Audit Committee
The full agenda, as filed
All 13 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.
AU5.1adopted
The Auditor General's Office conducts an annual follow-up review to determine the implementation status of recommendations in previously issued audit reports. The results of the review are reported to City Council through the Audit Committee. This report provides information regarding the implementation status of audit recommendations issued to City divisions in Community and Social Services, the City Manager's Office and the People and Equity Division. Our 2020 follow-up review included 82 outstanding recommendations from audit reports issued between 2009 and 2018 for the following divisions: - City Manager's Office - Children's Services - Court Services - Parks, Forestry and Recreation - People and Equity - Shelter, Support and Housing Administration - Social Development, Finance and Administration - Toronto Paramedic Services Our review verified that 30 recommendations (37 per cent) have been fully implemented, 51 recommendations (62 per cent) have not been fully implemented and one recommendation (1 per cent) is no longer applicable. While a number of the recommendations have not been fully implemented, we recognize management's efforts to implement these recommendations. We also recognize that audit recommendations in recently issued reports may need more time to be fully implemented. Of the 51 outstanding recommendations, 37 are outstanding from the audit reports issued in 2018. Continued efforts to implement outstanding recommendations will provide additional financial and non-financial benefits to the City. These benefits include cost savings, additional revenue, enhanced service delivery and improved controls. The Auditor General reports to the Audit Committee each year on the implementation status of outstanding recommendations. Recommendations reported by management as implemented that the Auditor General determined as not fully implemented During the current follow-up process, management reported that 55 out of 82 outstanding recommendations were fully implemented. However, based on our review we determined that 25 (45 per cent) of those recommendations have not been fully implemented because the steps undertaken or the extent of the improvement did not fully address the issue or the intent of the recommendation, or management was unable to provide sufficient appropriate evidence of action taken. Management agreed with our assessment and will take additional actions to fully implement these recommendations.
The Audit Committee recommends that: 1. City Council receive the report (January 27, 2020) from the Auditor General for information. 2. City Council direct that the confidential information contained in Confidential Attachment 1 to the report (January 27, 2020) from the Auditor General remain confidential in its entirety, as it involves the security of property belonging to the City of Toronto.
Staff recommendation as filed
The Auditor General recommends that: 1. City Council receive this report for information. 2. City Council direct that the confidential information contained in Confidential Attachment 1 remain confidential in its entirety, as it involves the security of property belonging to the City of Toronto.
AU5.2adopted
2019 Annual Report - Demonstrating the Value of the Auditor General's Office
This report provides information on the Auditor General's Office 2019 activities and financial and non-financial benefits. In 2019, the Auditor General's Office completed 14 performance audits, investigations, and reviews, and issued several other reports. We also conducted our regular follow-up process for outstanding recommendations and managed the City's Fraud and Waste Hotline. The Auditor General's Office calculates the return on every dollar invested in the Office by comparing the ratio of five-year audit costs to the cumulative estimated five-year realized savings. Since 2015, total one-time and projected five-year cost savings and revenue increases are approximately $318.8 million. The cumulative costs of operating the Auditor General's Office since 2015 were approximately $27.6 million. For every $1 invested in the Auditor General's Office, the return on investment was approximately $11.5. The identification of cost savings and increased revenue is only one component of the Auditor General's mandate. Equally important is the ongoing evaluation of governance, risk management and internal controls, the impacts of which are not always easily quantified in financial terms.
The Audit Committee recommends that: 1. City Council receive the report (January 27, 2020) from the Auditor General for information.
Staff recommendation as filed
The Auditor General recommends that: 1. City Council receive this report for information.
