Transcript: Audit Reveals Millions in Overbillings - Audit Committee - May 1, 2026 | Summary 39

Councelor Steven Holidayiday. I am the chair of the audit committee. We have quorum. I'm now calling meeting number 12 to order. Welcome everyone. Today's meeting is being held by video conference and in person at city hall in committee room number one. This meeting is also being livereamed online at youtube.com/torontoc cityconsil live. Although we may be meeting in different locations today, the audit committee would like to acknowledge that the land we are meeting on is the traditional territory of many nations including the missagas of the credit, the Anesnab, the Chipoa, the Hudnosoni and the Wendat peoples and is now home to many diverse first nations Inuit and Matei peoples. We also acknowledge that Toronto is covered by Treaty 13 with the Missosagas of the credit. Uh members, we have no speakers registered at this point. Uh members, the city clerk has provided all agenda materials on toronto.ca/counsel and on the CMP, the clerk's meeting portal. Clerk's IT staff are available to members if you need help with your devices. I also want to remind you to please submit and approve your motions by email. Staff are available at audit committee toronto.ca to help with motions. Are there any declarations of interest under the municipal conflict of interest act? If you do have an interest, please raise your hand or unmute your mic and indicate the item number and the nature of the interest. Seeing none, we will proceed. May I have a motion to confirm the minutes from our meeting on February 12th, 2026. Uh moved by councelor Myers. All those in favor, any opposed? That is carried. We have five items on our agenda. Let's review the agenda starting with item AU12.1. AU12.1 is audit of corporate real estate management strengthening accountability and oversight of change orders in capital projects. There's a presentation on this item so I will hold that. AU12.2 is investigation into the procurement of the pay it platform. So I'm going to hold that item. Auditor general is going to make a couple of remarks. The next item is AU12.3 cyber security audit of exhibition place phase 2 overall network security and cyber security assessment of select critical systems. Are there anyone uh wishing to hold this item? Seeing I'll move that item. I'm sorry. Councelor Casanti, could you repeat that, sir? I'm I'm happy to move that item if nobody has questions. Thank you. Uh councelor Croanti moves the recommendations. All those in favor? Any opposed? That item carries. EU12.4 is future contract considerations for smart track and other capital project agreements. I was going to ask a question of that. So I'll hold that item. And our fifth item is AU12.5 Moss Park Arena 2024 audited financial statements. Any questions on that item? May I have a member move the item? Councelor Myers moves the recommendations. All those in favor? Any opposed? That carries. Uh members, we will go back up to the top of the agenda and we will take just a moment to allow uh the auditor general's team to get into place at the speaking dis Okay, our first item is AU12.1 audit of corporate real estate management strengthening accountability and oversight of change orders in capital projects. Um as mentioned there's a presentation coming and madame auditor u to you and your team please begin as soon as you're ready. Thank you, chair. This presentation summarizes the results of our audit of corporate real estate management divisions oversight and management of change orders in capital projects. I'd like to acknowledge my team who are here with me today for their excellent work on this audit. Aa Chan, deputy auditor general, Angelo Rafalovich, senior audit manager, and audit managers Taclan Chin and Sha Dan. We would like to express our sincere appreciation for the cooperation and assistance we received from Pat Matso, executive director, and Lisa Barroso, director project management office of the Creme division. During this presentation, we will discuss why this audit matters, outline our audit objectives, key audit findings and recommendations, followed by my closing remarks. My office's work plan has included a focus on the priority area of infrastructure and contract management with a series of audits across various city divisions. For example, in November 2025, our office completed an audit of Toronto water, storm water, and wastewater contract management, and we have a contract management audit of the solid waste management services division underway. The focus of this audit was on the corporate real estate management division's process for reviewing capital project change orders and related documentation. This audit matters as the corporate real estate management or creme division is responsible for delivering some of the city's largest capital construction projects and changes that occur on capital projects can result in project delays and significant cost increases. In addition, as highlighted in my 2025 annual report on the fraud and waste hotline, the city is facing an emerging fraud risk related to change orders. The objective of this audit was to assess whether Creme sufficiently monitors and oversees capital project change orders, ensuring that change orders and the associated cost