Audit Committee
The full agenda, as filed
All 5 items in the clerk’s order. Each carries the city’s own words: the staff recommendation, what the body decided, and its status. Nothing below is written by us.
AU12.1amended
The Corporate Real Estate Management Division is responsible for delivering some of the City's largest and complex capital construction projects. The Auditor General's 2025 Audit Work Plan included a review of Corporate Real Estate Management's oversight and management of capital projects. The focus of this audit was on Corporate Real Estate Management's processes for reviewing capital project change orders and related documentation, as changes that occur on capital projects can result in project delays and significant cost increases. In addition, the Auditor General's 2025 Annual Report on the Fraud and Waste Hotline highlighted an emerging fraud risk related to change orders. This audit assessed whether Corporate Real Estate Management sufficiently monitors and oversees change orders for capital projects ensuring that change orders are properly justified and appropriately reviewed and approved. Our audit identified opportunities to: 1. Strengthen Processes to Ensure Appropriate Change Order Oversight. 2. Reinforce Roles and Accountabilities for Change Order Review and Approval. 3. Improve Performance Through Ongoing Monitoring, Evaluation, and a Stronger Project Management System.
The Audit Committee recommends that: 1. City Council request the Executive Director, Corporate Real Estate Management Division, to improve and formalize the Division's change order policies and procedures to ensure they are comprehensive, clear and consistently applied across all capital projects and aligned with contract terms, and at a minimum, the procedures should: a. Establish Corporate Real Estate Management staff and management approval authorities and financial thresholds for review and approval of change orders, including requirements for escalation to senior management where necessary; b. Specify documentation requirements for Corporate Real Estate Management staff for change orders, including justification for the change, cost and schedule impact, cost breakdown, and evidence of review and approval by required parties; c. Specify documentation requirements for Corporate Real Estate Management staff confirming that markups and additional fees and charges included in change orders are applied in accordance with the contract; d. Specify review requirements for Corporate Real Estate Management staff for contractor invoices, including verification that the related work is completed in accordance with the contract terms before payment is authorized and released; and e. Set expectations for Corporate Real Estate Management staff for completing and communicating consultant and contractor performance evaluations and following up to make sure appropriate corrective actions are taken in areas where consultants and contractors do not meet expectations. 2. City Council request the Executive Director, Corporate Real Estate Management Division, to provide training for project managers when the capital project policy and procedures are implemented or updated, and when quality assurance reviews indicate the need for supplementary refresher training, to ensure consistent understanding and application of change order requirements across all capital projects. 3. City Council request the City Manager, in consultation with the Chief Procurement Officer, City Solicitor, and relevant Division Heads, to review contract structures, procurement practices, legal risks, and vendor relationships and consider adopting a consistent City-wide approach for directly accessing and reviewing subcontractor records, to enhance oversight of change orders and address risks related to contractor overbilling and / or irregularities in change order documentation. 4. City Council request the Executive Director, Corporate Real Estate Management Division, in consultation with the City Solicitor, to: a. Review the change orders for contracts where potential overcharges for markups and other charges were identified during the audit and take appropriate steps to recover the funds or secure credits, where possible; b. Review change orders for all current capital projects (and recently completed capital projects, prioritized based on risk) to confirm contract terms for markups and other charges are correctly applied and pursue recovery or credits of any charges that are not in accordance with contract terms, where possible; and c. Standardize and clarify the contract language included in Corporate Real Estate Management project-specific schedules attached to the City's standard construction agreement and ensure staff's consistent understanding of the applicability and calculation of markups and other additional fees and charges related to a change; and, where applicable, provide feedback on potential improvements to the City's standard clauses for consideration as part of the City-wide review of construction agreement templates. 5. City Council request the Executive Director, Corporate Real Estate Management Division, to ensure Corporate Real Estate Management staff and external consultants have an appropriate and consistent understanding of the consultants' roles and responsibilities for reviewing and recommending change orders for City approval, including: a. Assessing the reasonableness of change order pricing; b. Documentation standards and record retention requirements; and c. Verifying general contractor compliance with City contract terms. 6. City Council request the Executive Director, Corporate Real Estate Management Division, to reduce overreliance on external consultants and to update policies and procedures and provide training, to reinforce Corporate Real Estate Management project managers' understanding of the importance of fulfilling their oversight responsibilities and overall accountability for reviewing, approving and administering change orders. 