December 23, 1998

To:Audit Committee

From:City Auditor

Re:Review of Parking Tag Operations

Recommendations:

It is recommended that:

1.in preparing the 1998 financial statements, management should provide an additional allowance for doubtful accounts of $6.4 million relating to parking tag receivables. In addition, a projected final collection rate of 78 percent should be used for accrual purposes at 1998 year end;

2.Parking Tag Operations (PTO) staff review its current arrangement with the Ministry of Transportation (MTO) relating to the administration of plate denial and enter into a formal agreement with MTO which outlines the administrative responsibilities of the respective parties regarding the collection of parking fines at plate denial;

3.priority be given to the reconciliation of PTO records with MTO records to ensure that all tags filed for plate denial are in fact awaiting collection at plate denial. This reconciliation should be done at least annually;

4.PTO staff perform an analysis of the tags outstanding at plate denial, investigate the reasons for the delay of their collection and assess their current collectability. In addition, management should evaluate MTO's collection procedures and take appropriate action to ensure that reliance can be placed on the Ministry's processes for the collection of outstanding fines at plate denial;

5.the Chief Financial Officer and Treasurer and the City Solicitor report to the Corporate Services Committee on the changes required to the current provincial legislation and regulations, to enable the City to collect outstanding fines at any stage, as well as to use private collection agencies in this regard;

6.PTO staff work with the Ministry to actively pursue collection of the old outstanding fines at plate denial, specifically those individuals or companies identified as owing more than $5,000;

7.the Chief Financial Officer and Treasurer meet with the appropriate senior Ministry officials to expedite the resolution of the issues relating to the plate denial process in order to improve the collection of outstanding fines at plate denial;

8.in view of the loss of revenue from parking tags issued to out-of-province vehicles, management pursue with the Province of Ontario the extension of reciprocal agreements with other Canadian provinces and United States cities, to parking violations. Consideration should also be given to assigning the outstanding fines relating to out-of-province vehicles to a private collection agency;

9.in consultation with the City Solicitor, management request an appropriate change in legislation to provide an alternative means of serving parking tags to drove-away vehicles, which could include mailing the notice of infraction;

10.the Parking Enforcement Unit of the Toronto Police Services report to the Corporate Services Committee on the reasons for the increase in the number of spoiled tags and the action that will be taken to keep this number to a minimum;

11.the current report from the Chief Financial Officer and Treasurer relating to parking tags be modified to include additional management information such as the total number of tags written, spoiled, available for collection, withdrawn, status of outstanding fines, including those that are issued to out-of-province vehicles, as well as an analysis of any significant trends or problem areas; and that this report be submitted to the Corporate Services Committee on a quarterly basis, rather than monthly;

12.PTO management establish key indicators to monitor the activity with respect to the issuance and processing of parking tags. This should include monitoring the number of spoiled tags, withdrawn tags, illegible tags, etc. In this regard, management should designate an individual the responsibility for this function as well as for the analysis of trends and the provision of relevant reports to management;

13.PTO management utilize other available tools and resources within the City to generate customized reports to facilitate the review and monitoring of activity within PTO and discontinue the need to manually re-input data;

14.the monthly reconciliation of the Parking Tag Management System (PTMS) to the general ledger be reviewed and approved by the Manager of PTO;

15.PTO management make arrangements for the First Appearance Facilities to deposit all monies directly to the nearest financial institution, having a banking arrangement with the City;

16.a transaction report showing the details of all tags withdrawn be provided to all First Appearance Facilities locations. To help ensure compliance with the guidelines, the respective supervisors should scan the transaction report and, on a test basis, examine the supporting documentation of tag withdrawals. Evidence of such review should be documented in writing;

17.priority be given to acquiring the required computer server for the Parking Tag Management System and making the necessary arrangements with the appropriate provincial ministries and financial institutions to ensure that all computer systems related to parking tag operations are Year 2000 compliant by September 1999, as planned;

18.PTO management develop an action plan with specific time lines to implement the recommendations contained in this report, and

19.that this report be forwarded to the Corporate Services Committee for consideration.

Background:

The City of Toronto derives revenue of approximately $50 million annually from the issuance of over 2.5 million parking tags for infractions under Part II of the Provincial Offences Act (POA II).

The Parking Tag Operations Unit (PTO), Revenue Services Division, Finance Department is responsible for the administration, processing and collection of parking fines under POA II. PTO is also responsible for the operation of three First Appearance Facilities as well as the scheduling of trials. The First Appearance Facilities allow persons with a parking infraction notice to discuss/dispute the ticket and/or request a trial. Payment of parking tags are also accepted at these Facilities.