and schedule impacts are properly justified and appropriately reviewed and approved. It may be helpful to note that my office previously completed an audit of the city's modular housing initiative in 2023 which included several recommendations to improve Creme project management of modular housing construction. Creme has been working towards implementing those recommendations and implemented the policies and procedures on the change order process in July 2023. As a result, our work for this current audit included samples that covered the period before, during, and after that work was done by Creme. The audit included a review of eight large capital projects delivered by Creme that were in progress or completed between January 2024 to February 2025. Our sample of 105 change orders spans the period from July 2020 to July 2025 with over half selected from the period after the July 2023 implementation of creme change order policies and procedures and over 10% selected from 2025. Our audit identified opportunities to strengthen process to ensure appropriate change order oversight, reinforce roles and accountabilities for change order review and approval, and improve performance through ongoing monitoring, evaluation, and a stronger project management system. We'll briefly highlight key findings and recommendations in these three areas in the slides that follow. The first area is for imp for improvement is for creme to enhance policies and procedures and strengthen processes to ensure appropriate change order oversight. As mentioned, CRE implemented its change order policies and procedures in July 2023. The division updated its policies and procedures in 2025 with staff trained on the new process by October 2025. Based on our review of sample change orders, including our assessment of the current 2025 procedures, we found there are still opportunities to improve guidance and training. Clearer expectations would help ensure consistency and accountability. Key areas for improvement include clearly defining approval authorities, including signing limits or financial thresholds and when issues should be escalated to senior management. clearly identifying what documentation must be retained to show that change orders have been thoroughly reviewed by Creme project managers and external consultants and providing clearer guidance to Creme project managers on expectations for assessing the reasonleness of contractor pricing and evaluating schedule impacts. Our audit included procedures specifically designed to address the emerging fraud risk that the city has been facing related to contractor billings for subcontractor work. As part of this audit, we selected 24 subcontractors across the capital projects in our sample and contacted them directly to confirm the amounts they invoiced to general contractors. Based on the responses received, the vast majority majority 91% of invoice amounts were confirmed by subcontractors to be accurate. However, we did identify several exceptions where the amounts build to the city by general contractors for subcontractor work did not align with the amounts invoiced by the subcontractors. In two cases, general contractors build the city more than the subcontractors invoiced, totaling about 58,000 in over billings. In addition, there are several exceptions totaling over $500,000 on one project that is under investigation, and further details are included in confidential attachment one. All of the capital projects we reviewed had contracts that clearly outlined what costs could be included in change orders. In our sample of 105 change orders, almost half had charges that were not consistent with the contract terms, including change orders where markups exceeded contractual limits and/or additional fees were charged on top of the quoted costs for the work itself and contracted markups. Even though the contracts clearly state that the markups constitute the only compensation the contractor is entitled to for overhead, profit, incidental and administrative costs, including supervision costs. In these cases, there was no evidence provided that Creme project managers or external consultants properly questioned or validated the appropriateness of the charges. The lack of documented reviews by Creme project managers and the external consultants made it difficult to determine why the additional fees were approved and whether they were reasonable given the standard contract provisions. Creme's proper review and oversight of markups and additional charges are critical to ensuring project costs remain within budget, comply with contractual requirements, and reflect fair and reasonable pricing. Where there is uncertainty in in interpreting or applying contract clauses or questions regarding the appropriateness of charges, creme should consult legal services. Looking ahead, Creme should improve the clarity of the standard clauses and related schedules included in the construction agreements used by the division. I'll now pass it over to AA Chan, deputy auditor general, to present on the next two key areas for improvement. Thank you, Madam Auditor General. The next area of improvement we'll discuss is the need to reinforce CREM's role accountability and oversight responsibilities for change order review and approval. In the projects we