7. City Council request the Executive Director, Corporate Real Estate Management Division, to ensure: a. Change orders are appropriately reviewed and records demonstrating the nature and extent of reviews of the reasonableness and appropriateness of change orders (including pricing, scope, and schedule impacts) are retained in the City's project files; b. Change orders and change directives are appropriately approved, in accordance with signing authority and financial thresholds, before beginning work; and c. Contractor invoices and supporting documentation are reviewed and confirmed by Corporate Real Estate Management project managers to comply with contract terms and related policies and procedures, before payment is approved and released. 8. City Council request the Executive Director, Corporate Real Estate Management Division, to establish a formal and consistent process for identifying, documenting, and managing change orders resulting from design errors and omissions, and this process should include: a. Requiring the use of standardized categories to identify the reasons for change orders (including design errors and omissions) and consistently tracking design errors and omissions across projects; b. Establishing procedures for assessing additional costs arising from design errors and omissions; and c. Defining when and how to pursue claims and cost recovery from the external consultant, including required documentation, considering the cost and benefit of pursuing such claims. 9. City Council request the Executive Director, Corporate Real Estate Management Division, in consultation with the Chief Procurement Officer and City Solicitor, to: a. Ensure that Corporate Real Estate Management project managers consistently complete the mandatory performance evaluations for general contractors and consultants; b. Ensure that Corporate Real Estate Management project managers monitor general contractors and consultants to confirm they take corrective actions in response to areas where performance does not meet expectations, which includes communicating issues, reviewing progress and documenting whether the issues persist or are resolved; and c. Ensure that the performance evaluations are reviewed and used for performance management purposes, and to explore opportunities to incorporate evaluation results into future bid evaluations. 10. City Council request the Executive Director, Corporate Real Estate Management Division, to strengthen the quality assurance process for both complete and active projects and to include a focus on capital project change orders by: a. Establishing the scope and frequency of quality assurance reviews related to change orders; b. Ensuring quality assurance reviews examine a sample of change orders to verify that Corporate Real Estate Management project managers have obtained, reviewed, and retained sufficient supporting documentation to confirm that changes were necessary and justified; that costs, schedule impacts, and markups or other fees are reasonable and in accordance with contract terms; and that all required approvals and supporting documentation were obtained in a timely manner; and c. For a selection of general contractors, confirming directly with subcontractors that the amount on change orders matches the subcontractors' quotes or actual charges invoiced to the general contractor, where possible. 11. City Council request the Executive Director, Corporate Real Estate Management Division to: a. Expedite implementing a centralized system to track and record key documentation and data for capital projects, including all change orders; b. Ensure the use of standardized categories to identify and track the root causes of change orders; c. Establish and implement key performance indicators for change order management to support consistent monitoring and oversight of compliance with internal procedures and contractual requirements; and d. Create standardized reports for management to monitor change orders and related key performance indicators, including volume, value, reasons and trends across all Corporate Real Estate Management-managed capital projects. 12. City Council direct that Revised Confidential Attachment 1 to the report (April 17, 2026) from the Auditor General remain confidential in its entirety, as it contains information that is subject to litigation or potential litigation that affects the City of Toronto and contains information about a position, plan, procedure, criteria, or instruction to be applied to any negotiations carried on or to be carried on by or on behalf of the City of Toronto. 13. City Council request the Executive Director, Corporate Real Estate Management Division, to report back to Audit Committee in the second quarter of 2027 on the status of actions taken in response to audit recommendations, including progress made and outcomes achieved as a result of those actions. 14. City Council request the City Manager, in consultation with the City Solicitor, to: a. Review the change orders for contracts where potential overcharges for markups and other charges were identified during the audit and take appropriate steps to recover the funds or secure credits, where possible; b. Review change orders for all high-risk capital projects, over at least the last two years (May 1, 2024 to May 1, 2026), and recently completed capital projects, prioritized based on risk, to confirm contract terms for markups and other charges are correctly applied and pursue recovery or credits of any charges that are not in accordance with contract terms, where possible; and c. Standardize and clarify the contract language included in all of the City's capital project-specific schedules attached to the City's standard construction agreement and ensure staff's consistent understanding of the applicability and calculation of markups and other additional fees and charges related to a change; and, where applicable, provide feedback on potential improvements to the City's standard clauses for consideration as part of the City-wide review of construction agreement templates.