The enforcement of POA II, which includes tag issuance, is the responsibility of the Parking Enforcement Unit of Toronto Police Services, and was not covered in this review. Our previous year's comments and recommendations regarding this Unit were included in our management letter to the Police Services Board, and will be followed up under a separate review. The City Auditor has discussed these issues with the Police Services Board.

Comments:

As part of the 1998 Audit Workplan, a review of the Parking Tag Operations Unit, Revenue Services Division, Finance Department was recently completed.

The review focused on the following areas:

• status of outstanding fines/receivables;
• revenue collection, recording and control;
• tag withdrawal procedures at the First Appearance Facilities;
• Year 2000 compliance of computer systems, and
• follow-up of previous year's audit and internal control review recommendations.

The review included interviews with applicable staff, an examination of relevant documents and reports, an analysis of applicable data, and the testing of transactions on a sample basis.

The results of our review are summarized below. A more detailed report, which includes management's response to each recommendation, is provided in Appendix A.

Parking Tag Receivables

Based on our review and in conjunction with PTO staff's ongoing analysis of the accounts receivable and collection history, the projected final collection rates which were used to record parking tag revenue for the years 1994 to 1996 are lower than originally estimated. Parking tag receivables pertaining to tags issued in these years are therefore overstated by approximately $6.4 million. While an allowance for doubtful accounts of $4.9 million was provided in 1997, an additional provision of $6.4 million is required in 1998.

A final collection rate of 78 percent which was used to calculate revenues for 1997 and 1998, appears reasonable at this time.

Prior to the issuance of this report, we advised the Chief Financial Officer and Treasurer with respect to the additional allowance required so that it could be considered during the 1999 budget process and the necessary action taken in finalizing the City's 1998 financial statements.

Outstanding Fines

Over 1.4 million tags issued in 1989 to 1997 with a value of approximately $43.2 million remain outstanding at plate denial as at the end of October 1998. Of this amount, $24.4 million pertains to tags issued in 1993 and prior. There is currently no formal agreement with the Ministry of Transportation (MTO) pertaining to the administration of plate denial. In addition, PTO staff have been unable to obtain an adequate explanation from the MTO for the delay in collecting the fines outstanding at plate denial. PTO staff have also been unable to reconcile their records with the MTO and therefore, cannot verify that the unpaid fines have in fact been filed and are awaiting collection at plate denial. Over the last few years, PTO staff have had little success in resolving these issues with provincial staff. These matters should therefore be addressed at a more senior level.

PTO staff are evaluating other options for the collection of fines prior to enforcement at plate denial and have sought legal advice regarding the City's authority to use collection agencies. It is our understanding that changes to the current provincial legislation are required in order for the City to directly collect outstanding fines at any time in the process, and to use collection agencies in this regard.

Our review noted that over 449,000 tags for the years 1989 to 1997, with an approximate value of $10.8 million, remain unpaid relating to tags issued to out-of-province vehicles. These tags cannot be enforced for collection as there are no reciprocal agreements with other Canadian provinces or United States cities. In addition, over 60,000 tags, with an approximate value of $1.4 million are written annually but are not attached to the vehicle when the vehicle is driven away during the ticket writing process. Under current legislation, these tags cannot be processed further for collection.

In order to improve collection and increase revenue, it is important that action be taken to address these issues. This would require co-operation and assistance of the Province and changes in the current provincial legislation.

Tag Issuance, Reporting, Recording and Control

Currently, total tag issuance reported includes spoiled tags. These tags are cancelled prior to completion of the tag and therefore are never issued nor are available for collection. The number of spoiled tags has increased from 1.2 percent (10,000) in 1989, to as high as 6.2 percent (160,000) in 1996, to 5.4 percent (139,000) in 1997. Including these tags as part of the total number of tags issued has the effect of artificially inflating the level of tag issuance and distorting the collection rate. The reasons for the increase in the number of spoiled tags should be determined by the Parking Enforcement Unit and necessary corrective action taken.

Current monthly reports to the Corporate Services Committee provide information on tag issuance, collection rates and receivables. However, these reports do not include other key information such as tag withdrawals, spoiled tags, illegible tags, etc. Improvements to these reports should further assist management in identifying key trends and problem areas.

While significant progress has been made with respect to the reconciliation of the Parking Tag Management System to the general ledger, current banking procedures instituted for monies collected at the First Appearance Facilities still involve the multiple handling of cash and therefore continues to be a problem.

Tag Withdrawal Procedures

Effective September 1, 1998, new guidelines were issued which tightened the criteria for the withdrawal of tags at the First Appearance Facilities. PTO staff have indicated that these guidelines will be submitted to the Corporate Services Committee in March 1999.