reviewed, we found limited evidence that Creme project managers independently review change orders and supporting documentation. Instead, Creme staff adise that they rely heavily on external consultants. It's important for Creme to reinforce to staff the importance of exercising their own independent due diligence to ensure change orders are justified, properly documented, and in the city's best interest. During our audit, we also found that on most projects, the same external consultant responsible for project design is also reviewing and recommending change orders for approval. This creates a potential conflict of interest as the same consultant is assessing changes to their own design work, including the underlying causes of those changes, which sometimes can be due to a design error or emission. This heightens the importance of independent oversight by creme. Currently, Creme doesn't consistently track design errors or emissions, and often change orders are recorded on change order logs under other cause categories. As a result, it's difficult to quantify the extent of these issues and and there is a risk that recoverable costs may not be identified or pursued. Furthermore, Creme doesn't have a formal policy or procedures related to assessing and pursuing potential cost recovery. Strengthening guidance in this area would improve consistency, accountability, and support the city's financial interests. During this audit, we also found that project files did not always provide clear evidence of the nature and extent of project manager and external consultant reviews. For example, for many change orders, project managers were not able to provide email confirmations, comments or notes demonstrating their review or analysis of project pricing uh change order pricing, scope or schedule impacts. In some cases, change orders and change directives were not properly approved, increasing the risk of unauthorized work, overpayments, or issues with contract compliance. We also found better documentation is needed to support change orders. Our review identified deficiencies in the records retained by CREM, including missing supporting documentation, insufficient breakdown of costs, and inaccurate change order logs. In some cases, there was also insufficient documentation to demonstrate project managers confirmed change order work was completed before approving payment. Next, we'll quickly highlight opportunities for CREM to improve performance through ongoing monitoring, evaluation, and a strong stronger project management system. During the audit, we found that although creme project some creme project managers experienced ongoing performance issues with general contractors, the required contractor and consultant performance evaluations were often not completed. Opportunities exist to improve procurement processes by considering past performance, but supplier performance evaluation should be consistently completed for past performance to be considered when afford awarding future contracts. In addition, we identified that by enhancing the nature, extent and frequency of creme quality assurance reviews um of change orders, the division can better verify that changes are properly reviewed, approved, documented, justified, and comply with contract terms. Finally, we identified that inconsistencies in process and documentation persist because creme does not have a centralized construction project management system. As a result, Creme could not readily produce a complete view of change orders across all projects, including how many there were and their total value by project. Change orders are currently tracked manually and managed at the project level by individual project managers. This limits creme's ability to analyze trends and identify opportunities to improve change order management for individual projects as well as across the division. management advised that they are in the final stages of procuring an enterprise project and portfolio management system to support the effective planning, delivery, and oversight of capital projects. I'll now pass it back to the auditor general for her closing remarks. Thank you, Aina. In closing, our audit identified opportunities to improve how Creme monitors and oversees its change management processes. Implementing the 11 recommendations in this report will strengthen oversight and accountability, reduce the risk of errors, overpayments, and contract non-compliance, and support better management of project changes within the project budget and schedule. Management has agreed to all of the recommendations and their response and action plans are included as appendix one in the report. Once again, we would like to express our sincere appreci appreciation for the cooperation and assistance we received during our audit from creme management and staff. Thank you. That concludes our presentation and back to you, chair. Thank you, Madam Auditor, and to the team. Are there questions of staff on this item? Uh, councelor Myers. Yeah. Okay. Councelor Croanti, did you have questions as well? Uh yes chair I do uh when um yeah councor Myers said he needs a second. Do you want to go ahead? Oh sure if he needs some time I I begin. Um so thank you u to the A for your presentation. Uh certainly another opportunity to uh save taxpayers