Staff recommendation as filed
The Auditor General recommends that: 1. City Council request the Executive Director, Corporate Real Estate Management Division, to improve and formalize the Division's change order policies and procedures to ensure they are comprehensive, clear and consistently applied across all capital projects and aligned with contract terms. At a minimum, the procedures should: a. Establish Corporate Real Estate Management staff and management approval authorities and financial thresholds for review and approval of change orders, including requirements for escalation to senior management where necessary; b. Specify documentation requirements for Corporate Real Estate Management staff for change orders, including justification for the change, cost and schedule impact, cost breakdown, and evidence of review and approval by required parties; c. Specify documentation requirements for Corporate Real Estate Management staff confirming that markups and additional fees and charges included in change orders are applied in accordance with the contract; d. Specify review requirements for Corporate Real Estate Management staff for contractor invoices, including verification that the related work is completed in accordance with the contract terms before payment is authorized and released; and e. Set expectations for Corporate Real Estate Management staff for completing and communicating consultant and contractor performance evaluations and following up to make sure appropriate corrective actions are taken in areas where consultants and contractors do not meet expectations. 2. City Council request the Executive Director, Corporate Real Estate Management Division, to provide training for project managers when the capital project policy and procedures are implemented or updated, and when quality assurance reviews indicate the need for supplementary refresher training, to ensure consistent understanding and application of change order requirements across all capital projects. 3. City Council request the City Manager, in consultation with the Chief Procurement Officer, City Solicitor, and relevant Division Heads, to review contract structures, procurement practices, legal risks, and vendor relationships and consider adopting a consistent City-wide approach for directly accessing and reviewing subcontractor records, to enhance oversight of change orders and address risks related to contractor overbilling and / or irregularities in change order documentation. 4. City Council request the Executive Director, Corporate Real Estate Management Division, in consultation with the City Solicitor, to: a. Review the change orders for contracts where potential overcharges for markups and other charges were identified during the audit and take appropriate steps to recover the funds or secure credits, where possible; b. Review change orders for all current capital projects (and recently completed capital projects, prioritized based on risk) to confirm contract terms for markups and other charges are correctly applied and pursue recovery or credits of any charges that are not in accordance with contract terms, where possible; and c. Standardize and clarify the contract language included in Corporate Real Estate Management project-specific schedules attached to the City's standard construction agreement and ensure staff's consistent understanding of the applicability and calculation of markups and other additional fees and charges related to a change; and, where applicable, provide feedback on potential improvements to the City's standard clauses for consideration as part of the City-wide review of construction agreement templates. 5. City Council request the Executive Director, Corporate Real Estate Management Division, to ensure Corporate Real Estate Management staff and external consultants have an appropriate and consistent understanding of the consultants' roles and responsibilities for reviewing and recommending change orders for City approval, including: a. Assessing the reasonableness of change order pricing; b. Documentation standards and record retention requirements; and c. Verifying general contractor compliance with City contract terms. 6. City Council request the Executive Director, Corporate Real Estate Management Division, to reduce overreliance on external consultants and to update policies and procedures and provide training, to reinforce Corporate Real Estate Management project managers' understanding of the importance of fulfilling their oversight responsibilities and overall accountability for reviewing, approving and administering change orders. 7. City Council request the Executive Director, Corporate Real Estate Management Division, to ensure: a. Change orders are appropriately reviewed and records demonstrating the nature and extent of reviews of the reasonableness and appropriateness of change orders (including pricing, scope, and schedule impacts) are retained in the City's project files; b. Change orders and change directives are appropriately approved, in accordance with signing authority and financial thresholds, before beginning work; and c. Contractor invoices and supporting documentation are reviewed and confirmed by Corporate Real Estate Management project managers to comply with contract terms and related policies and procedures, before payment is approved and released. 8. City Council request the Executive Director, Corporate Real Estate Management Division, to establish a formal and consistent process for identifying, documenting, and managing change orders resulting from design errors and omissions. This process should include: a. Requiring the use of standardized categories to identify the reasons for change orders (including design errors and omissions) and consistently tracking design errors and omissions across projects; b. Establishing procedures for assessing additional costs arising from design errors and omissions; and c. Defining when and how to pursue claims and cost recovery from the external consultant, including required documentation, considering the cost and benefit of pursuing such claims. 9. City Council request the Executive Director, Corporate Real Estate Management Division, in consultation with the Chief Procurement Officer and City Solicitor, to: a. Ensure that Corporate Real Estate Management project managers consistently complete the mandatory performance evaluations for general contractors and consultants; b. Ensure that Corporate Real Estate Management project managers monitor general contractors and consultants to confirm they take corrective actions in response to areas where performance does not meet expectations. This includes communicating issues, reviewing progress and documenting whether the issues persist or are resolved; and c. Ensure that the performance evaluations are reviewed and used for performance management purposes, and to explore opportunities to incorporate evaluation results into future bid evaluations. 