1999 Audit Workplan

The Audit Committee recommends the adoption of the following report (February 8, 1999) from the City Auditor:

Recommendations:

It is recommended that the audit workplan set out below be approved.

Background:

At its meeting of November 3, 1998, the Audit Committee approved the workplan of the City Auditor for the period ending April 30, 1999 and requested the City Auditor to report back to the Audit Committee with his workplan for the balance of 1999 at the first meeting of the Audit Committee in 1999.

Comments:

The projects listed in Appendix 1 are either in progress or planned during the period from March1,1999 to December 31, 1999. A brief description of each project is included in Appendix 2.

The project selection process was based on an updating of the procedures undertaken in 1998. In that process 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 met on a number of occasions to review and discuss potential audit projects. Further, input has been received from the City's executive management staff to ensure that all significant risk items have been identified. To even further broaden the perspective, data bases containing information relating to audit projects conducted in both Canadian and United States cities were 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:

(i)Total Expenditure;

(ii)Total Revenues;

(iii)Value of Assets;

(iv)Extent of Liabilities;

(v)Complexity of Operations;

(vi)Management and Internal Controls;

(vii)Legislative Requirements;

(viii)Previous Audit History;

(ix)Extent and Complexity of Computerization;

(x)Changes to Operations and Organizational Structure;

(xi)Political Sensitivity; and

(xii)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. In fact, this assistance and other financial audit commitments of the City Auditor will consume approximately ninety percent of the Department's resources during the months of March and April.

It should be noted that the workplan is still dominated by audits dictated by the current status of the City's operations. That is, many departments are still undergoing significant change and the audits will ensure that appropriate controls are in place to safeguard the assets and resources of the City. As such, most of the projects will not serve as complete operational reviews of the activities identified. It is hoped that by the year 2000 the City will have reached a more stable state to allow for more detailed operational reviews of key functions/services within the City.

The Departments proposed workplan from March 1, 1999 to December 31, 1999 is attached as Appendix 1.

Appendix 3 presents the workplan in chart format showing the elapsed time for each project.

Conclusion:

Given the significant change the City is still experiencing, it is suggested that the City Auditor report back to the Audit Committee in November of 1999 with his workplan for the year 2000. 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, at the present time, be premature.

The audit projects planned and currently underway represent a mix of departmental requests, political requests, and projects identified as high risk through the risk ranking process conducted by the City Auditor. The completion of these projects by December 31, 1999 is contingent upon minimal additional, higher priority requests for audits.

Contact Name and Telephone No.:

