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Auditor correspondence

28-May-2010 [220]

Part of Auditor

[Letter to Mr.Jeff Griffiths, Auditor General, City of Toronto, October 23 2009. From Jutta Mason, CELOS.]

Dear Mr.Griffiths,

This letter is prompted by a fairly close reading of the report you presented to the Audit Committee on October 20, addressing a number of the Parks, Forestry and Recreation Capital Projects issues.

Your report described the situation from what you called a “broad high level perspective.” For about ten years, a group of us has studied some of the same issues from a ground-level perspective. I would like to come and talk to you about the view we have from our vantage point.

1. It’s our impression that facility audits conducted by external consultants can be ill-informed, partly because the consultants may have trouble even getting complete access to the facilities they are supposed to evaluate. (We have read this qualifier in their reports and have often seen it ourselves.) In the case of the City’s outdoor artificial ice rinks and wading pools (two examples), the reports often predict problems that turn out to be fine, and they just as often miss problems that then come up by surprise. We have documented some examples in detail.

2. The citywide State-of-Good-Repair plans that are made on the basis of these audits are therefore also often flawed. In addition, capital projects staff, through no fault of their own, have been in what seems to us be a conflict of interest ever since amalgamation. It’s our understanding that they must meet the major part of their payroll through a percentage of the capital projects that they manage. The incentive to increase the size of their SOGR projects would therefore be compelling. This may be one explanation why the SOGR projects we have studied seem to include so much that is unrelated to repair. Indeed, needed repairs are not always part of the plans. Again, we have detailed examples.

3. Our original reason for learning about the way the city spends it funds in parks was to find out why we were so often told that there was no money to carry out needed maintenance and repairs, nor to program the best use of existing resources. Over the years, we have had limited success in engaging with the PF&R Division, or the relevant committees of Council, over what we found.

4. At a recent meeting with two of the Division’s directors, we made a joint proposal with some part-time staff, for how to improve an under-used (but expensive) outdoor rink. We were warned that staff who sought to collaborate with us had put themselves at risk of being investigated by your office for conflict of interest. We are intrigued that your audits might include such details as adding Sunday campfires (one of the many humble things suggested at this meeting) to make an orphan rink more inviting for families. But we were hoping that your attention would be drawn to what is neglected and wasted in existing facilities and in staffing allocations, even more than to improvements that are proposed.

5. At this week’s audit committee meeting, the question of policies being followed was raised frequently, as it was in your report as well. There has been a remarkable proliferation of policies in the PF&R Division in the last three or four years. At the same time, public consultation regarding policies affecting all of us, has shrunk to the vanishing point. Even our political representatives often seem frustrated and in the dark about the proliferation of new rules and restrictions. Many policies seem to emanate from staff meetings and not be vetted by Council. Is this problem within your scope of work?

Our group recently got a grant from the Ontario Trillium Foundation, to establish a database of the effects of legislation, regulation, policies and guidelines on community use of parks and public space. For that reason, it’s of particular interest for us now to come and talk to you about the issues I’ve raised above. Could you let me know if you can set aside an hour or two to have a conversation?

January 18 2010 Ms Mason,

Just wanted to let you know that the Auditor General's Office did receive your correspondence dated October 22, 2009 and Mr Griffiths has asked me to respond on his behalf. My apologies for taking so long to get back to you but we don't have an audit project planned in the Parks, Forestry and Recreation area for 2010 so other matters took precedence.

In your letter you mention that there are several ground-level issues that you would like to speak to us about.

We are always interested in hearing from individuals with ideas for improving City operations and I'd be pleased to meet with you at your convenience in the coming weeks.

Please feel free to contact me as noted below.

Jerry Shaubel, CA, CA.CISA, CGAP Director, Auditor General's Office

February 4, 2010, from Jutta Mason to Jerry Shaubel

Thanks again for coming and spending all that time at Dufferin Rink last week.

Several parts of the conversation need our follow-up. I'll send you the documentation about the limited work assignment of the outdoor rink staff next week. But the most pressing issue for me is your colleague Mayssa Mirshak's conviction that only outside consultants are paid with a percentage of capital projects. Here is the response we got several years ago from Corporate Access, about the way the capital projects salary and benefits are recovered:

"Only the Capital Projects section is required to recover 100% of staff salaries & benefits through a 'recovery from capital' charge. Shortly after amalgamation, a corporate decision was made that the full salary and benefits of the Capital Projects Section were to be recovered by allowing a charge of up to 10% against the gross budget of sub-projects within the capital budget.

The budget for any capital sub-project contains the following components:

  • salary and benefit recovery
  • professional and technical services (external consulting)
  • contingencies for design and construction
  • construction costs"

Under this formula, if there is less capital spending, there will be less money available for salary and benefit recovery. This means that every year, staff need a certain level of capital spending in order to cover their payroll. This will contribute to shaping the information they give to Council. Since SOGR is near the top of the priority list, that means that SOGR is a good place to look for the effects for this conflict of interest. Our group has tracked a number of cases -- they're not hard to find.

If this problem was not known to the auditor, the audit has a crucial blind spot. Do you agree? How could this be addressed?

Feb.4 2010, from Jerry Shaubel to Jutta Mason

Thanks for the information....I did check following our conversation and confirm that there is a City policy that where staff work on capital projects their costs should be charged to those projects. The policy limits these charges to a maximum of 10% of the project cost. This treatment is common and appropriate since the recorded costs for a capital project should be comprehensive. Within that principle it is reasonable that a Section devoted to capital projects would recover all of its costs from the related capital projects.

The policy doesn't create a conflict of interest in that the level of full time staff is closely scrutinized at both the staff and political level as is the capital budget. As you know, there's not enough money to go around so it's not possible to add capital projects merely to justify employing staff. The City staffs at a base level and engages contract staff as and when required when activity exceeds the base.

Feb.4 2010, from Jutta Mason to Jerry Shaubel

Re the practice of covering payroll with debt (which is the result of the formula): I think I had a misapprehension of the duties of an auditor. I thought the analysis would be a little more detailed, tracking spending from several different angles. For example, reflecting on this sentence from your e-mail: "the level of full time staff is closely scrutinized at both the staff and political level as is the capital budget" these questions come to mind:

  • how much capital spending is needed to support the current level of staffing? How closely does the capital budget, recommended by staff, correspond to this figure?
  • to reliably cover the staff payroll, how much pressure is there to prefer large projects involving long-term reliable budget projections, in favour of smaller repairs and place-specific good -repair requests?
  • who scrutinizes the quality of the audits, including access and consultation between audit consultants and technical/repair staff?
  • who scrutinizes the relation of the audit reports to the SOGR recommendations arising from them?
  • who scrutinizes the SOGR projects and evaluates the proportion of repair versus embellishments?
  • who scrutinizes the project management percentage assigned, versus the project management required or delivered (i.e. the value-for-money?)
  • where are such findings recorded, and are such evaluations (whether by capital projects management or by the auditor) public?

My questions are based on real examples and on staff complaints about the lack of repair money for small projects, over about 15 years. Can you let me know if the audit did include these where-the-rubber-meets-the-road type of questions, and if so whether this part of your analysis is public?

Feb.4 2010, from Jerry Shaubel to Jutta Mason

Sorry, I can't get involved in answering such detailed questions. Our reports are public. Our reports describe the work we do and the results and that is the information that is public.

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