PTO staff have the authority to withdraw parking tags, in most cases, without supervisory approval. However, there are no monitoring procedures to ensure that tags are withdrawn in accordance with the guidelines. While transaction reports are generated by the system, these reports are not available at two of the three First Appearance Facilities. The possibility therefore exists that tags are withdrawn inappropriately without being detected.

Year 2000 (Y2K) Compliance of Computer Systems

Ongoing discussions have taken place between PTO staff and the Corporate Y2K Project Team. The Parking Tag Management System (PTMS) has been identified as one of the City's critical systems and is scheduled to be Y2K compliant by September 1999. At the time of this report, PTO has yet to acquire a new server with a larger capacity, hence, no significant progress has been made on the project. In addition, no discussions have yet been initiated with external organizations such as banks and provincial ministries whose systems have a direct impact on PTMS, through electronic data exchanges. Failure of these systems to be Y2K compliant could result in revenue loss to the City.

Follow-up of Previous Year's Audit and Internal Control Review Recommendations

A status of the recommendations contained in our previous year's management letters is provided below:

Implemented 7

In the process of implementation 4

Not implemented 5

16

Those recommendations which have not yet been implemented are repeated in this report in modified form to reflect current systems. Attachment I in Appendix A of this report provides details with respect to the status of our previous year's recommendations.

Conclusion:

The Parking Tag Operations Unit (PTO) handles a large volume of transactions and relies heavily on the Parking Tag Management System (PTMS) to capture all parking tag information and transaction details from the time of issuance to final disposition. It is therefore critical that the acquisition of the required computer server be expedited to facilitate Y2K compliance and prevent any adverse impact on operations.

There are important issues to be addressed that impact on collections and potentially increase parking tag revenue. These issues, which may require changes to provincial legislation, include the City's lack of authority to use other means of collection such as private collection agencies, the lack of reciprocal agreements with other Canadian provinces and United States cities, and delays in the collection of fines at plate denial.

There is also a need for an additional provision for doubtful accounts to more accurately reflect parking tag receivables, as well as a need to enhance the current reporting process so as to provide an analysis of key indicators and trends. In addition, there are some areas where internal administrative improvements are required.

In order to address many of the issues in this report, consultation is required with other parties including Toronto Police Services, the Ministry of Transportation, and the Ministry of the Attorney General. It is important that the consultation be undertaken on a timely basis and if required, involve the Chief Administrative Officer and/or the Chief Financial Officer and Treasurer.

Given the significant amount of revenue derived from parking fines, it is essential that the recommendations outlined in this report are addressed on a timely basis. We have discussed this report with senior staff from the Division who generally concur with our recommendations. Audit Services is prepared to assist PTO staff in implementing the recommendations, as required.

Contact Name:

Tony Veneziano, Senior Audit Manager, 392-8353

Jeffrey Griffiths

City Auditor

Appendix A

AUDIT SERVICES

City Auditor:Jeffrey Griffiths

Senior Audit Manager:Tony Veneziano

Audit Project Manager:Sonia Villanueva

Auditor:Wayne Louie

REVIEW OF PARKING TAG OPERATIONS

Finance Department

City of Toronto

Table of Contents

GENERAL1

OBJECTIVES AND SCOPE1

FINDINGS AND RECOMMENDATIONS

Status of Outstanding Fines/Receivables

Parking Tag Receivables

Outstanding Fines

Out-of-Province Vehicles

Drove-away Vehicles

Tag Issuance, Reporting, Recording and Control

Tag Issuance

Reporting

Control

Recording

Deposits

Tag Withdrawal Procedures

Year 2000 (Y2K) Compliance of Computer Systems

Follow-up of Previous Year's Audit and Internal Control Review Recommendations

ATTACHMENTS

Attachment I

Follow-up of Previous Year's Audit and Internal Control Review Recommendations

Attachment II

Status of Parking Tags as at October 31, 1998

REVIEW OF PARKING TAG OPERATIONS

Finance Department

City of Toronto

GENERAL

The City of Toronto derives revenue of approximately $50 million annually from the issuance of approximately 2.5 million parking tags for infractions under Part II of the Provincial Offences Act (POA II).

The Parking Tag Operations Unit (PTO), Revenue Services Division, Finance Department is responsible for the administration, processing and collection of parking fines under POA II. PTO is also responsible for the operation of three First Appearance Facilities. The Facilities have been established under the authority of Bill 47 which allows persons, requesting a trial, to appear in person and file a request. Staff at the Facilities also have the authority to review, investigate and withdraw parking tags, as well as accept payments.