10. City Council request the Executive Director, Corporate Real Estate Management Division, to strengthen the quality assurance process for both complete and active projects and to include a focus on capital project change orders by: a. Establishing the scope and frequency of quality assurance reviews related to change orders; b. Ensuring quality assurance reviews examine a sample of change orders to verify that Corporate Real Estate Management project managers have obtained, reviewed, and retained sufficient supporting documentation to confirm that changes were necessary and justified; that costs, schedule impacts, and markups or other fees are reasonable and in accordance with contract terms; and that all required approvals and supporting documentation were obtained in a timely manner; and c. For a selection of general contractors, confirming directly with subcontractors that the amount on change orders matches the subcontractors' quotes or actual charges invoiced to the general contractor, where possible. 11. City Council request the Executive Director, Corporate Real Estate Management Division to: a. Expedite implementing a centralized system to track and record key documentation and data for capital projects, including all change orders; b. Ensure the use of standardized categories to identify and track the root causes of change orders; c. Establish and implement key performance indicators for change order management to support consistent monitoring and oversight of compliance with internal procedures and contractual requirements; and d. Create standardized reports for management to monitor change orders and related key performance indicators, including volume, value, reasons and trends across all Corporate Real Estate Management-managed capital projects. 12. City Council direct that Confidential Attachment 1 remain confidential in its entirety, as it contains information that is subject to litigation or potential litigation that affects the City of Toronto and contains information about a position, plan, procedure, criteria, or instruction to be applied to any negotiations carried on or to be carried on by or on behalf of the City of Toronto.
AU12.2adopted
Investigation into the Procurement of the PayIt Platform
This report provides the outcome of the Auditor General's Office's investigation into the procurement of the PayIt platform.[1] In 2024, after the Auditor General issued an audit report on the procurement and implementation of PayIt's unsolicited proposal, City Council requested the Auditor General to consider further investigating: a. the decision-making process that resulted in the score sheet used for the Request for Proposal; b. whether there are additional City records located on the City's servers or on private cell phones and emails of senior City staff that merit further investigation; and, c. whether a further forensic investigation on the procurement is required. Following City Council's request, the Auditor General's Office undertook an investigation that examined two lines of inquiry: 1. an explanation for the removal of the detailed scoring breakdown in the published call document for proponents of the Swiss Challenge negotiated Request for Proposal (SC-nRFP), determining who removed the detailed scoring and who approved this change; and, beyond City Council's request, whether any wrongdoing occurred on behalf of any current or former City staff and / or Senior Management; and, 2. based on additional interviews and any potential additional City records located on City servers or on private cell phones and emails of senior City staff that provide further information and / or merit further investigation and beyond City Council's request, to determine any further reasoning for not following the City's policy and process throughout the procurement of the PayIt platform during 2019 to 2021, including the unsolicited proposal, proceeding with the proof of concept and the transparency of reporting to City Council; and whether any wrongdoing occurred on behalf of any current or former staff and / or Senior Management. Our investigation found the following: - The [then] Senior Corporate Buyer removed the detailed scoring breakdown, but there was conflicting and insufficient evidence to conclude on who directed them to do so and who approved the change, and why the change was made. - City staff and [then] Senior Management did not always follow City policies, processes, and by-laws during the unsolicited proposal process and procurement of the PayIt platform, including some use of personal email addresses to conduct City business. - Other observations include the potential reasons and motivation for not complying with City policies and by-laws. Both staff and the former Senior Management interviewees said they felt pressure, for different reasons, to proceed with the digital transformation, which included the PayIt procurement. Despite the policy and by-law violations noted in the report, based on the interviews and available evidence reviewed and in the Auditor General's view, these do not meet the threshold of wrongdoing as defined by the Toronto Public Service By-law. The findings of this investigation reinforce the need to implement the nine recommendations from our 2024 audit. This will improve the City's unsolicited proposal policy and process and the procedure for conducting a Swiss Challenge, as well as support addressing the proof of concept process concerns. This investigation and our 2024 audit report also reinforce the importance of management's leadership and commitment to ensuring openness, fairness, and transparency in City procurement. The current Senior Leadership Team can continue to model and promote a culture that encourages compliance with City policies and by-laws. Given the challenges that arise from the length of time that has passed since the unsolicited proposal and procurement of PayIt began (approximately seven years), including the lack of available information and devices, as well as the inability of individuals to recall accurately or completely, it is the Auditor General's view that further investigative work is unlikely to yield any further relevant information and / or benefits that would materially impact the findings of this investigation. We also note that Senior Management and the Senior Leadership Team that were involved and referred to in this report are no longer with the City or are in different roles. We express our appreciation for the co-operation and assistance we received from current and former City staff and Senior Management throughout our investigation. [1] The PayIt platform refers to a digital government platform offered by PayIt LLC.
