Audit Committee
The full agenda, as filed
All 8 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.
AU7.1adopted
City of Toronto - 2019 Audited Consolidated Financial Statements
This report presents the City of Toronto's (City) Audited Consolidated Financial Statements (Statements) for the year ended December 31, 2019, for approval, to the Audit Committee and Council and provides highlights of the City's financial performance during 2019 and financial condition as of December 31, 2019. The Statements include all entities with City Council's control; a full list is included in the Notes to the Statements. The Statements are attached as Appendix A. In addition, Appendix B - 2019 Financial Statement Review, provides information about each statement and explains the City's revenue and expenditure activities and financial position for the audited fiscal year. The City's Statements have been prepared by management who is responsible for ensuring that proper internal controls have been applied to the presentations in each statement. The City's 2019 auditors, PricewaterhouseCoopers LLP (PwC), are responsible for providing an opinion on the fair presentation of the City's Statements in accordance with Public Sector Accounting Standards (PSAS). The Audit Committee is responsible for approving the Statements prior to City Council approval. The City of Toronto 2019 Year-End Report to the Audit Committee (Year-End Report), Appendix C, includes a draft of the external auditor's opinion on the Statements. The report contains two internal control recommendations, unadjusted items that total $220 million which have been included on the Summary of Unadjusted items and the draft Independent Auditor's Report, which includes PwC's unqualified opinion as to the fair presentation of the Statements. The PwC final audit opinion will be received and dated the day following City Council approval. Financial statements and auditor's reports are typically reported to the Audit Committee and Council in June, when external audit work is substantially complete. During the external auditor's normal engagement period, management's focus was on the COVID-19 response and meeting operational requirements. Additionally, public health restrictions put in place because of the pandemic required that the audit process be conducted in an extended fashion over a longer period of time. As a result, the completion of the 2019 Statements and external audit was delayed.
The Audit Committee recommends that: 1. City Council approve the 2019 Audited Consolidated Financial Statements for the City of Toronto in Appendix A to the report (November 3, 2020) from the Controller and the Chief Financial Officer and Treasurer.
Staff recommendation as filed
The Controller and the Chief Financial Officer and Treasurer recommend that: 1. City Council approve the City of Toronto's 2019 Audited Consolidated Financial Statements as attached in Appendix A to this report.
AU7.2adopted
Business Improvement Areas (BIAs) - 2018 and 2019 Audited Financial Statements
The purpose of this report is to present the City of Toronto's (City) Business Improvement Areas' (BIAs) audited financial statements and management letters for approval. This report contains the 2019 audited financial statements and management letters for 63 entities and the 2018 audited financial statements and management letters for 33 entities. All 2018 audited financial statements have now been presented for approval, with the exception of Historic Queen BIA, which does not have any revenues or expenses to report. All of the in-scope BIAs have received an unqualified audit opinion for their financial statements. Several BIAs received audit recommendations for minor internal control and process improvements that have been accepted by the respective BIA Boards of Management - these audit recommendations can be found in the attached management letters. The City will provide a separate report to the Audit Committee in 2021 to disclose the results of any fiscal 2019 external audits that remain outstanding at this time.
The Audit Committee recommends that: 1. City Council approve the 2018 Audited Financial Statements and Management Letters for 33 Business Improvement Areas and the 2019 Audited Financial Statements and Management Letters for 63 Business Improvement Areas in Appendices A to CD to the report (November 13, 2020) from the Controller and the General Manager, Economic Development and Culture.
Staff recommendation as filed
The Controller and the General Manager, Economic Development and Culture recommend that: 1. City Council approve the 2018 audited financial statements and management letters of the 33 Business Improvement Areas and the 2019 audited financial statements and management letters of the 63 Business Improvement Areas as attached in Appendices A to CD to this report.