The enforcement of POA II, which includes tag issuance, is under the responsibility of the Parking Enforcement Unit of Police Services, and is not covered in this review. Our previous year's comments and recommendations regarding this unit were included in our management letter to the Police Services Board, and will be followed up under a separate review. These issues have been discussed with the Police Services Board by the City Auditor.

OBJECTIVES AND SCOPE

As part of the 1998 Audit Workplan, a review of the Parking Tag Operations Unit was completed to identify issues or concerns regarding this area of operation and make recommendations for appropriate corrective action.

The review covered the various aspects of parking tag operations and focused on the following areas:

• status of outstanding fines/receivables;
• revenue collection, recording and control;
• tag withdrawal procedures at the First Appearance Facilities;
• Y2K compliance of computer systems, and
• follow-up of previous year's audit and internal control review recommendations.

The review included interviews with applicable staff, an examination of relevant documents and reports, an analysis of applicable data, and the testing of transactions on a sample basis.

FINDINGS AND RECOMMENDATIONS

Status of Outstanding Fines/Receivables

Parking Tag Receivables

Parking tag revenue is recorded annually based on three components: estimated final collection rate; estimated average tag value; and the actual number of tags issued. A review conducted in 1997 by the former Metro Internal Control Unit concluded that the estimated receivables pertaining to tags issued in 1989 to 1996 were overstated. It was recommended that an appropriate allowance for doubtful accounts be made and the receivables reviewed annually to determine the adequacy of such provision. In response to the recommendation, an allowance of $4.9 million was made in 1997.

As the collection experience over the last several years provides a more reasonable indication of the final collection rate, it has become apparent that initial projections used to calculate parking tag receivables for 1994 to 1996 were overly optimistic. As a result of our review and in conjunction with PTO staff's ongoing analysis of the accounts and collection history, we have determined that the allowance for doubtful accounts in relation to parking receivables is understated by approximately $6.4 million.

The receivable for tags issued in 1997, which was calculated using a 78 percent final collection rate and a per tag value of $24.14, appears reasonable at this time.

In the October 1998 Parking Tag Issuance report to the Corporate Services Committee, PTO staff projected a revenue shortfall of $1.9 million in 1998, based on a lower collection rate (78 percent) than the rate used for the 1998 budget (80 percent). Based on our analysis, the projected final collection rate of 78 percent appears reasonable and should be used for accrual purposes at year end.

Prior to the issuance of this report, we advised the Chief Financial Officer and Treasurer with respect to the additional allowance required so that it could be considered during the 1999 budget process and the necessary action taken in finalizing the City's 1998 financial statements.

It is recommended that:

The Manager, Provincial and Parking Offences met with the Director, Accounting Services to discuss the letter from the City Auditor dated December 8, 1998 regarding parking tag receivables and the 1998 accruals. It was agreed that an additional provision for doubtful accounts will be made to more correctly reflect the parking tag accounts receivables for the years 1989 through 1996. As well, a memo dated January 21, 1999 was sent instructing the Director, Accounting Services to set up an accrual for 1998 parking tag revenue and costs using a calculation that reflects current payment and collection rates.

Outstanding Fines

Parking tags which remain unpaid for a specified amount of time are filed for conviction with the Ministry of Attorney General (MAG), which in turn, forwards them to the Ministry of Transportation (MTO) for plate denial. Effective for tags issued in 1989 and subsequent years, the City uses the plate denial system as a final mechanism to collect unpaid fines. The system is administered by MTO, whereby a vehicle licence plate renewal is denied unless all outstanding parking fines are paid.

According to PTO records as at the end of October 1998 over 1.4 million tags with a value of $43.2 million pertaining to the years 1989-1997 are outstanding at plate denial, as shown below:

Outstanding as at October 31, 1998

At Plate DenialOther OutstandingTotal Outstanding

Year#Amount#Amount#Amount

198950,708$1,562,000625$13,00051,333$1,575,000

1990295,1689,040,0004,518101,000299,6869,141,000

1991226,1656,793,0001,15233,000227,3176,826,000

1992119,2233,500,00088327,000120,1063,527,000

1993122,0113,541,0006,927216,000128,9383,757,000

813,27524,436,00014,105390,000827,38024,826,000

1994129,8093,783,0006,380183,000136,1893,966,000

1995134,8404,058,0006,04592,000140,8854,150,000

1996155,2504,659,0006,819110,000162,0694,769,000

1997211,4596,233,0007,249161,000218,7086,394,000

631,35818,733,00026,493546,000657,85119,279,000

1,444,633$43,169,00040,598$936,0001,485,231$44,105,000

Other outstanding tags represent tags on which a payment plan has been imposed, are awaiting trial, or are awaiting registration to plate denial.