AU5.3amended
Previous Audit Reports - Common Themes and Issues
Over the years, we've noticed that when management is busy working within their division, they may not see or be learning from broader lessons that may help to move their divisions and the City forward as one City. In this report, the Auditor General has identified three common themes in audit recommendations that will, if applied City-wide, help the City move forward in a positive way. These themes include: 1. Shifting mindsets and culture so that the Public Service works as one to achieve City-wide objectives and outcomes. 2. Strengthening oversight and accountability for contracts by more effective procurement, management, and monitoring. 3. Modernizing processes, integrating technology, and leveraging data to deliver programs and services more effectively and efficiently. The number of recurring issues we see in our reports could be reduced if every manager runs their division, agency or corporation with a 'one City' mindset focused on outcomes and accountability. Recurring issues will also be reduced if managers can make better use of technology, leveraging data to inform their business processes. By narrowing these lessons down to three themes, and by expanding them with examples, the Auditor General hopes these lessons will remain top of mind for each and every manager. To achieve lasting change, every leader should ask themselves the following questions after each audit report is published: - Is our division experiencing similar issues? - Are there opportunities and lessons learned that we can leverage? - Who is involved with delivering on the service? Is someone else doing what we are doing? How can we work together? - Who has overall responsibility? - Are we empowered to make the needed changes? We endorse the City Manager's key message that trust and confidence is, in part, achieved "through our actions and decisions," which he stated in the Toronto Public Service's Corporate Strategic Plan. We also support his move to Results Based Accountability as a performance management and accountability framework. The lessons learned from this common themes report supports the City Manager's focus on achieving outcomes, ensuring accountability, and using data. This report will be helpful in guiding the actions and decisions of staff accountable for achieving results.
The Audit Committee recommends that: 1. City Council receive the report (January 31, 2020) from the Auditor General for information. 2. City Council request the City Manager to forward the report (January 31, 2020) from the Auditor General, to Division Heads and Heads and Boards of the City's major agencies and corporations and request them to review and consider the relevance of the themes identified in the report for their respective operations and any actions that may need to be taken. 3. City Council request the City Manager to include consideration of Audit common themes and issues and continuous improvement as part of leadership training and performance evaluation. 4. City Council request the City Manager to establish appropriate systems that will break down silos and ensure co-ordination, as needed, between all levels of government, partner agencies and corporations, and City divisions to achieve Council's policy objectives on both ad hoc issues and ongoing initiatives, and report to the Audit Committee by Q4 of 2020.
Staff recommendation as filed
The Auditor General recommends that: 1. City Council receive this report for information. 2. City Council request the City Manager to forward this report to Division Heads and Heads and Boards of the City's major agencies and corporations and request them to review and consider the relevance of the themes identified in the report for their respective operations and any actions that may need to be taken.
AU5.4adopted
Fraud and Waste Hotline - 2019 Annual Report
This report represents the 2019 annual report on fraud, waste and wrongdoing at the City including the activities of the Fraud and Waste Hotline Program (the Hotline Program). It highlights the complaints that have been communicated to the Auditor General's Office. It does not represent an overall picture of fraud or other wrongdoing across the City. In 2019, 587 complaints comprised of approximately 950 allegations were received by the Auditor General's Office. The Hotline Program has helped to reduce losses and resulted in the protection of City assets. The cumulative total of actual and potential losses for complaints received in previous years (2015 to 2019) is more than $13.2 million (actual) plus $3.4 million (potential) had the fraud not been detected. Additional benefits that are not quantifiable include: - the deterrence of fraud or wrongdoing - strengthened internal controls - improvements in policies and procedures - increased operational efficiencies - the ability to use complaint data to identify trends, address risks, make action-oriented - recommendations to management and inform the audit work plan
The Audit Committee recommends that: 1. City Council receive the report (January 27, 2020) from the Auditor General for information. 2. City Council request the City Manager to formally remind all City of Toronto staff of the importance of reporting fraud, waste or wrongdoing to the Auditor General's Office, through the Fraud and Waste Hotline, in accordance with Chapter 192 of the Toronto Public Service By-law.
Staff recommendation as filed
The Auditor General recommends that: 1. City Council receive this report for information. 2. City Council request the City Manager to formally remind all City of Toronto staff of the importance of reporting fraud, waste or wrongdoing to the Auditor General's Office, through the Fraud and Waste Hotline, in accordance with Chapter 192 of the Toronto Public Service By-law.