Jerry Shaubel, Director of Audit 392-8462

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Appendix 1

No.ProjectDepartment

1Financial Information System (FIS)Finance

2Property Tax ReviewFinance

3External Audit Assistance - 1998 AuditsFinance

4Financial Audits of BIA's (37)Finance

5Financial Audits of Community Centres/Arenas (17)Finance

6Children's Services ProjectCommunity Services

7HFA / Health SubsidyCommunity Services

8York University Track and FieldEconomic Development

9Year 2000 Review (Y2K)Corporate Services

10Client Identification and Benefits System (CIBS)Community Services

11Sheppard SubwayWorks & Emergency Services

12Parking EnforcementWorks & Emergency Services

13Parks & Recreation - Selected Recreation Centre AuditsEconomic Development

14Toronto Hydro - Control Over BillingsFinance

15Municipal GrantsAll

16Real Estate FunctionCorporate Services

17Service Review Team Reports - Savings EvaluationAll

18Use of Corporate LimousinesWorks & Emergency Services

19Review of Budget Process Finance

20Toronto Fashion IncubatorEconomic Development

21BIA - Operational ReviewEconomic Development

22Permit / Lottery Licences ControlsCorporate Services

23Vehicle Safety ComplianceCorporate Services

24Collision Reporting Centres Works & Emergency Services

25Toronto Housing Company - Capital ReportsCommunity Services

26Toronto New Business CentreEconomic Development

27AbsenteeismAll

28By-Law EnforcementUrban Planning

29Quality Assurance FunctionCommunity Services

30Contract ComplianceAll

31Children's Services - Intake EligibilityCommunity Services

32Purchasing Division - Operational ReviewFinance

33Business Continuity PlanCorporate Services

34Reserves and Reserve FundsFinance

35"Squeegee Kids" ProjectCommunity Services

36Water Supply - Controls over BillingsFinance

37Toronto Parking AuthorityWorks & Emergency Services

38Computer Security FrameworkCorporate Services

39Economic DevelopmentEconomic Development

40Libraries - Operational ReviewCommunity Services

41Major Capital ProjectsWorks & Emergency Services

42Shelter, Housing CompanyCommunity Services

43Taxi Industry ReviewUrban Planning

44Fire / Ambulance TrainingWorks & Emergency Services

45External Audit Assistance - 1999 Audits *Finance

46Public HealthCommunity Services

47InvestmentsFinance

* 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.

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Appendix 2

Details for Project List Submitted

To November 3, 1998 Audit Committee Meeting

RefProject

1.Financial Information System (FIS):

City Council has approved the purchase of SAP as a new system for financial and human resource information processing. The Audit Department has requested to be included on the design/implementation 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.

2.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.

3.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 is by agreement between the External Auditor and the City Auditor.

4.Financial Audits of 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 37 Business Improvement Areas operating within the City.

5.Financial Audits of 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 17 Community Centres and Arenas operating within the City.

6.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.

7.Homes for the Aged and Public Health Unit Subsidies:

The Homes for the Aged and the Public Health Divisions of the Community and Neighbourhood Services are required to provide annual audited subsidy claims to the Province. Separate claims are required for each Home for the Aged and for certain specific health programs subsidized by the Province. Once the required claim forms are completed by the Divisions an audit will be performed.

8.York University Track and Field Centre:

By agreement, the City shares the costs of operating the York University Track and Field Centre with York University. As part of the agreement an audit is required of the expenses incurred in the operation of the Centre.

9.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.

10.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.

11.Sheppard Subway:

The Audit Committee requested the City Auditor to review the management process relating to the Sheppard Subway and report in particular on the agreement with Cadillac Fairview, the land acquisition process, the building approval process and the status of development levies.

12.Parking Enforcement Review:

This review will assess the operations of the Parking Enforcement Operation of Toronto 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.

13.Parks and Recreation - Selected Recreation Centre Audits:

An assessment of the current policies, procedures and practices that exist within recreation centres with respect to: effective control over the generation of revenue, the control of and timely processing of cash receipts, the appropriateness and controls over banking arrangements, the appropriateness of procedures for requisition of materials and supplies, and the adequacy of management and control over payroll administration.

14.Toronto Hydro - Control Over Billings:

This review will examine the effectiveness of controls over the billing and collection processes at Toronto Hydro, including the rationalization of systems and processes from the former municipalities.

15.Municipal Grants:

All seven of the amalgamated municipalities provide a variety of grants to community, cultural and multicultural agencies and organizations for a variety of different purposes. A review is to be conducted to assess whether grants are properly approved and processed, that grants are spent by the recipients for the purposes for which they were provided and that a satisfactory process is in place to measure and report on the effectiveness of the grants in meeting their objectives. The review will also consider whether adequate policies and procedures are established to monitor the use of grants by agencies and organizations and whether existing criteria for grant funding are appropriate.

16.Real Estate Functions:

The City is contemplating significant changes to its real estate holdings. In advance of these changes it is important to ensure that the Real Estate Services Unit's policies, procedures, and practices are appropriate to optimize the benefits the City can realize from the changes which are underway.

17.Service Review Team Reports - Savings Evaluations:

As part of the amalgamation process, the Toronto Transition Team received reports on the anticipated changes in all areas of the City's operations. Our review will consist of determining the progress which has been made on implementing the identified changes and realization of related cost savings.

18.Use of Corporate Limousines:

We will review the policies, practices and procedures in relation to the use of the corporate limousines. We will also determine the relative costs of alternative service delivery models.

19.Review of Budget Process:

The City's budget is generally approved in April of the year being budgeted. Ideally, the budget should be finalized by January 1 of each year. While a completion of January 1 may not be possible, there may be an opportunity to advance the budget completion date. This review will look for methods of streamlining the budget process to allow for a more timely completion of each years budget.