While PTO staff have attempted to obtain information from MTO to reconcile the City's records with the Ministry's records, they have been unable to verify that these tags are in fact awaiting collection at plate denial.

In our previous year's management letter, we recommended that PTO staff reconcile their records with MTO records to ensure that the unpaid fines have in fact been filed with MTO. PTO staff explained that MTO was unable to provide the information because specific tag information was not maintained by MTO for tags issued prior to 1994. Alternatively, PTO staff obtained a report of outstanding fines at plate denial as of January 1998 from MAG's Integrated Court Offences Network (ICON) system. A comparison of the report with PTO records was made as of August 1998 which indicated that over 500 individuals or companies owing more than $5,000 had outstanding fines totaling approximately $4.5 million. No further action was taken following this analysis.

There is currently no formal agreement with MTO pertaining to the administration of plate denial. PTO staff have indicated that a reconciliation with MTO records is currently part of their ongoing negotiations with MTO relating to new fees.

As the adjacent graph shows, there are still a significant number of tags outstanding at plate denial pertaining to tags issued in the years 1989 to 1996. However, based on past collection experience and current collection efforts, it is estimated that only a small portion of these tags will be collected.

PTO staff have been unable to obtain an adequate explanation from MTO for the delay in collecting the fines outstanding at plate denial. The collectability of these amounts remain a concern, particularly when viewed in the context of the amounts collected in prior years from the Province through the plate denial process. It is our understanding that there are procedural weaknesses which impact the effectiveness of the plate denial system. We also understand that the City's authority to collect fines at plate denial, which is now within the jurisdiction of the Province, is uncertain. We acknowledge that PTO staff have been discussing these issues with Provincial staff over the last few years, albeit with little success. In view of the significant amount of funds involved and as the possibility of collection diminishes over time, the resolution of this matter should be conducted at a more senior level as a priority issue.

In the meantime, PTO staff are evaluating other options of collecting fines prior to enforcement at plate denial. Legal advice has also been sought in respect of the extent of the City's authority to use private collection agencies to collect outstanding fines. PTO staff have advised that changes to the current provincial legislation are required in order for the City to directly collect outstanding fines and use collection agencies. Nevertheless, the City should work with the Ministry of Transportation to actively pursue collection of the old outstanding fines at plate denial, specifically those individuals or companies identified as owing more than $5,000.

It is recommended that:

1. Parking Tag Operations (PTO) staff review its current arrangement with the Ministry of Transportation (MTO) relating to the administration of plate denial and enter into a formal agreement with MTO which outlines the administrative responsibilities of the respective parties regarding the collection of parking fines at plate denial;

Management Response:

Parking Tag Operations (PTO) staff are currently negotiating a contractual relationship with the Ministry of Transportation (MTO) relating to the data access fees, for information provided. Subject to Council approval, it is expected that the agreement will be signed prior to the end of June 1999.

1. priority be given to the reconciliation of PTO records with MTO records to ensure that all tags filed for plate denial are in fact awaiting collection at plate denial. This reconciliation should be done at least annually;

Management Response:

Part of the negotiations discussed in recommendation #2 involves the reconciliation of PTO records and MTO records. However, the first reconciliation must be with the Ministry of the Attorney General (MAG) records as that Ministry forwards the PTO request for plate denial to MTO. This reconciliation cannot take place until the Parking Tag Management System (PTMS) server is upgraded to provide more processing capacity. This upgrade is scheduled to be complete by April 30, 1999, at which time, resources permitting, the reconciliation process can commence.

1. PTO staff perform an analysis of the tags outstanding at plate denial, investigate the reasons for the delay of their collection and assess their current collectability. In addition, management should evaluate MTO's collection procedures and take appropriate action to ensure that reliance can be placed on the Ministry's processes for the collection of outstanding fines at plate denial;

Management Response:

PTO staff have already performed a high level analysis of unpaid fines at plate denial. As well, MTO staff have performed some analysis on persons owing more than $5,000.00 in parking fines. They have also done some comparisons between the drivers licence data base and the vehicles data base. In many cases, persons with plate denials also have their driver's licence suspended for some payment of fines. The results of this analysis will be provided once completed. PTO staff will also review MTO collection procedures with the Ministry to ensure the process is effective.