AU5.5adopted
Toronto Building Division: Conditional Permits - Follow-up Review
This report provides results of the Auditor General's follow-up review of conditional permits issued by Toronto Building Division. In October 2017, the Auditor General issued a report titled "Toronto Building Division: Conditional Permits". The report identified several issues, including a lack of effective Conditional Permit (CP) policy and guidance that was leading to the inconsistent issuing of CPs. Since the 2017 report, there have been key changes in the senior leadership team in the Toronto Building Division, including the appointment of the current Chief Building Official (CBO) in April 2018. In October 2018, the CBO issued a draft CP policy and conducted a review of 2018 CP files across all four districts. The review highlighted continuing inconsistencies among districts and files when compared to the Auditor General's prior report findings and the draft CP policy. The Auditor General reviewed a total of 19 CP files, including the files identified by the CBO. Recommendations are made in this report to improve consistency in the CP process. During the course of our review, Toronto Building finalized the CP policy on May 15, 2019, with increased controls and documentation requirements. We have tested additional files after these changes have been made. We found that the consistency and quality of the process has improved. Implementing the eight recommendations contained in this report will help to ensure: - an appropriate process for issuing and reviewing CPs is in place - documentation is sufficient, appropriate and consistent - divisional expectations are reinforced through training and performance objectives - the CBO conducts ongoing reviews of the process. Consistency helps to ensure fairness among all applicants and protects the City's interests in collecting development charge revenue.
The Audit Committee recommends that: 1. City Council request the Chief Building Official, Toronto Building Division, to ensure that site visits including photos are conducted prior to issuing the first above-grade Conditional Permit for any development site. 2. City Council request the Chief Building Official, Toronto Building Division, to have every Conditional Permit reviewed by a central, trusted advisor to the Chief Building Official for consistency and compliance with the new policy, and ensure that sufficient, appropriate evidence of why the Conditional Permit is needed be included in the file. 3. City Council request the Chief Building Official, Toronto Building Division, to ensure the requirement for consistent documentation related to Conditional Permit issuance is filed in the Integrated Business Management System (IBMS). 4. City Council request the Chief Building Official, Toronto Building Division, to work with other Divisions involved in the Conditional Permit process to ensure that supporting documentation is complete and filed in the Integrated Business Management System (IBMS) in a timely manner. 5. City Council request the Chief Building Official, Toronto Building Division, to conduct Conditional Permit training for all Divisional staff involved in the Conditional Permit process, at least once per year and in advance of development charge increases in order to reinforce expectations and highlight any areas of concern that are identified through the Chief Building Official's review. 6. City Council request the Chief Building Official, Toronto Building Division, to continue to reinforce Divisional expectations with all staff involved in the Conditional Permit process through performance planning objectives. 7. City Council request the Chief Building Official, Toronto Building Division, to continue, at least twice per year, to conduct reviews on Conditional Permits issued in order to identify areas of concern and further opportunities to strengthen the Division's Conditional Permit policy, where required. 8. City Council request the Chief Building Official, Toronto Building Division, to ensure that any concerns that are noted by the Division continue to be brought to the attention of the Auditor General.
Staff recommendation as filed
The Auditor General recommends that: 1. City Council request the Chief Building Official, Toronto Building Division, to ensure that site visits including photos are conducted prior to issuing the first above-grade Conditional Permit for any development site. 2. City Council request the Chief Building Official, Toronto Building Division, to have every Conditional Permit reviewed by a central, trusted advisor to the Chief Building Official for consistency and compliance with the new policy, and ensure that sufficient, appropriate evidence of why the Conditional Permit is needed be included in the file. 3. City Council request the Chief Building Official, Toronto Building Division, to ensure the requirement for consistent documentation related to Conditional Permit issuance is filed in the Integrated Business Management System (IBMS). 4. City Council request the Chief Building Official, Toronto Building Division, to work with other Divisions involved in the Conditional Permit process to ensure that supporting documentation is complete and filed in the Integrated Business Management System (IBMS) in a timely manner. 5. City Council request the Chief Building Official, Toronto Building Division, to conduct Conditional Permit training for all Divisional staff involved in the Conditional Permit process, at least once per year and in advance of development charge increases in order to reinforce expectations and highlight any areas of concern that are identified through the Chief Building Official's review. 6. City Council request the Chief Building Official, Toronto Building Division, to continue to reinforce Divisional expectations with all staff involved in the Conditional Permit process through performance planning objectives. 7. City Council request the Chief Building Official, Toronto Building Division, to continue, at least twice per year, to conduct reviews on Conditional Permits issued in order to identify areas of concern and further opportunities to strengthen the Division's Conditional Permit policy, where required. 8. City Council request the Chief Building Official, Toronto Building Division, to ensure that any concerns that are noted by the Division continue to be brought to the attention of the Auditor General.
