October 13, 1998
TO:Audit Committee
FROM:City Auditor
SUBJECT:AUDIT WORKPLAN
Recommendations:
(1)That the audit workplan set out below be approved; and
(2)That the City Auditor report back to the Audit Committee with his workplan for the
balance of 1999 at the first meeting of the Committee in 1999.
Background:
At it's meeting of September 11, 1998, the Audit Committee requested the City Auditor to
report on, "a prioritized workplan of audits currently requested by members of Council and
civic officials and audits that are recommended".
Comments:
The projects listed below are either in progress or planned during the period from September
30, 1998 to April 30, 1999. A brief description of each project is included in Appendix A.
Various factors were considered in the identification and prioritization of specific audit
projects. In terms of the identification of audit projects a detailed analysis of the City's 1998
budget document as well as the 1997 financial statements of each of the amalgamated
municipalities was conducted in order to ensure that all significant revenue, expenditure and
balance sheet items were listed as potential audit projects. Senior audit staff have met on a
number of occasions to review and discuss potential audit projects. In addition data bases
containing information relating to audit projects conducted in both Canadian and U.S. cities
were also reviewed in order to ensure that the "audit universe" was as complete as possible.
This process resulted in the preliminary identification of some 350 audit projects.
Subsequent to the identification of the projects, a risk ranking exercise was conducted in order
to prioritize the 350 projects. Various factors were considered during this evaluation process
and included the following:
- Total Expenditure
- Total Revenues
- Value of Assets
- Extent of Liabilities
- Complexity of Operations
- Management and Internal Controls
- Legislative Requirements
- Previous Audit History
- Extent and Complexity of Computerization
- Changes to Operations and Organizational Structure
- Political Sensitivity
- Public Sensitivity
The use of the above factors to prioritize audit projects was validated with other internal audit
organizations, both public and private.
Certain projects ranked as high priority were eliminated from the preliminary listing of
projects due to the fact that they are being addressed elsewhere in the Corporation. Those
projects include a fleet management review, various site location studies (e.g. fire
department), property inventories, property lease inventories, etc.
Included in the listing of the audit projects identified by the Department are additional
projects relating to requests made by City Council or the Audit Committee. In addition, the
City Auditor is committed to providing audit assistance to the Corporation's external auditor
in connection with their audit of the 1998 financial statements.
The Departments proposed workplan from September 30, 1998 to April 30, 1999 is as
follows:
RefProjectInitiated By
- Procedures Relating to Sexual Assault InvestigationsCouncil
- Chemical PricingCouncil
- Metropolis Review (Toronto Police Information System)Council
- Parking Authority ReviewCouncil
- Collision Reporting Centres ReviewCouncil
- Follow-up of Sheppard Subway Budget ReviewAudit Committee
- Review of Police Towing ContractPolice Services Board
- Payroll Processing ControlsAudit Department
- Investments Review Audit Department
- Cash Management ReviewAudit Department
- Property Tax ReviewAudit Department
- Parking Tags Revenue/AdministrationAudit Department
- Parking Enforcement ReviewAudit Department
- Compliance with Expenditure PoliciesAudit Department
- Financial Information System (FIS)Audit Department
- Year 2000 Review (Y2K)Audit Department
- Consolidation of Financial InformationAudit Department
- Client Identification and Benefits System (CIBS)Audit Department/Social Services
Division
- Review of Quality Assurance Function - Community Svcs.Audit Department
- Bylaw EnforcementAudit Department
- Contract ComplianceAudit Department
- Vehicle Safety ComplianceAudit Department
- Children Services ProjectChildren's Services Division
- External Audit AssistanceStatutory Audit*
- Business Improvement Areas (BIA) Operational ReviewAudit Department (approved by
Audit Committee)
- Financial Audits Relating to BIA's (37)**Statutory Audit*
- Financial Audits Relating to Community Centres/Arenas (17)**Statutory Audit*
- Homes for the Aged SubsidiesStatutory Audit*
- Compliance Audit - Election ExpensesCouncil
* The Request for Proposal for the City's external audit considered that these audits would be
performed by staff of the City Auditor's office.