1. the Chief Financial Officer and Treasurer and the City Solicitor report to the Corporate Services Committee on the changes required to the current provincial legislation and regulations, to enable the City to collect outstanding fines at any stage, as well as to use private collection agencies in this regard;

Management Response:

PTO management is continuing discussions with Legal Services regarding the authority to collect fines and alternative collection strategies. A report on the result of these discussions will be submitted to the Corporate Services Committee in the near future.

1. PTO staff work with the Ministry to actively pursue collection of the old outstanding fines at plate denial, specifically those individuals or companies identified as owing more than $5,000;

Management Response:

Agreed, provided that current staff can be reassigned without affecting the day to day operations of the Unit.

1. the Chief Financial Officer and Treasurer meet with the appropriate senior Ministry officials to expedite the resolution of the issues relating to the plate denial process in order to improve the collection of outstanding fines at plate denial.

Management Response:

This meeting will be arranged in the near future. In the meantime, the Manager, Provincial and Parking Offences continues to meet with the Director, MTO Business and Technology to discuss these matters.

Out-of-Province Vehicles

Over 449,000 parking tags issued from 1989 to 1997, with an approximate value of $10.8 million, were issued to vehicles which were registered outside Ontario and remained unpaid. Except for voluntary payments on tags issued to out-of-province vehicles, collection of the outstanding fines is not enforceable as there are no reciprocal agreements with other Canadian provinces or with United States cities. We understand that reciprocal agreements with other provinces already exist with regard to certain moving violations. In response to our previous year's recommendations, PTO staff indicated that this matter would be "considered as part of the Revenue Enhancement Strategy and the use of collection agencies." However, no action has been taken to date.

It is recommended that:

1. in view of the loss of revenue from parking tags issued to out-of-province vehicles, management pursue with the Province of Ontario the extension of reciprocal agreements with other Canadian provinces and United States cities, to parking violations. Consideration should also be given to assigning the outstanding fines relating to out-of- province vehicles to a private collection agency.

Management Response:

PTO management has already communicated with the Province of Quebec and collection agencies in order to attempt to collect fines for parking tags issued to out-of-province drivers. The results of these discussions will be reported to the Corporate Services Committee in the near future.

Drove-away Vehicles

Over 60,000 parking tags, with an approximate value of $1.4 million are written annually, but are not attached to the vehicle when the vehicle is driven away during the ticket writing process. Current legislation requires that the issuing officer serve the parking tag either by affixing it to the vehicle or delivering it personally to the driver at the time of the alleged infraction. Consequently, these tags are cancelled and withheld from further processing.

It is recommended that:

1. in consultation with the City Solicitor, management request an appropriate change in legislation to provide an alternative means of serving parking tags to drove-away vehicles, which could include mailing the notice of infraction.

Management Response:

An alternative to serving the parking infraction notice on the vehicle is already in place. However, because it involves a personally served summons, it is a very expensive method and not cost effective. PTO management will explore the recommended option and make the appropriate recommendations to the Corporate Services Committee.

Tag Issuance, Reporting, Recording and Control

Tag Issuance

Total tag issuance as reported by PTO in its monthly reporting to the Corporate Services Committee, and as referred to in this report, represents the total number of tags written by the issuing officers and serves as the basis for calculating collection rates and other statistical information. Included in this amount are tags that are spoiled by the enforcement officer prior to completion of the tag and therefore are never issued nor available for collection.

As illustrated in the adjacent graph, the number of spoiled tags has increased from 1.2 percent (10,000) in 1989 to as high as 6.2 percent (160,000) in 1996, to 5.4 percent (139,000) in 1997. Including these tags as part of total issuance has the effect of artificially inflating the level of parking tag issuance, as well as distorting the collection rate.

It is important that the reasons for the increase be investigated and corrective action taken to keep spoiled tags to a minimum. The Parking Enforcement Unit of Police Services is responsible for tag issuance and, therefore, should be requested to explain the increase in the number of spoiled tags.

It is recommended that:

1. the Parking Enforcement Unit of Police Services report to the Corporate Services Committee on the reasons for the increase in the number of spoiled tags and the action that will be taken to keep this number to a minimum;

Management Response (Parking Enforcement Unit):

This matter will be reviewed and the corrective action required will be reported to the Corporate Services Committee.

Reporting

PTO submits monthly reports to the Corporate Services Committee providing information relating to tag issuance, collection and receivables. However, information with respect to spoiled tags, withdrawals and other cancellations is not provided. To improve reporting, it would be useful to include such information in a quarterly report, that would replace the current monthly report. In addition, the number of spoiled tags should be reported and adjusted from the total tag issuance to reflect the actual number of tags available for collection. This adjusted total should serve as the basis for calculation of collection rates.

Details of the status of parking tags as at October 31, 1998 are provided in Attachment II to this report and are illustrated in the adjacent graph.