AU5.6amended
Cyber Safety - Critical Infrastructure Systems: Toronto Water SCADA System
Some critical infrastructure at the City, such as the Toronto Water treatment plants, use Operational Technology (OT) systems called industrial control systems (ICS). ICS systems include supervisory control and data acquisition (SCADA) systems. SCADA systems monitor and control the equipment and devices used in critical infrastructure. The Canadian Cyber Security Centre describes how ICS and SCADA systems are vulnerable if appropriate cybersecurity protections are not in place: "As part of the drive for modernization and efficiency, critical infrastructure providers are continuing to automate their processes and connect IT and OT devices to the Internet. While connecting OT, such as ICS and SCADA devices, to the Internet provides several advantages - for example, remote management - it can also expose critical infrastructure to cyber threat activity". The objectives of the audit were to assess the adequacy of controls in place to address potential threats to the Toronto Water SCADA network, systems and applications, and to review the actions taken by Toronto Water to address concerns raised during the 2019 cybersecurity audit. This public report contains two administrative recommendations. The confidential audit findings and recommendations to improve physical security and cybersecurity controls are presented separately to this report in Confidential Attachment 1. Management has already initiated actions to address the identified risks. The confidential report will be made public at the discretion of the Auditor General after discussing with appropriate City Official.
The Audit Committee recommends that: 1. City Council adopt the confidential recommendations contained in Confidential Attachment 1 to the report (January 24, 2020) from the Auditor General. 2. City Council adopt the confidential recommendation contained in the Confidential letter (February 10, 2020) from the Audit Committee. 3. City Council direct that all information contained in the following confidential documents be released publicly at the discretion of the Auditor General after discussing with the appropriate City official: - Confidential Attachment 1 to the report (January 24, 2020) from the Auditor General; and - the Confidential letter (February 10, 2020) from the Audit Committee.
Staff recommendation as filed
The Auditor General recommends that: 1. City Council adopt the confidential recommendations contained in Confidential Attachment 1 to the report (January 24, 2020) from the Auditor General. 2. City Council direct that all information contained in Confidential Attachment 1 to the report from the Auditor General be released publicly at the discretion of the Auditor General after discussing with the appropriate City Official.
AU5.7adopted
The purpose of this report is to advise on the results of Request for Proposal (RFP) No. 9119-19-7141 (Doc2038917448) to appoint one (1) auditor licensed under the Public Accounting Act, 2004 to perform the annual financial statement audits for the years 2020 to 2024 inclusive for the City of Toronto and certain of its agencies and corporations, as well as other attest audits of financial information (listed in Attachment 1), and to request authority to enter into an agreement with the recommended proponent, KPMG LLP.
The Audit Committee recommends that: 1. City Council appoint KPMG LLP as the auditor licensed under the Public Accounting Act, 2004 who is responsible for annually auditing the accounts and transactions of the City and certain of its local boards and expressing an opinion on the financial statements of these bodies based on the audit. 2. City Council grant authority to the Auditor General to negotiate and enter into an agreement in the amount of $6,733,000 excluding all applicable taxes and charges, $7,608,290 including HST and all applicable charges ($6,851,501 net of HST recoveries), with KPMG LLP being the highest ranked proponent meeting the requirements of the RFP for external audit services to perform the annual financial statement audits for the years 2020 to 2024 inclusive for the City of Toronto and certain of its agencies and corporations, as well as other attest audits of financial information as described in the RFP, as outlined in Attachment 1 to the report (January 24, 2020) from the Auditor General, on the terms and conditions set out in RFP 9119-19-7141(Doc2038917448) and in a form satisfactory to the City Solicitor. 3. City Council authorize the public release of the confidential information in Confidential Attachment 2 to the report (January 24, 2020) from the Auditor General, upon Council's approval of this contract award to KPMG LLP and KPMG LLP signing the contract.