**Figures in brackets represent the number of individual audits within the listed audit project.
Appendix B presents the above workplan in chart format.
Conclusion:
It is suggested that the City Auditor report back to the Audit Committee at its first meeting of
1999 with his workplan for the balance of 1999. Ultimately, it is proposed that the City
Auditor operate on the basis of a three year workplan which would be reviewed and updated
annually. In view of the significant and ongoing changes taking place at the new City it is
suggested that the compilation of a three year workplan may be premature.
The audit projects planned and currently underway represent a mix of departmental request,
political requests, and projects identified as high risk through the risk ranking process
conducted by the City Auditor. The completion of these projects by April 30, 1999 is
contingent upon minimal additional, higher priority requests for audits.
Contact Name and Telephone No.:
Jerry Shaubel, Director of Audit 392-8462
Jeff Griffiths
City Auditor
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APPENDIX A
DETAILS FOR PROJECT LIST SUBMITTED
TO NOVEMBER 3, 1998 AUDIT COMMITTEE MEETING
RefProject
1. Procedures Relating to Sexual Assault Investigations:
The audit was requested by Council and came about as a result of the ruling by Madam Justice
Jean MacFarland of the Ontario Court relating to the Jane Doe balcony rapist case. The audit
entails the review of the Toronto Police Services handling of sexual assault and domestic
violence cases.
2. Chemical Pricing:
City Council at its meeting of July 8, 9 and 10, 1998 adopted a report from the Works and
Utilities Committee wherein the Committee, in considering a report regarding the purchase of
Liquid Chlorine, requested the City Auditor to submit a report to the appropriate committee
on the issue of chemical pricing.
This review is in progress and is intended to determine whether procedures and the selection
process for the procurement of chemicals in the City of Toronto are effective in ensuring fair
market competition and economy. The review will also assess whether procurement decisions
are made in compliance with Council and departmental policies and procedures.
3. Metropolis Review (Toronto Police Information System):
During the 1998 budget process several questions were raised as to the value of technology
expenditures being made in the City in general and the Police specifically. The Metropolis
project has consumed a significant amount of resources. In view of this Council recommended
that the Police request the City Auditor to perform a value for money audit of the expenditures
incurred on the Metropolis project. The audit will attempt to determine whether amounts were
spent as planned, whether anticipated results were realized, and whether the expenditures
represented good value for money for the City.
4. Parking Authority Review:
Council approved the transfer of responsibly for off-street municipal parking operations and
on-street metered parking operations within the former municipalities to the Toronto Parking
Authority.
The approval also included a request that, "... the City Auditor conduct a review of the
operations of both the present City meter collection system and the Toronto Parking
Authority, and submit recommendations thereon to Council through the Corporate Services
Committee". In discussions with the Councillor who moved the amendment requesting an
audit, it was determined that the primary focus of the audit was to obtain information
sufficient to allow appropriate comparisons of operating results between the former cities and
the newly amalgamated Toronto Parking Authority. Any operational recommendations arising
from this information gathering exercise would be reported as requested.
5. Collision Reporting Centres Review:
Council requested the City Auditor to report on the collision reporting centres' operations and
their profit margins. This report is in the final stages of completion.
6. Follow-up of Sheppard Subway Budget Review:
Council requested the City Auditor to report on the projected over-expenditures relating to the
Sheppard Subway project. In reviewing the Auditor's Report, the Audit Committee requested
a follow-up review be conducted on a number of issues relating to the project.
7.Review of Police Towing Contract:
At the request of the Police Services Board the City Auditor was asked to review contract
compliance in relation to the award of the Police Towing Contract. Two in-camera reports
were issued to the Board. A report for the public session of the Board is currently in process.
8. Payroll Processing Controls:
This review will assess the effectiveness of procedures and controls with respect to the
processing of payroll in the City. The fact that payroll is still being processed on several
different accounting systems combined with restructuring and downsizing that is occurring
across the organization increases the risk of errors and other irregularities. In addition to
evaluating overall controls, the review will ensure, on a sample basis, that staff who have
exited the Corporation are no longer on the payroll, that staff whose position has changed are
being paid the correct rate and that staff are being charged to the correct department or
division. Separation payments made will also be reviewed to ensure they are accurate and in
accordance with the Corporate policies.