20.Toronto Fashion Incubator:

The organization is a small business incubator project to promote new fashion entrepreneurs for which funding is provided through the Toronto Economic Development Corporation. The organization is not consolidated with the City and the annual financial audit is to be performed by staff of the City Auditors office in accordance with the request for proposal for external audit services.

21.Business Improvement Area (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. This will include the reporting relationship and responsibilities with the City and appropriateness of expenditures under existing operating guidelines for BIA Boards of Management, in accordance with by laws under Chapter 20 of the Municipal Act and provincial enabling legislation.

22.Permit /Lottery License Review:

This review focuses on an assessment of the policies and procedures over the issuance and control of all permits and lottery licences within the domain of the City Clerks Department. The review will include an assessment of adherence to legislative requirements and test the effectiveness of internal controls and management reporting mechanisms.

23.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.

24.Collision Reporting Centres:

Pursuant to a special request from the Emergency and Protective Services Committee, Audit will undertake an independent customer survey to corroborate previously reported levels of customer satisfaction and acceptance of the Collision Reporting Centre program.

25.Toronto Housing Company - Capital Reports:

Pursuant to the completion of two capital development projects, the Housing Company is required to submit an audited "Statement of Capital Costs" to satisfy Provincial requirements.

26.Toronto New Business Centre:

The organization is a small business incubator project to promote new business ventures for which funding is provided through the Toronto Economic Development Corporation. The organization is not consolidated with the City and the annual financial audit is to be performed by staff of the City Auditors office in accordance with the request for proposal for external audit services.

27.Absenteeism Review:

This review will examine absenteeism in the Corporation. The review will determine the existence and effectiveness of programs to manage absenteeism. In addition, it will address the availability of appropriate systems and information to assist management in effectively carrying out their responsibilities in this regard.

28.By -Law Enforcement:

The amalgamation of by-law enforcement 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 in a second phase with consideration to the development and implementation of appropriate program performance metrics for evaluation of efficiency and effectiveness.

29.Review of Quality Assurance Functions:

The Social Services Division of Community and Neighbourhood 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. Due to the amount of expenditure 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. Audit Services will review current policies, procedures, work load, audit approach and training programs and make recommendations where appropriate.

30.Contract Compliance:

The various departments of the City are executing and monitoring numerous contracts throughout the year. A sample of corporate contracts will be selected to ensure compliance with Corporate policies and the terms and conditions of the contracts.

31.Children's Services - Intake Eligibility:

The Children's Services Division of Community and Neighbourhood Services provides day care services through 34 directly operated and numerous purchase of service agreements throughout the City. Our review will assess whether adequate internal controls are in place to ensure that only eligible children are allowed subsidies, whether monitoring of subsidy requirements is ongoing and that applications are processed efficiently and in compliance with corporate policies. We will also review the compliance with the contract provisions established for the purchase of services by the Division and the cost of providing services through directly operated versus purchase of service agreements.

32.Review of Purchasing and Materials Management Division:

This review will examine the operations of the City's Purchasing Division. The review will assess how well the Division is carrying out its mandate, including reviewing the adequacy of policies and procedures and determining the extent of compliance with these policies. It will assess how effective the procurement process is in ensuring fair market competition and in obtaining quality goods and services for City departments at the best price. The reasonableness of performance indicators will also be evaluated and compared, if possible, to other comparable organizations.

33.Business Continuity Plan:

This project will review the plans which exist to ensure the continuous operation of the City's computing centre. Among other things, we will examine the systems in place to ensure continuous power supply, systems and data backup routines and procedures, and results of any tests of the continuity plan.

34.Reserves and Reserve Fund:

The City has in the range of two hundred separate Reserves and Reserve Funds. Staff of the Finance Department, with Council's approval, are in the process of consolidating these Reserves and Reserve Funds with the expectation that the final number of individual Funds will be about sixty. The total value of these Funds, as reported to Council in April of 1998, was $915 million. The purpose of an Audit review of these Funds at this time is to ensure that the expenditures being made from each significant Fund are appropriate, consistent with the Fund's stated purpose, and consistent with Councils approval.