Staff recommendation as filed
The Auditor General and the Chief Purchasing Officer, Purchasing and Materials Management recommend that: 1. City Council appoint KPMG LLP as the auditor licensed under the Public Accounting Act, 2004 who is responsible for annually auditing the accounts and transactions of the City and certain of its local boards and expressing an opinion on the financial statements of these bodies based on the audit. 2. City Council grant authority to the Auditor General to negotiate and enter into an agreement in the amount of $6,733,000 excluding all applicable taxes and charges, $7,608,290 including HST and all applicable charges ($6,851,501 net of HST recoveries), with KPMG LLP being the highest ranked proponent meeting the requirements of the RFP for external audit services to perform the annual financial statement audits for the years 2020 to 2024 inclusive for the City of Toronto and certain of its agencies and corporations, as well as other attest audits of financial information as described in the RFP, as outlined in Attachment 1, on the terms and conditions set out in RFP 9119-19-7141(Doc2038917448) and in a form satisfactory to the City Solicitor. 3. City Council authorize the public release of the confidential information in Attachment 2 upon Council's approval of this contract award to KPMG LLP and KPMG LLP signing the contract.
AU5.8adopted
Arenas - 2018 Audited Financial Statements Update
The purpose of this report is to provide the Audit Committee and City Council with an update on the remaining 2018 audited financial statements of arenas. The 2018 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 external auditor, Welch LLP, advise that they have provided their comments on internal controls to some organizations by way of a report to the Board. The Independent Auditor's Report, accompanying financial statements, and internal control letter (where applicable) is attached to this report.
The Audit Committee recommends that: 1. City Council receive the 2018 audited financial statements of arenas attached to the report (January 24, 2020) from the Auditor General.
Staff recommendation as filed
The Auditor General recommends that: 1. City Council receive the 2018 audited financial statements of arenas attached to this report.
AU5.9adopted
This report responds to a request from City Council at its meeting in October 2019 that the City Manager, in consultation with the Auditor General, report on the mechanisms required that would enable the Auditor General to conduct risk assessments or investigate cyber security for City Agencies and Corporations not currently within the Auditor General's purview. This report therefore outlines the existing mechanisms which may be used by the Auditor General to conduct risk assessments or investigate cyber security for City Agencies and Corporations not currently within the Auditor General's purview. These Agencies and Corporations are specifically identified as Toronto Hydro Corporation and its subsidiaries, Toronto Police Services, Toronto Public Library and Toronto Board of Health. The Auditor General is currently engaging with these entities to conduct risk or cyber security assessments utilizing these existing mechanisms. As a result, no new mechanisms are required at this time.
The Audit Committee recommends that: 1. City Council receive the report (January 24, 2020) from the Chief Technology Officer, Information and Technology Division, for information.
Staff recommendation as filed
The Chief Technology Officer, Information and Technology Division, recommends that: 1. City Council receive this report for information.
AU5.10received
This staff report responds to City Council's direction for the Shelter, Support and Housing Administration (SSHA) division to report to the Audit Committee in the first quarter of 2020 with an update on the implementation of the Auditor General's recommendations in the report Safeguarding Rent-Geared-to-Income Assistance: Ensuring Only Eligible People Benefit. The Auditor General's report identified areas where the City can strengthen its oversight role as the Service Manager responsible for rent-geared-to-income (RGI) subsidies administered by over 200 housing providers across Toronto. This includes recommendations to investigate files flagged in the audit as having potential eligibility issues; centralize aspects of RGI administration and monitoring; and increase integration with other income-based subsidy programs. SSHA agrees with and is working towards achieving all of the Auditor General's recommendations, many of which are in line with SSHA's current direction and modernization initiatives. SSHA's plans for implementation involve a full review of households flagged as having potential eligibility issues; a range of initiatives to build capacity in housing providers and reinforce direction on detecting and addressing fraud; and strengthening the City's oversight mechanisms. Recognizing the importance of ensuring that RGI assistance is being used for its intended purpose of making rent affordable for low-income households, SSHA has taken direct action to ensure immediate and sustained improvement to the administration of RGI. Early advancements include the development of a comprehensive plan and tracking tools to ensure appropriate follow up on all files flagged by the Auditor General. Updates on actions taken to date and estimated completion dates for all 15 recommendations are outlined in Attachment B.
The Audit Committee received this Item for information.
Staff recommendation as filed
The General Manager, Shelter, Support and Housing Administration, recommends that: 1. Audit Committee receive this report for information.
