January 15, 1999

To:Audit Committee

From:City Auditor

Subject:Review of Staff, Councillors' and Mayor's Office Expenses

Background:

On March 17, 1998, the Chief Administrative Officer issued an expense claim policy for staff. This policy pertains to all City departments and covers the requirements with respect to attendance at conferences/seminars, business trips, meterage claims for use of personal auto, meal allowances, business meetings, etc.

A separate policy, entitled "Office Administration and Expenses for Members of Council", adopted by City Council on June 3, 1998, established the requirements with respect to the office, travel and other expenses of Members of Council.

Comments:

As part of our on-going evaluation of internal controls across the Corporation, a review of staff expense claims, as well as expenditures relating to Members of Council and the Office of the Mayor was completed.

The objective of this review was to ensure awareness of and compliance with the expense policies, and to identify any areas where clarification or corrective action was required.

The review included an examination of records and documents for the period January to October 1998, interviews with applicable staff and the testing of transactions on a sample basis.

Recommendations:

It is recommended that:

1. To increase awareness of and ensure compliance with the expense claim policy, the Chief Administrative Officer:

(a)ensure all staff and Councillors are aware of the new City's expense claim and related policies;

(b)in consultation with the Chief Financial Officer and Treasurer and the City Auditor, formalize policies and procedures governing expenditures in the Office of the Mayor, specifically the administrative and approval requirements with respect to the purchase of goods and services, business meetings, travel, etc., as well as appropriate expenditure control procedures;

(c)advise all staff, Members of Council and the Mayor's Office that business meeting expense claims must be supported by original restaurant receipts, with the names of the attendees and the purpose of the meeting documented, and that payment will be withheld if the required supporting documentation is not provided;

(d)advise all staff that business lunch and dinner meetings involving City staff should be kept to a minimum and should only occur when time schedules do not permit such a meeting during normal working hours;

(e)reiterate to department heads that all staff travel outside of Canada requires the Chief Administrative Officer's written pre-approval;

(f)advise all staff, Councillors and the Mayor's Office that it is their responsibility to abide by all parking and traffic regulations, even when on City business, and that fines and penalties relating to violations of such regulations will not be reimbursed; and

(g)advise staff that meal allowances should not be claimed when visiting another Civic Centre, and request the Executive Director of Human Resources to formulate a mileage reimbursement policy for staff who have been re-located to a new location. Costs related to travel to and from permanent work places is considered a taxable benefit by Revenue Canada.

1. To ensure that costs are encumbered against Councillors' global budgets and that management reports are accurate, complete and provide a proper audit trail:

(a)the City Clerk advise Councillors that all their expenses, including any requests for services (ie. printing, postage, distribution) be processed directly through Council Services, Clerks Division, and all payments be made directly to suppliers;

(b)Finance Department ensure that all Councillors' expenses, which have been processed through their former municipalities, are allocated to the proper accounts on a timely basis. In order to improve controls, Councillors' expenses should not be processed through their former municipalities;

(c)Clerks Division staff review with Finance Department staff, system deficiencies with respect to the timely reporting of Councillors' staff salary costs, for appropriate corrective action; and

(d)Finance staff advise all departments/divisions that all business meeting expenses, cellular phone charges and kilometres reimbursements be charged to specific accounts, established for these types of expenses.

1. With respect to the "Office Administration and Expenses for Members of Council" policy, the City Clerk:

(a)advise Councillors that any additional work performed by Councillors' staff be remunerated in the form of lieu time or paid overtime and not through the Accounts Payable system as payment for consulting services or an honorarium;

(b)reiterate to Councillors the policy requirements with respect to consulting services, and advise that payment will be withheld if proper supporting documentation (ie. nature of services provided, per diem or hourly rate) is not provided;

(c)prepare a policy with respect to expenditures incurred by Members of Council in their capacities as members of local boards, including whether such expenditures should be charged to the Councillors global office budget; and

(d) clearly outline to Councillors and their staff the purpose of the global office budget and that payments to community organizations, including sports teams, in the form

of sponsorships, donations, etc. are not permitted.