35.Squeegee Diversion Strategy for Street-Involved Homeless Youth:

In November 1998, Council approved funds to develop and support an integrated service model for a subgroup of homeless youth who are not currently served by the existing service system. This service model will provide a single point of access for homeless street-involved youth and create a new employment training program specifically targeted to this group to divert them from squeegeeing and panhandling. All existing and new programs such as pre-employment training and specialized employment training initiatives will be combined into one overall program. Council asked the City Auditor to audit this model and assess its value after twelve months.

36.Water Supply:

This review will examine the effectiveness of controls over the billing and collection processes for water and hydro in the City, including the rationalization of systems and processes from the former municipalities.

37.Toronto Parking Authority:

In 1998 the former municipal parking operations were amalgamated into the Toronto Parking Authority. We have collected some baseline information on the pre-amalgamation operating results. Once the amalgamated entity has had a sufficient period of operations, a comparison will be made to determine if the amalgamation of the operations is proving to be a net benefit for the City.

38.Computer Security Framework:

Adequate computer security for the City requires the establishment, communication, and enforcement of precise security policies and procedures. The audit will review the City's policies and procedures compared with current industry best practices. We will also review how the security statements have been communicated to City staff and what monitoring/enforcement mechanisms are in place.

39.Economic Development - Best Practices Review:

This review will focus on the organizational and operational practices established within the various business segments of Economic Development. The review will draw on comparisons with other large municipal organizations and report on best practices and benchmarking which will assist management in developing the most effective economic strategies for the City of Toronto.

40.Toronto Public Library Board:

The Toronto Public Library Board consists of 97 branches and two Research and Reference Libraries. The total operating expenditure is approximately $122 million. A review is to be undertaken to assess the adequacy of the Board's accounting records and related procedures including whether a fully integrated library information system has been implemented. This review will assess the adequacy of controls over operating expenditures and payroll transactions and determine whether such expenditures are being made in accordance with the policies and procedures of the Board. The review will also assess the system of controls over physical and other assets, and determine the effectiveness of controls over revenues.

41.Major Capital Projects - Works and Emergency Services:

This review will examine the effectiveness of control and monitoring procedures with respect to major capital projects in the Works and Emergency Services Department. The review will assess the adequacy and effectiveness of processes to ensure projects are completed on time and on budget and meet the pre-determined project deliverables. The review will also examine the administration of these projects/contracts to ensure the necessary procedures exist to protect the City's interest.

42.Toronto Housing Company:

The Toronto Housing Company provides subsidized housing to senior citizens and non-profit family housing in the Toronto area. The Company is operating over 190 buildings located throughout the City. In addition, the Central Maintenance Unit of the Company provides ongoing repairs and maintenance and 24 hour emergency maintenance services to the Company and to other divisions of the Community and Neighbourhood Services. This review will determine whether an adequate system of controls exist over the processing of applications for housing, waiting lists, physical assets, operating expenditures, revenue and payroll transactions. The review will also assess whether the best practices are applied at all decentralized locations, that preventative maintenance programs are in place and that the Central Maintenance Division is providing services efficiently and effectively at a reasonable cost.

43.Review of Taxi Industry:

The Report of the Task Force to Review the Taxi Industry contained numerous recommendations adopted by Council including the issuance of 100 new Ambassador Taxicab licenses commencing in 1999. Council recommended an annual review of this issue be conducted by appropriate City staff and the City Auditor prior to any further issuance or "second allotment" of Ambassador licences. This review will report on the status of the recommendations as approved by Council including the implementation of these licences.

44.Fire and Ambulance Services - Training:

This review will focus on the adequacy of training programs in both Fire and Ambulance Services to ensure the training provided to staff is effective in assisting these emergency program areas to carry out their respective mandates, and is in compliance with all relevant legislative requirements.

45.External Audit Assistance:

In accordance with the agreement with the external auditor, the City Auditor will be providing 1,000 hours of audit resources to the External Auditor in connection with the City's 1999 audit. It is anticipated that some of this assistance will be provided in late 1999.

46.Public Health:

A review will be undertaken of all Public Health programs in terms of defining the extent of mandatory/discretionary programs.

47.Investments - Annual Compliance Review:

The Investment Policy and Procedures manual approved by Council in January 1998 requires that the "Treasurer of the City shall establish an annual process of independent review by the City's Auditor." This review provides assurance of compliance with governing legislation and investment policies and procedures established by the Treasurer of the City.