AU5.11adopted
At its meeting on June 28, 2019, the Audit Committee directed staff to report back on a process to track and report the progress on management's implementation and target completion date of outstanding recommendations, with emphasis on those identified by the Auditor General as items of greatest concern. As requested by the City Manager, Internal Audit compiled a database of all outstanding council approved recommendations issued to management by the Auditor General which included recommendations from audits, investigations, Fraud and Waste Hotline reports and those added by Council. Updates were solicited from management on the implementation status of the recommendations throughout November and December 2019. This report provides statistics related to the status of implementation as asserted by management and detailed action taken on the implementation of recommendations of greatest concern. There are 785 recommendations outstanding for Agencies, Corporations and City divisions up to and including recommendations tabled at the October 25, 2019 Audit Committee meeting. Within the 785 recommendations, 144 have been deemed of greatest concern by the Auditor General. Management has asserted that 183 or 23% of the 785 total outstanding recommendations have already been implemented or are no longer applicable, which includes 24 or 17% of the 144 recommendations of greatest concern. A further 441 or 56% of the total outstanding recommendations are expected to be implemented by the end of 2020, which includes 92 or 64% of the recommendations of greatest concern. Therefore, by the end of 2020 it is expected that 624 or 79% of the 785 total outstanding recommendations and 116 or 81% of the 144 recommendations of greatest concern will be implemented.
The Audit Committee recommends that: 1. City Council receive the report (January 23, 2020) from the City Manager for information. 2. City Council request the City Manager to provide an updated report at scheduled Audit Committee meetings. 3. City Council direct that the confidential information contained in Confidential Appendix 4 to the report (January 23, 2020) from the City Manager remain confidential in its entirety, as it involves the security of property belonging to the City of Toronto.
Staff recommendation as filed
The City Manager recommends that: 1. City Council receive this report for information. 2. City Council request the City Manager to provide an updated report at scheduled Audit Committee meetings. 3. City Council direct that the confidential information contained in Confidential Appendix 4 remain confidential in its entirety, as it involves the security of property belonging to the City of Toronto.
AU5.12adopted
Pension, Payroll and Employee Benefits Outstanding Auditor General Recommendations Update
On October 29 and 30, 2019 Council put forth and approved two (2) motions related to the Audit Committee October 10, 2019 Report as it relates to nine (9) outstanding Finance and Treasury Services, Pension Payroll and Employee Services recommendations deemed 'high priority'. This reports responds to the two motions by providing: 1. The status of each of the nine (9) high-priority outstanding recommendations within the October 10, 2019 Corporate Services and Finance and Treasury Report referenced above. 2. The Director Pension, Payroll and Employee Benefits' approach regarding the formal documentation of an annual evaluation of the benefit administrator performance as it relates to prevention, detection and investigation of benefit fraud including fraud related to the receipt of Long Term Disability benefits.
The Audit Committee recommends that: 1. City Council receive the report (January 24, 2020) from the Controller for information. 2. City Council authorize the public release of Confidential Attachment 1 to the report (January 24, 2020) from the Controller, once collective bargaining has concluded and Council has ratified the collective agreements.
Staff recommendation as filed
The Controller recommends that: 1. City Council receive this report for information. 2. City Council authorize the public release of Confidential Attachment 1, once collective bargaining has concluded and Council has ratified the collective agreements.
AU5.13received
Audit Plan for the City of Toronto's Consolidated Financial Statements for the Year Ended 2019
PricewaterhouseCoopers presenting an Audit Plan for the audit of the consolidated financial statements of the City of Toronto for the year ended 2019. The report provides a summary of the PWC team, audit scope and approach, including an initial assessment of risks and required communications. The audit continues to evolve to reflect the changes within the City's environment and any significant changes to the audit plan will be shared and discussed with the Audit Committee.
The Audit Committee: 1. Received for information, the Audit Plan for the audit of the consolidated financial statements of the City of Toronto for the year ended 2019, submitted by PricewaterhouseCoopers, LLP.
Staff recommendation as filed
That the Audit Committee: 1. Receive for information, the Audit Plan for the audit of the consolidated financial statements of the City of Toronto for the year ended 2019, submitted by PricewaterhouseCoopers, LLP.