staff receiving payment. Such a process would reduce the administrative process of issuing refund cheques.

12. The Treasurer review the merits of amending the cheque collection process so that NSF fees are clearly identified and subsequently collected. Amendments to provincial legislation be requested, if required.

13. The Treasurer develop a formal change control process. Application development should be separate from system administration, and developers should not install their own programs to the production environment.

14. The Treasurer develop and implement a formal access control and review process. A review of user access should occur periodically and unauthorized users deleted from the authorized user list.

Our review identified opportunities for strengthening controls in the administration of parking tag revenues. Certain of our recommendations, however, will necessitate negotiation with the Province and will require legislative change. In view of the significant potential revenue opportunities, such negotiations should occur as soon as possible.

The implementation of recommendations in this report will improve controls in the management and administration of parking tags. The extent of any resources required or potential cost savings and revenue improvements resulting from implementing the recommendations in this report is not determinable at this time.

The Auditor General recommends that:

1. City Council grant authority to enter into an agreement with PriceWaterhouseCoopers LLP for external audit services for fiscal years 2010 through 2014 inclusive for $4,085,000 (net of all applicable taxes) as per the fee schedule outlined in Confidential Attachment 2 and under terms satisfactory to the Auditor General and the City Solicitor.

2. City Council authorize the public release of the confidential information in Attachment 2 upon Council’s approval of this contract award to PriceWaterhouseCoopers LLP and PriceWaterhouseCoopers LLP signing the contract.

3. City Council direct that the confidential information in Attachment 3 remain confidential.

4. City Council authorize and direct the appropriate City officials to take the necessary action to give effect thereto.

The purpose of this report is to advise on the results of Request for Proposal (RFP) 9171-09-7137 for external audit services to perform the financial statement audits for the City of Toronto and its major agencies, boards, and commissions for the years ending 2010 to 2014 inclusive and to request authority to enter into an agreement with the recommended proponent.

The total contract award identified in this report is $4,156,896 including HST.

The total annual audit fees for the programs, ABCs and Local Boards (entities) listed in Attachment 1 for the years 2010 to 2014 inclusive are shown in the table below.

The 2009 audit fees were $1,230,140 (net of all applicable taxes). The total amount for audit fees for 2010 is $750,000 (net of all applicable taxes), which represents a 39 per cent decrease from 2009.

2010	2011	2012	2013	2014	TOTAL
$ 763,200	$ 763,200	$ 819,168	$ 875,136	$ 936,192	$ 4,156,896

Various agencies, boards, commissions and programs are responsible for the payment of audit fees. Funding is available in the 2010 Recommended Operating Budget of the various entities.

The Deputy City Manager and Chief Financial Officer has reviewed this report and agrees with the financial impact information.

The Auditor General recommends that:

1. the Audit Committee receive this report for information.

This report responds to a request from the Audit Committee that the Auditor General, “provide the value added of his department.”

At the request of the Audit Committee, attempts have been made to identify the extent of the quantifiable financial benefits which have resulted from the work conducted by the Auditor General’s Office.

While certain reports have resulted in tangible cost savings, the more important benefits provided relate to the avoidance of future costs, as well as the protection of City assets. Nevertheless, tangible annual cost savings have occurred, or will occur, as a result of the work conducted by the Auditor General. Over the five-year period commencing January 1, 2005, the estimated potential savings to the City are in the range of $87 million compared to a cumulative audit expenditure of $17.6 million. In simple terms, for every $1 invested in the audit process the return on this investment has been $5.0. Many of the estimated cost savings are ongoing and occur on an annual basis.

The adoption of this report has no direct financial implication.

The City Manager recommends that:

1. City Council receive this report for information.

This report outlines the City Manager’s response to Audit Committee’s request of October 20, 2009 as to the status of recommendations made by the Auditor General since January 1, 1999.

There are no financial impacts associated with this report.

The Deputy City Manager and Chief Financial Officer recommends that:

1. City Council receive the report (January 22, 2010) from the Deputy City Manager and Chief Financial Officer for information.

2. City Council direct that the confidential information contained in Attachment 1 to the report (January 22, 2010) from the Deputy City Manager and Chief Financial Officer remain confidential and not be released publicly as it involves litigation or potential litigation that affects the City.

The report provides Audit Committee with the outcome of negotiations with Mercer (Canada) Limited with respect to a refund of certain fees paid for actuarial services.

There are no financial implications as a result of this report.

To respond to the audit opinion and the auditor’s comments contained in the report, "Auditor’s Report on Compliance with Investment Policy 2008" and to comply with the City’s Statement of Lease Financing Policies which requires confirmation that the City’s Agencies, Boards and Commissions have complied with the City’s investment and leasing policies during 2008.

The Treasurer and the Director, Business Services, Economic Development and Culture recommend that:

1. The Audit Committee approve the 2008 audited financial statements and management letters of the eight Business Improvement Areas attached as Appendices A-1 to M-1 to the report (January 22, 2010) and forward these to City Council for its approval.

The purpose of this report is to present the 2008 audited financial statements and management letters of eight Business Improvement Area’s (BIAs) financial statements to Audit Committee and City Council for approval.

There are no financial implications resulting from this report.

Meeting No.	15	Contact	Rosemary MacKenzie, Council Administrator
Meeting Date	Friday, February 12, 2010	Phone	416-392-8021
Start Time	9:30 AM	E-mail	rmacken@toronto.ca
Location	Committee Room 1, City Hall	Chair	Councillor Doug Holyday