some dollars here and and finding better pro processes that seem to be currently not not uh um not there. Uh now can you uh just reiterate again how many projects were reviewed um in this audit? Yes. So through you chair chair we reviewed eight major capital projects which included 105 change orders over what period of time was this? So the change orders covered the period from July 2020 to July 2025. All right. And um now I seem to recall that there was an audit done um at some point in the in the past. When do so can you confirm that when was the last audit that we did for um for corporate real estate? So through the chair the last audit that related to creme was our modular housing audit in 2023. Yes. For modular housing. There were some recommendations in that audit that were directed to Creme and others to the housing secretariat. Okay. Were all those recommendations implemented if through the chair? Um my understanding is that management has assessed seven of the nine recommendations as fully implemented and they're in our current follow-up cycle to review those and and verify. All right. Thank you. Um, believe you indicated that there were invoicing discrepancies of about $500,000. I believe I saw that in slide nine. Yes, that's correct. Okay. And this amount is being investigated currently or you don't you have any more details on that? So through the chair, there is a confidential attachment related to that and yes, it's current there is currently an investigation. Okay. Um, another discrepancy I found on slide 9 as well, it it mentions that there is $219,000 extra charges for insurance and bonding. And it also states that there's $43,000 uh uh of additional supervision costs and once again insurance and bonding. Um I don't understand the insurance and bonding part of it is the insurance and bonding is always negotiated at the top of the contract uh when it's awarded. Uh what would happen that would um necessitate an adjustment? Stop right there, counselor, just for a second. I'm just going to seek some advice on the information that uh is emanating from your question and whether or not we need to go in camera. So, this will be an in camera question. Yeah, just bear with me for a second. We're just going to assess where the track of the questions is going and whether or not we need to go on camera. Just give me one moment to consult with staff and the clerk. Yeah, no worries. Uh counselor, we're the advice is we're going to continue. Uh I'm going to watch u um for uh the information and we may need to stop the question line, but uh I will ask you if staff need it repeated. If you could just repeat that question and we'll get an answer. And I'm sorry, let your time go. I'll give you some extra minutes on this time. Yeah, I I'm almost done. But so this is information already provided by the auditor general in public. Uh so two pieces of information, $219,000 of extra insurance and bonding and another uh on the same slide it was discussed that there was an additional $400,000 for supervision costs but as well insurance and bonding. I don't have a breakdown on that. I don't know what it is. Uh and uh you know I'm wondering why that wasn't lumped together. I also said as I'm also asking is this the insurance and bonding portion of any agreement that is um uh awarded isn't that uh negotiated right at the top of the agreement? What would necessitate the adjustment of the insurance and bonding during the uh uh contract um through the chair? Maybe I'll start and then um if I step past then let me know when and stop me. Um so uh in the slide the additional charges for markups as well as mark um the additional fees for supervision and project management that were charged were $118,000. And then the additional charges for insurance and bonding on change orders that we were in our sample was $285,000 on one project that is in our review. The total additional ch um cost for bonding insurance was another $219,000 on top of the the 285 that was in our s 285 285,000 in our sample. we we added them up across all the change orders on that project. So that's the additional $219,000. So is the additional insurance and bond the money for that as a result of um an increase additional um or the contract increasing in value through the chair. the additional bonding and insurance was charged on every single change order regardless of the size. Um if okay that's what I'm trying to understand. So every change order resulted in requiring some additional insurance to you Mr. Chair, it's Pat Matso, Councelor Croanti. The only time a uh insurance and bonding could be added to a project if there was a substantial change in the scope that would require it. Otherwise, they're over billings. All right. So, this is what um likely took place that necessitated this additional insurance and bonding cost. correct to you Mr. Chair that is correct. Okay. Uh my last question chair if I can have a another moment. Um I heard the AG mentioning that uh creme's cost recovery procedure on over on overages uh is um uh that they currently don't have one. Can you please reiterate what the concern there was with their process for cost recovery currently? So through the chair exactly as you said that there is not currently a policy in terms of potential cost recovery related to the