It is recommended that:

1. the current report from the Chief Financial Officer and Treasurer relating to parking tags be modified to include additional management information such as the total number of tags written, spoiled, available for collection, withdrawn, status of outstanding fines, including those that are issued to out-of-province vehicles, as well as an analysis of any significant trends or problem areas; and that this report be submitted to the Corporate Services Committee on a quarterly basis, rather than monthly.

Management Response:

Agreed.

Control

Over 10 percent of total tag issuance are withdrawn or cancelled annually for various reasons, such as illegibles, officer errors, deliveries, valid permits, drove-aways, etc. The reasons for tag withdrawals can be classified into two categories: those that are within the control of the Parking Enforcement Unit and those at the discretion of the PTO Unit. It is essential that the reasons for tag withdrawals are analyzed and investigated by the respective unit so that appropriate corrective action can be taken on a timely basis in order to keep the number of withdrawn tags to a minimum.

Considering the significant amount of revenue and high volume of transactions involved, PTO should identify key indicators, analyze trends and establish quality control procedures under the responsibility of a designated staff member. The production of exception reports, providing information on tag withdrawals, spoiled tags, collection at various stages, etc., would facilitate the review and monitoring procedures as well as help identify trends and possible problem areas.

Currently, statistical reports which summarize transactions are compiled by manually re-inputting data from PTMS reports into a spreadsheet file. This procedure is time-consuming and prone to error. We understand that certain reports required by PTO involve requesting the external service provider, which designed the PTMS, to write new programs to accommodate the request. However, with slight modifications to the current database structure, the information may be accessible to other programs to generate custom reports, thereby eliminating the requirement for the manual re-input of data.

It is recommended that:

1. PTO management establish key indicators to monitor the activity with respect to the issuance and processing of parking tags. This should include monitoring the number of spoiled tags, withdrawn tags, illegible tags, etc. In this regard, management should designate an individual the responsibility for this function as well as for the analysis of trends and the provision of relevant reports to management;

Management Response:

Agreed, however, due to the requirement to maintain the current level of day to day operations, current resources are not sufficient to handle this additional responsibility.

1. PTO management utilize other available tools and resources within the City to generate customized reports to facilitate the review and monitoring of activity within PTO and discontinue the need to manually re-input data.

Management Response:

The PTMS is in the process of being upgraded and modified to provide a revenue tracking function which should resolve the problem of manual re-entry of data.

Recording

PTO utilizes the Parking Tag Management System (PTMS), which provides a database containing all the transaction details relating to a parking tag from the time of issuance to its final disposition. In the previous year, we recommended that PTO staff reconcile the payment records of the PTMS to the general ledger. PTO staff have made progress in this regard. However, there is currently no supervisory review and approval of the monthly reconciliation.

It is recommended that:

1. the monthly reconciliation of the Parking Tag Management System (PTMS) to the general ledger be reviewed and approved by the Manager of PTO.

Management Response:

Agreed.

Deposits

Parking fines may be paid at any of the three First Appearance Facilities, at any chartered bank, by mail, or by telephone.

Payments received at the First Appearance Facilities are processed directly into the system by the counter clerks. The system generates a sequentially numbered receipt for each payment transaction. At the end of the day, all monies are counted by the counter clerk and stored in a safe overnight. The following day, the Supervisor recounts and reconciles the monies to a cash report generated by the system. The monies and other documents are placed in a sealed bag and delivered by a City courier to the Finance & Administration Unit at Metro Hall. The monies are again recounted by a Finance & Administration clerk who prepares a consolidated deposit slip and makes the deposit. PTO staff explained that there is no bank branch, with which PTO is dealing, that is nearby the Facilities. It is worth noting, however, that a branch of another major bank resides in the same building as one of the Facilities. PTO staff also indicated that preparing a consolidated deposit provides more control over collections. Current banking procedures involve multiple handling of cash and increase the risk of loss.

It is recommended that:

1. PTO management make arrangements for the First Appearance Facilities to deposit all monies directly to the nearest financial institution, having a banking arrangement with the City.

Management Response:

There is no branch of the City's bank (the Royal Bank of Canada) close to any of the First Appearance Facility offices. However, the current process and banking arrangements will be reviewed and revised as appropriate.

Tag Withdrawal Procedures

Staff at the First Appearance Facilities process requests for trial, review or investigate parking tags, in case of dispute, as well as accept payments. Counter staff at the Facility also have the authority to withdraw the tags. Management has issued guidelines stipulating the conditions under which staff may withdraw a tag. Given the volume of tags processed, supervisory approval is required only for certain conditions.