9. Investments Review:
The significant size of the City of Toronto's investment portfolio requires a full review now
that the City has several months experience with the combined portfolio of the former Cities.
Our review will include an examination of the role and mandate of the function, the
appropriateness of policies and procedures relative to legislative requirements including
development of appropriate policy manuals, the incorporation of performance benchmarks,
the implementation of adequate internal control and segregation of duties and appropriate
management and independent controls.
10. Cash Management Review:
This audit will focus on an assessment of the current policies and procedures and practices
that exist within the organization to provide effective cash management. Cash management
encompasses several components including cash balances, receipts, disbursements and
banking relationships. The audit will review the impact of amalgamation and its effect on cash
management in the former cities and include testing of identified higher risk areas using audit
sampling and compliance testing of the appropriate internal control structure, segregation of
duties and timely processing of cash receipts.
11. Property Tax Review:
Revenue from property taxes is the City's major source of income. The implementation of an
actual value assessment base along with the restructuring of the new City of Toronto has
resulted in significant changes in systems, procedures and controls in the Property Tax
functions. Audit resources will be used to verify the accuracy of the assessment base as
received from the Province, review the property tax collection operations, the magnitude of
assessment deficiencies and controls over them and the value of, and controls over tax
collection write-offs.
12. Parking Tags Revenue/Administration:
This review will focus on the Parking Tag Operations Unit, Finance Department, which is
responsible for the processing of parking tags including payments, court scheduling and
customer service at three First Appearance Facilities.
The review will assess the validity of recorded receivables and whether the collection rate and
per tag value, used in conjunction with annual tag issuance as the basis for revenue
projections, are reasonable. The review will also evaluate the adequacy of procedures with
respect to payments, determine the reasonableness of guidelines and controls regarding tag
withdrawals, and ensure reconciliations are completed on a timely basis. In addition, we will
follow up on recommendations made in previous audits and report on the status of their
implementation.
13. Parking Enforcement Review:
This review will assess the operations of the Parking Enforcement Operation of City Police
Services. The review will examine the mandate of this unit and determine how effective this
mandate is being carried out. The reasonableness of performance indicators being used (if
any) will be assessed and compared if possible to other comparable jurisdictions. The
adequacy of policies, procedures and systems will be evaluated, and any applicable budgetary
and organizational issues addressed.
14. Compliance with Expenditure Policies:
The overall objective of this review is to ensure that expenditures incurred are in compliance
with the respective Corporate Expense Claim policy. The review will also assess the
effectiveness of procedures and management reports in monitoring expenditures against
budget.
15. Financial Information System (FIS):
City Council has approved the purchasse of SAP, a new financial information system. The
Audit department has requested to be included on the design/implementaiton team both to
gain knowledge of the system and to ensure that adequate controls are designed into the
system. In addition, Audit would review testing procedures and results prior to
implementation and would subsequently review the adequacy of the conversion to the new
system.
16. Year 2000 Review (Y2K)
The Year 2000 problem may be the most significant business issue facing the City at this
time. A Y2K Program Office has been established to co-ordinate activity to remedy the
problem. In addition to our consulting role as a member of the Y2K project teams; we will
monitor the project against pre-defined criteria designed to measure the progress and success
of the project.
17. Consolidation of Financial Information:
As a result of the amalgamation of the seven former municipalities, a consolidation of
financial information is required as of January 1, 1998. Audit will perform a traditional
financial audit function to ensure that this consolidation was accurately performed and that all
balances as at December 31, 1997 at each of the individual municipalities were carried
forward correctly to the new City.
18. Client Identification and Benefits System (CIBS)
CIBS is an automated system which offers enhanced access to benefits for general welfare
assistance clients. The system also improves client identification through the use of
biometrics. The Audit department is a member of the CIBS Security team which is tasked
with ensuring the assets of the City and the information assets acquired and/or maintained in
the CIBS environment are properly and adequately safeguarded.