AU7.3adopted
Trust Funds - 2019 Audited Consolidated Financial Statements
The City of Toronto (City) and its agencies and corporations are the beneficiaries of assets from third parties intended to be used for specific purposes. These assets, mainly held in cash and investments, are administered by the City and two of its related parties, the Toronto Police Services Board and the St. Lawrence Centre for the Arts (TO Live). Although these trust funds are assets to the City and its consolidated entities, they represent liabilities to third parties and therefore, are not included in the City's consolidated financial statements. This report presents the City's Audited Consolidated Trust Funds Financial Statements (Statements) for the year ended December 31, 2019 and provides highlights of the Trust Funds' 2019 financial performance and financial condition as at December 31, 2019. The Trust Funds Financial Statements have been prepared by management who is responsible for ensuring that proper internal controls have been applied to the presentations in each statement. The City's 2019 auditors, PricewaterhouseCoopers LLP (PwC), are responsible for providing an opinion on the fair presentation of the financial statements in accordance with Public Sector Accounting Standards (PSAS). The Audit Committee is responsible for approving the statements prior to City Council approval. In 2019, the Audited Consolidated Trust Funds Financial Statements received an unqualified audit opinion. In addition, no internal control recommendations were made by PwC. Financial statements and auditor's reports are typically reported to the Audit Committee and Council in June, when external audit work is substantially complete. During the external auditor's normal engagement period, management's focus was on the COVID-19 response and meeting operational requirements. Additionally, public health restrictions put in place because of the pandemic required that the audit process be conducted in an extended fashion over a longer period of time. As a result, the completion of the 2019 Statements and external audit was delayed.
The Audit Committee recommends that: 1. City Council approve the 2019 Audited Consolidated Financial Statements for the City of Toronto Trust Funds in Appendix A to the report (November 2, 2020) from the Controller.
Staff recommendation as filed
The Controller recommends that: 1. City Council approve the 2019 Audited Consolidated Financial Statements for the City of Toronto Trust Funds as attached in Appendix A to this report.
AU7.4adopted
Sinking Funds - 2019 Audited Financial Statements
The City of Toronto (City) maintains portfolios of sinking funds in order to build up funds used to repay City debt when it matures. Sinking fund contributions are invested; the investment earnings help reduce the amount of City own-source cash used to repay amounts borrowed. Sinking funds form part of the City's consolidated cash balances. This report presents the City's Sinking Funds Audited Financial Statements for the year ended December 31, 2019 and provides highlights of the Sinking Funds' 2019 financial performance as of December 31, 2019. The Sinking Funds Audited Financial Statements have been prepared by management who is responsible for ensuring that proper internal controls have been applied to the presentations in each statement. The City's 2019 auditors, PricewaterhouseCoopers LLP (PwC), are responsible for providing an opinion on the fair presentation of the financial statements in accordance with Public Sector Accounting Standards (PSAS). The Audit Committee is responsible for approving the statements prior to City Council approval. The 2019 Sinking Funds Financial Statements received an unqualified audit opinion from PwC. In addition, there are no internal control recommendations related to the 2019 Sinking Funds Audited Financial Statements. Financial statements and auditor's reports are typically reported to the Audit Committee and Council in June, when external audit work is substantially complete. During the external auditor's normal engagement period, management's focus was on the COVID-19 response and meeting operational requirements. Additionally, public health restrictions put in place because of the pandemic required that the audit process be conducted in an extended fashion over a longer period of time. As a result, the completion of the 2019 financial statements and external audit was delayed.
The Audit Committee recommends that: 1. City Council approve the 2019 Audited Financial Statements for the City of Toronto Sinking Funds in Appendix A to the report (November 2, 2020) from the Controller.
Staff recommendation as filed
The Controller recommends that: 1. City Council approve the 2019 Audited Financial Statements for the City of Toronto Sinking Funds as attached in Appendix A to this report.