The Audit Committee recommends that: 1. City Council receive the report (April 17, 2026) from the Auditor General for information.
Staff recommendation as filed
The Auditor General recommends that: 1. City Council receive this report for information.
AU12.3adopted
At its meeting on April 16, 2026, the Board of Governors of Exhibition Place considered Item EP22.1 and made recommendations to City Council. Summary from the report (March 25, 2026) from the Auditor General: The Auditor General included a cybersecurity audit of Exhibition Place, an agency of the City of Toronto, in her 2025 Work Plan. Exhibition Place is Canada's largest convention centre and entertainment and sports venue, generating $595 million[1] in economic impact annually and $67.3 million in revenue in 2024. Phase One of this cybersecurity audit was presented at Exhibition Place's December 5, 2025, Board meeting. The Auditor General's Phase One confidential report included results from testing physical security, user access management, and staff awareness of social engineering in relation to cybersecurity. The Phase One public cover report is available at: Cybersecurity Audit of Exhibition Place - Phase One: Physical Security, User Access Management and Staff Training Technology plays a vital role in all aspects of Exhibition Place's operations and services. This Phase Two report includes the results of our vulnerability assessment and penetration testing of the Exhibition Place's network, systems, applications and devices, as well as cybersecurity incident logging and monitoring review. This report includes five administrative recommendations. The confidential findings and recommendations are contained in Confidential Attachment 1 to this report. A separate, confidential and detailed technical report was provided to management with technical details to guide them in addressing the report findings and recommendations. Management agrees with the recommendations contained in the Confidential Attachment 1, which also includes management's response. [1] Budget TO 2026 Budget Notes Exhibition Place
The Audit Committee recommends that: 1. City Council authorize the public release of Confidential Attachment 1 to the report (March 25, 2026) from the Auditor General at the discretion of the Auditor General, after discussions with the appropriate Exhibition Place and City officials.
Staff recommendation as filed
The Board of Governors of Exhibition Place recommends that: 1. City Council authorize the public release of Confidential Attachment 1 to the report (March 25, 2026) from the Auditor General at the discretion of the Auditor General, after discussions with the appropriate Exhibition Place and City officials.
AU12.4adopted
Future Contract Considerations for SmartTrack and Other Capital Project Agreements
The purpose of this report is to assess the adequacy of the City's contract management and project management processes with respect to the SmartTrack Project and whether they ensure value for money and project delivery timelines. The report also identifies requirements that should be considered in future contracts and projects to protect the interests of the City, including the addition of audit clauses. This is in response to the motions made at the February 2026 Audit Committee meeting and the March 2026 City Council meeting.
The Audit Committee: 1. Received the report (April 17, 2026) from the Chief Procurement Officer and the Director, Internal Audit, for information.
Staff recommendation as filed
The Chief Procurement Officer and the Director, Internal Audit recommend that: 1. The Audit Committee receive this report for information.
AU12.5adopted
Moss Park Arena - 2024 Audited Financial Statements
The purpose of this report is to provide the Audit Committee and City Council with the 2024 audited financial statements of Arenas. The 2024 audited financial statements for the eight City Arenas are presented to the Audit Committee after approval by their respective Boards or Committees of Management. The financial statements for seven Arenas were previously presented at the July 11, 2025, November 5, 2025, and February 12, 2026 Audit Committee meetings. This report presents City Council with the Independent Auditor's Report, accompanying financial statements and management control letter for the one remaining Arena.
The Audit Committee recommends that: 1. City Council receive the 2024 audited financial statements and management letter for the Arena in attachment 1 to the report (April 16, 2026) from the Auditor General for information.
Staff recommendation as filed
The Auditor General recommends that: 1. City Council receive the 2024 audited financial statements and management letter for the Arena in attachment 1 to this report for information.