In the previous year, we recommended that the guidelines for tag withdrawals be reviewed to ensure that the conditions for tag withdrawals are appropriate. Effective September 1, 1998, new guidelines were issued which tightened the criteria for tag withdrawal. PTO staff have indicated that the revised guidelines will be submitted to the Corporate Services Committee, as requested.

We also recommended that supervisory staff review, on a test basis, the documentation for withdrawn tags to ensure that tag withdrawals are appropriate and done in accordance with the guidelines. PTO staff's response was that "all reasons for withdrawing parking tags are documented in the PTMS along with the identity of the persons performing the withdrawal transactions." While this information provides an audit trail, it does not give any assurance that the withdrawals are done in accordance with the guidelines. In addition, the reports are not available to two of the three First Appearance Facilities and there is no procedure in place to check the transaction report to supporting documents. Consequently, the possibility exists that tags are withdrawn inappropriately without being detected, resulting in revenue loss.

It is recommended that:

1. a transaction report showing the details of all tags withdrawn be provided to all First Appearance Facilities locations. To help ensure compliance with the guidelines, the respective supervisors should scan the transaction report and, on a test basis, examine the supporting documentation of tag withdrawals. Evidence of such review should be documented in writing;

Management Response:

This report is currently being copied and distributed to the two external sites. The office in Metro Hall has the capability of viewing the transaction on-line. Supervisory staff will scan the report and, on a test basis, verify the supporting documentation.

Year 2000 (Y2K) Compliance of Computer Systems

The Parking Tag Management System is comprised of nine software applications running on five computer servers. While the Finance Department Y2K Project Team has deemed the applications to be Y2K ready, no testing has yet been done on any of the system components. We understand that PTO will acquire a new computer server with a larger capacity to replace the current one and that no testing will be done until that server is acquired. A Business Case report outlining the requirements for parking tag operations has been prepared for Council approval. The Project Team has established critical time lines to ensure that the testing and implementation of systems, for Y2K compliance, is completed by September 1999. However, any significant delays in the acquisition of the replacement server could adversely impact the testing and implementation of systems for Y2K compliance within the target dates.

PTO also relies on the computer systems of the Ministry of the Attorney General, Ministry of Transportation and financial institutions. Interfaces with these organizations involve electronic data exchanges between the various systems to update information. At the time of our review, no significant progress had been made to identify Y2K issues with these organizations. The Y2K project team has indicated that this will be addressed as part of the project completion anticipated for September 1999. Failure of these systems to be Y2K compliant could result in revenue loss to the City.

It is recommended that:

1. priority be given to acquiring the required computer server for the Parking Tag Management System and making the necessary arrangements with the appropriate provincial ministries and financial institutions to ensure that all computer systems related to parking tag operations are Year 2000 compliant by September 1999, as planned.

Management Response:

The new server for the Parking Tag Management System (PTMS) should be available by the end of February 1999. As well, the PTMS system is currently undergoing Y2K verification. This process, including the external interfaces, is expected to be completed by the end of September 1999.

Follow-up of Previous Year's Audit and Internal Control Review Recommendations

Certain of our previous year's audit and internal control review recommendations have been implemented or in the process of implementation. Those not yet implemented which merit reconsideration have been repeated in modified form to reflect current systems.

A summary of the status of our previous year's recommendations is as follows:

Implemented 7

In the process of implementation 4

Not implemented 5

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Attachment I to this report is a chart showing the recommendations; a statement on whether they have been implemented; the expected implementation, if not yet implemented; and a reference to the appropriate section of the report, if further recommendation is warranted.

It is recommended that:

1. PTO management develop an action plan with specific time lines to implement the recommendations contained in this report.

Management Response:

The action plan, where not already in place, will be developed.

Follow-up of Previous Year's Audit and Internal Control Review Recommendations

Attachment II

Status of Parking Tags

As at October 31, 1998

Notes:

a)Spoiled tags represent tags that are cancelled by the officer prior to completion of the tag and are never issued nor available for collection.

b)Except for voluntary payments, collection of out-of-province tags is not enforceable as there are no reciprocal agreements with the other Canadian provinces and U.S. cities.

c)Tags are withdrawn for various reasons such as illegibles, officer errors, drove-aways, valid permits, etc. In 1992 and 1993, the number of withdrawn tags increased significantly mainly as a result of efforts taken to clear the court backlog, resulting in cases being quashed due to court delays.

d)Outstanding tags include 1.44 million tags that are awaiting collection at plate denial. The balance includes tags on which a payment plan has been imposed, are awaiting trial, or are awaiting registration to plate denial.