AU7.5adopted
Auditor General's Office 2021 Work Plan
The Auditor General's audits and investigations provide independent information for City Council to hold City administrators accountable for providing stewardship over public funds. The Auditor General's work helps to identify and mitigate risks the City faces, improve accountability, strengthen management controls, and enhance the efficiency and effectiveness of City operations. The purpose of this report is to provide City Council with an overview of the work the Auditor General plans to conduct in 2021. Audit projects included in the Annual Work Plan are identified through a risk assessment process conducted periodically, a review of emerging issues, and an analysis of trends in allegations made to the Fraud and Waste Hotline. The Auditor General also considers the views and experience of City Councillors and City management. The Auditor General may amend the Annual Work Plan if new priorities arise. Flexibility within the Auditor General's Work Plan is needed to address high-risk complaints to the Fraud and Waste Hotline, emerging risk areas, and unanticipated requirements for immediate audits or investigations. For example, in July 2020 City Council requested the Auditor General to report further on staff's report on "Ensuring Value for Money for Tree Maintenance Services - Update and Legal Advice". The work associated with this report was not anticipated in our 2020 Annual Plan and resulted in re-prioritization of projects and re-allocation of staff resources. The Auditor General's 2020 Work Plan was impacted by the COVID-19 pandemic. Some of the audit projects that were in progress were delayed or put on hold to enable divisions, agencies and corporations to focus on the delivery of essential services. The deferred audit projects from the 2020 audit Work Plan are listed in Attachment 4. During this time, the Auditor General commenced work on the City-wide risk and opportunities assessment. The City-wide risk and opportunities assessment is a major undertaking and was part of the Auditor General's 2020 Annual Work Plan. The assessment is performed every five years. The Office conducts a survey of over 50 City divisions and its major agencies and corporations. The purpose of the Auditor General's City-wide risk and opportunities assessment is to inform the development of her risk-based Audit Work Plan. It ensures that all significant areas of the City are evaluated from an audit risk perspective by using uniform criteria to identify areas that may warrant audit attention. Determining which areas to audit and the appropriate allocation of audit resources is essential in maximizing the value of an effective audit process. The risk factors criteria are included in Attachment 2. The Work Plan includes projects that have been identified through the risk and opportunities assessment. Some of these projects are expected to be initiated in 2021 (refer to Table 1), while others are expected to commence shortly thereafter in 2022 (refer to Table 2). The list of projects to be completed over the longer term is included in Attachment 3. Our work on the City-wide risk and opportunities assessment is expected to continue into Q1 of 2021 and any additional potential audit projects will be incorporated into future Work Plans. At the invitation of their respective Boards, the Auditor General has completed a risk and opportunities assessment for the Toronto Public Library and Toronto Police Service to inform the Auditor General's proposed risk-based audit plans for these entities. At their October 2020 Board meetings, the audit plan was adopted by the Toronto Public Library Board, and an emerging audit area was adopted by the Toronto Police Services Board. The proposed risk-based audit plan for the Toronto Police Service will be presented to its Board at their November 24, 2020 meeting. Potential audit projects requested by these two Boards have been included in this Work Plan, and the Work Plan will be updated following the consideration and adoption of the audit plan by the Toronto Police Services Board. In light of the fiscal constraints faced by the City, the Auditor General has not included a budget enhancement request in her 2021 Operating Budget to address the requests for audits by these two Boards. Instead, the Auditor General's ability to include these projects in her Work Plan, while keeping budget and staffing levels in line with her 2020 base budget, means that the Office will conduct fewer audits of City divisions, agencies, and corporations within her mandate.
The Audit Committee recommends that: 1. City Council receive the Auditor General's 2021 Work Plan as outlined in the report (November 5, 2020) from the Auditor General.
Staff recommendation as filed
The Auditor General recommends that: 1. City Council receive the Auditor General's 2021 Work Plan.
AU7.6adopted
Auditor General's Office 2021 Operating Budget
In accordance with Chapter 3 of the Toronto Municipal Code, the Auditor General is submitting her 2021 Operating Budget request to the Audit Committee for consideration and recommendation to City Council. The attached report provides information relating to the Auditor General's 2021 Operating Budget request of $6.651 million. This is slightly less than the base budget request last year and is equal to 1/20th of one per cent, or 0.05 per cent, of the City's 2020 Approved Adjusted Budget. Within the requested base budget, the Auditor General is seeking to convert five temporary contract staff positions to permanent positions as part of an organizational restructure. This will result in a net zero budget impact; conversion costs will be absorbed in the base budget. The budget request supports the Auditor General providing the same level of capacity to undertake value for money audits and investigations as in previous years. The Auditor General recognizes the City's ongoing financial pressures, especially with a focus on identifying savings and/or efficiencies. That being said, the benefits of performance audits that the Auditor General brings are that much more valuable. As highlighted in the Auditor General's Annual Reports, past audit reports have realized millions of dollars in cost savings, avoided costs, and identified revenue increases and new revenues. The Auditor General's 2021 Work Plan is being presented to the Audit Committee at the same meeting as this 2021 Budget Request.
