Welch LLP Report on Arena Board Financial Controls and Governance

under contract by the City of Toronto to conduct financial statement audits for its controlled entities for five fiscal years (2018 - 2022), including the City's eight Arena Boards of Management (Arena Boards) with responsibility for the following City-owned arena facilities: Forest Hill Memorial Arena George Bell Arena Leaside Memorial Community Gardens Arena McCormick Playground Arena Moss Park Arena North Toronto Memorial Arena Ted Reeve Community Arena William H. Bolton Arena Welch has experienced delays in auditing and issuing audit opinions for many of the Arena Boards over the past several years, exacerbated and highlighted by the COVID-19 outbreak and mandatory arena closures under provincial emergency orders. At the November 2, 2021 meeting of the Audit Committee, the Chair asked what could be done to improve Arena Board performance. In response, staff requested Welch look back at issues encountered during audits of the Arena Boards over the past several years and identify any key findings, with a view to highlighting key areas of risk with respect to governance and financial oversight over the Arenas. In its report, Welch found that delays in financial reporting stem from underlying issues at the Arena Boards with respect to internal controls, capacity, knowledge, processes and technology. The report summarizes the issues found and notes areas for improvement. The report makes two key recommendations: 1) Evaluate new governance structures. In particular, the report recommends centralizing accounting, reporting and documentation processes. This could be achieved by having all Arena Boards use the same services or systems for accounting, cash management and payroll, while remaining independent entities. Alternatively, the report notes that the City could achieve improved coordination by bringing Arena operations under City management. 2) Evaluate different levels of assurance. Welch notes that the status quo is for the Arenas to meet the highest possible level of assurance by preparing general-purpose financial statements that are audited by an independent audit firm, as required under the City of Toronto Act, 2006. Welch notes that other audit procedures, such as a Financial Statement Review or Special Purpose Procedures (e.g. auditing only certain transactions or balances), may provide a reasonable level of assurance with less administrative burden on the Arenas and the City proportional to the level of financial risk. This report is a transmittal of findings by Welch LLP and does not constitute City staff's advice with regard to Welch's recommendations. The City Manager will review and evaluate the recommendations provided by Welch in its report, engage key stakeholder at the City and at the Arena Boards of Management on viable actions, and report back to Audit Committee in Q1 2023 with options for implementation.