1. To ensure the necessary supporting documentation is provided for expense approval and reimbursement and to promote consistency across the Corporation, the Chief Financial Officer and Treasurer:

(a)advise all staff, Councillors and the Mayor's office that travel expense reimbursements must be accompanied by a properly completed and approved Request for Travel form;

(b)develop a standard kilometres claim form for the Corporation and advise all staff, Councillors and the Mayor's office that when submitting kilometres claims, appropriate supporting detail must be provided for each trip, specifically, the destination and purpose of the trip and the number of kilometres travelled; and

(c)advise all staff, Councillors and the Mayor' s Office that reimbursement of expenses, whether processed through petty cash, payroll or accounts payable, must be supported by original receipts indicating what was purchased and be approved by the individual's immediate supervisor, in accordance with the department's delegation of financial signing authority.

1. Due to the delay in settling travel claims, and the fact that many expenses (ie. air fare, registration fees) relating to travel can be paid directly by the Corporation:

(a)the Chief Financial Officer and Treasurer consider eliminating travel advances; and

(b)Accounting staff follow up on all advances currently outstanding for more than 30 days, to either recover any unspent funds or to settle the advance, and that any travel advance still outstanding after follow up by Accounting, be escalated to the respective department head for appropriate action.

1. With respect to cellular telephones:

(a)the Telecommunications Division, Corporate Services, in consultation with Departments, Agencies and Commissions, develop a policy covering the criteria and authorization for purchase and issuance of cellular telephones, guidelines for business and personal use, and procedures for the reassignment and return of these telephones;

(b)a complete inventory of all cellular telephones be undertaken by each department, and a listing indicating the staff member assigned each telephone be forwarded to the Telecommunications Division, Corporate Services;

(c)all future purchases of cellular telephones be made through the Telecommunications Division, Corporate Services, which will also maintain an inventory of cellular telephones for the Corporation; and

(d)cellular telephone bills be reviewed and approved by the appropriate departmental staff and any personal calls reimbursed to the City.

1. To ensure that travel arrangements are made at the lowest possible cost, more than one quote be obtained and documented for all travel by Councillors and the Mayor's Office, including a quote from the corporate travel agent.
2. In view of the fact the majority of Councillors' expenses will be well below the $70,000 allocated to each Councillor for office expenses in 1998, the Councillors' global office budget should be reviewed.

Conclusions:

The new City is comprised of staff and Councillors from former municipalities, each of whom had its own culture, policies and practices with respect to general expense claims. Consequently, what may have been an appropriate expenditure in one municipality may have not been permitted in another. The level of supporting documentation and approvals also differed, to a certain extent, from municipality to municipality. The policies approved by City Council in 1998, for both staff and Councillors, have helped to standardize the administrative requirements (approval and supporting documentation) for various types of expenditures as well as defining, to the extent possible, what are considered to be permitted expenditures. It is difficult, however, to have a policy that covers every situation and consequently, good judgement must be exercised in terms of the types of expenditures incurred. In this regard, all expenses incurred by staff and elected officials in the City must be able to withstand scrutiny by an outside third party.

Our review noted a general lack of awareness of the current policies, as well as instances of non-compliance on the part of some staff, Councillors and the Mayor's office with respect to proper approval and adequacy of supporting documentation for business meeting expenses, meal allowances, consultants, travel advances and other general expenses. The City's purchasing policy was also not followed by some Councillors with respect to general purchases made for their respective offices. These problems were especially prevalent prior to the introduction of the policies, although in some situations, they continued to persist even after the policies were established. While the dollar value of each individual transaction is not significant, many of these items are of a sensitive nature. It is therefore essential that all staff and elected officials comply with the policies.

Considering we are in the first year of the amalgamated City and the fact that standard policies were not developed until mid 1998, this report focuses on the corrective action required to remedy the problems identified during our review. My office will be performing a follow-up review in the third quarter of this year and will report any continuing or new problems to the Audit Committee and Council.

Finally, it should be noted that our review also included an analysis of the Councillors' $70,000 global office budget. Preliminary year end expenditures indicate that approximately 65 percent of all Councillors will spend less than $50,000 in 1998, with an average and median spending of approximately $40,000. With the benefit of one years spending experience, a lower global office budget in the range of $40,000 to $50,000 would result in a savings of between $1.1 and $1.7 million for the Corporation.

Contact Name and Telephone Number:

Tony Veneziano, Senior Audit Manager, 392-8353

Jeffrey Griffiths

City Auditor