The Audit Committee recommends to the Budget Committee that: 1. City Council approve the 2021 Operating Budget for the Auditor General's Office in Attachment 1 to the report (November 5, 2020) from the Auditor General. 2. City Council approve the Auditor General's request to convert five temporary contract staff positions into permanent positions, resulting in a net zero budget impact, as outlined in the report (November 5, 2020) from the Auditor General.
Staff recommendation as filed
The Auditor General recommends that: 1. The Audit Committee approve the attached 2021 Operating Budget for the Auditor General's Office, and forward it to City Council through the Budget Committee. 2. City Council approve the Auditor General's request to convert five temporary contract staff positions into permanent positions; resulting in a net zero budget impact.
AU7.7adopted
Review of 260 Eighth Street Land Transaction: No Wrongdoing Identified
City Council, at its meeting on October 27, 28 and 30, 2020, referred Item AU6.7 back to the Audit Committee for further consideration. Summary from the report (October 6, 2020) from the Auditor General on Review of 260 Eighth Street Land Transaction: No Wrongdoing Identified [Item AU6.7]: This report provides the Auditor General's findings from reviewing the 2018 sale of a property at 260 Eighth Street in Etobicoke, Ontario (the Property). This review was initiated based on concerns brought forward by a complainant in relation to the sale of the Property. They included that the sale amount of the Property was less than market value, the approval process for the sale of the Property was not conducted in accordance with City guidelines, and the best value for the Property was not attained. We conducted an investigative review to evaluate whether there was evidence to support concerns of wrongdoing. This does not constitute an audit conducted in accordance with Generally Accepted Government Auditing Standards (GAGAS). However, we believe we have performed sufficient work in satisfaction that there was no wrongdoing in this transaction. The Auditor General's review including hiring a designated professional real estate appraiser to conduct an independent appraisal of the Property. Based on this review, it was concluded that there was insufficient evidence to support a claim that the Property was sold at less than market value. We also reviewed the process surrounding the special meeting related to this transaction. Proper procedures appear to have been followed in the process, including the notice for and conduct of the special meeting of the Boards of Build Toronto and Toronto Port Lands Company which occurred on April 15, 2019. Given that the sale price of the Property was at fair market value and the appropriate processes were followed in the notice for and conduct of the special meeting, we decided not to investigate the matter of obtaining the best value for the property by maximizing the number of jobs. It is important to note that during our review, no evidence came to our attention to sufficiently support or refute the job creation numbers by any of the proponents or that would suggest that the Property's successful purchasers are likely to create fewer jobs than other developers. Finally, there was a question regarding whether late, unsolicited offers received should have been accepted. In our view, it was appropriate for CreateTO to proceed with the agreement it already had in place, considering that fair market value was being received from the successful proponent, as well as the complexity of the transaction and environmental issues on the Property. In addition, it is important for the public to be able to rely on the City's open bidding process.
The Audit Committee recommends that: 1. City Council receive the report (October 6, 2020) from the Auditor General for information.
Staff recommendation as filed
The Auditor General recommends that: 1. City Council receive this report for information.
AU7.8adopted
Audit of Winter Road Maintenance Program Update
The Auditor General's Office recently completed the Audit of Winter Road Maintenance Program - Phase One: Leveraging Technology and Improving Design and Management of Contracts to Achieve Service Level Outcomes. The audit focused on whether the Transportation Services Division meets the Council-approved service levels for winter road maintenance and whether it manages contracts, evaluates contractor performance, and holds contractors accountable as per the contract terms. The audit was adopted by City Council on October 27, 2020, which included three approved motions requesting the General Manager, Transportation Services Division, to report back to the November 19, 2020 Audit Committee. This report provides an update on the three motions.
The Audit Committee: 1. Received the report (November 4, 2020) from the General Manager, Transportation Services, for information.
Staff recommendation as filed
The General Manager, Transportation Services recommends that: 1. The Audit Committee receive this report for information.