19. Review of Quality Assurance Function - Community Services:
The Social Services Division of Community Services includes a Quality Review and
Improvement Unit. The responsibilities of this Unit include conducting audits to ensure the
effective administration of client accounts, compliance with policies and procedures and the
identification and investigation of client or caseworker fraud. Recent audits by the City
Auditor's office of the Social Services Division suggest that the operations of the Unit could
be improved. Given the dollar value of expenditures passing through the Social Services
Division, and the many changes accompanying the provincial downloading of social
programs, an efficient and effective Quality Review and Improvement Unit is important to the
operations of the Division. The Audit Department will review current policies, procedures,
work load, audit approach, training programs and make recommendations where appropriate.
20. Bylaw Enforcement:
The amalgamation of these functions requires review to ensure the combination of staff and
office locations has or is being accomplished with harmonization of appropriate policies and
procedures, efficient deployment of inspectors and by-law officers, full adherence to
legislative requirements with due regard to management and internal controls, and with
consideration to program performance metrics for evaluation of efficiency and effectiveness.
21. Contract Compliance:
A sample of corporate contracts will be selected to ensure compliance with Corporate policies
and terms and conditions of the contract.
22. Vehicle Safety Compliance:
The objective of this review is to ensure that applicable staff are aware of the requirements
under the Highway Traffic Act with respect to commercial vehicles, and that procedures are in
place in all City departments and local boards to ensure compliance with legislation. This
review will focus on the City's commercial vehicle fleet and will evaluate procedures with
respect to registration of vehicles, maintenance, inspection, training, transportation of
dangerous goods and other related issues and requirements. Compliance with applicable
legislation and effective training, maintenance and inspection procedures are important in
ensuring the safety of our drivers and the public at large.
23. Children Services Project:
As a result of provincial downloading of responsibilities, over 300 new programs will have
contractual and financial agreements with the City of Toronto. The Audit Department will
assist in establishing controls over these programs by undertaking to describe the financial
and cost elements of each downloaded service, outline agency requirements and
accountability processes and develop criteria for funding allocation. Financial accountability
and fee assessment practices differ in many of the programs and will need to be harmonized to
ensure public funds are expended in a manner consistent with approved program guidelines.
24. External Audit Assistance:
The request for proposal for the external audit of the City proposed that the City Auditor
would provide 1,000 staff hours in assistance to the successful proponent. The details of the
assistance to be provided will be agreed upon between the external auditor and the City
Auditor.
25. Business Improvement Areas (BIA) Operational Review:
The amalgamated City includes the operations of some 37 BIA's. Most of these organizations
are managed by volunteers with varying degrees of experience. Accordingly, the management
practices, policies and procedures and financial administration of many of these organizations
are inconsistent and/or below acceptable good business practices.
This audit will examine the operations of these BIA's and make appropriate recommendations
with respect to their managerial and financial practices including their reporting relationship
and responsibilities with the City. It will also review the appropriateness of expenditures
under existing operating guidelines for BIA Boards of Management, by laws under Chapter
20 of the Municipal Act and provincial enabling legislation.
26. Financial Audits Relating to BIA's (37):
The request for proposal for the external financial audit of the City proposed that the City
Auditor would perform the detailed audit work required for the audit of the numerous
Business Improvement Areas operating within the City.
27. Financial Audits Relating to Community Centres/Arenas (17):
The request for proposal for the external audit of the City proposed that the City Auditor
would perform the detailed audit work required for the audit of the many Community Centres
and Arenas operating within the City.
28. Homes for the Aged Subsidies:
This project relates to the 1997 subsidies for the former Metropolitan Toronto's Homes for the
Aged Division. A separate audit opinion on the Provincial subsidy claim is required for each
home. The audit could not be completed earlier as the Province was changing the required
reporting format. The format has not yet been finalized and therefore the Homes for the Aged
Division has been unable to prepare final subsidy claims. Once the required reporting format
is received from the Province, the Division will complete appropriate financial statements and
the audit will be performed.
29.Compliance Audit - Election Expenses:
Council requested the City Auditor to perform a compliance audit relative to the election
expenses of a candidate for the last Municipal election. This audit has been completed and
forwarded to Council. In connection with the results of this Audit, City Council "directed the
City Auditor to lay the information to begin legal proceedings."
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