consultants. Go ahead. So through the chair just to to build on that um there is no consistent way that project managers are cap capturing whether there are design errors and emissions. So depending on the project manager and the project they are doing different things and in some cases have indicated there's no expectation to track this. They these identifications don't show up on the change order log and then there is no formal policies and procedures to guide staff on consistently tracking and then pursuing potential cost recovery. So once they determine there's an overage, what do they do? They just let it go. There's got must be a procedure that deals with that particular issue on overages currently. I I can't imagine that we just walk away from that. To you, Mr. Chair, it's Pat Matso again, councelor Canti, as noted by the auditor general. This was part of her findings and part of our action plan moving forward and strengthening our controls. We are evaluating and reviewing the eight projects that the auditor Jennifer identified in her report. We are also looking at other high value high complex projects to review all of them with additional charges and we will take the appropriate action to recover those charges along with legal in accordance with those contracts. All right. Thank you chair for the questions. Thank you councelor Myers. Thank thank you through you chair. um over what time period was the audit conducted in terms of what time period were these invoices submitted? So through the chair again the change orders that we've reviewed covered the period of time from July 2020 to July 2025. Okay. Um and do we know the total number of change orders over this period? not just the eight high value ones but the total number uh over this period. So through the chair I'll start off. So there is as we mentioned there is not a centralized project uh management tracking system. So we were unable to obtain a listing of all the change orders from crown. Do you want to add to that? uh through the chair on the on the eight projects that are in our sample, the total change order value was 50 over $51 million. Um and that was sorry over the total change order value, not the total in our in our sample, but the total change order value was $51 million. And then um uh what was I going to say? Uh the this ranged on project to project um anywhere up to 76% of the contract value. Okay. Um, is Creme able to provide an estimate of the total number of change orders over this period understanding that there is no centralized project management database. I'll refer that to management to you, Mr. Chair, to councelor Meyers. Um, councelor, we manage uh on an ongoing basis es and flows on an annual basis about 1,400 projects. The larger complex projects will have a larger um number of changes given the complexity where the majority of projects we manage are smaller in scope. Um it's hard to assess uh how many but I would surmise on the larger projects there's a larger volume of changes and on smaller projects there's a lower volume. Okay. Um so I guess my question is is it likely that if you looked at all the change orders over this period that similar issues would be found uh with inconsistent invoices and the number of companies that are engaging in these types of practices. Thank you for the question to you Mr. Chair. We plan to first look at the eight projects and review them for overcharges on all of those change orders. We will also look at um all of the high value high complex projects. We've estimated that at about 140 projects and we'll review all of those projects and then we'll do sampling on the smaller projects less complex that have fewer change orders to see if there's any irregularities there and then we will proceed with working with legal on recovery process. And to add to that through the chair um our we feel that our audit sample was sufficient and our findings showed that they were systemic as opposed to being isolated in nature. So the answer is yes. If you looked at all the change orders over this period that similar issues would be found. Yes. Yes. Okay. So I guess my question is understanding that there is no centralized project management database. Um would there not be value in looking at all of the invoices understanding that is it would be quite cumbersome but just to sort of get a sense as to the total dollar value of what's happening even if it's not over the fiveyear period maybe if it's over just a one-year period and understanding not just the dollar value but what which companies are engaging in this type of practice. My my concern is is that your audit is limited to Creme and these companies are doing business with other city agencies, TTC, police. So similar practices could be happening across the city on a much more system systemic way that we just don't understand because the audit is focused on creme. Right. So through the chair we do have a recommendation in terms of taking a riskbased approach to to do that kind of review. Which sorry what recommendation is that? Uh 4B. And what's the recommendation? Sorry, I'm just having trouble pulling it up. Sorry. through the chair to review change orders for all current capital projects and recently completed capital projects prioritized based on risk to confirm contract terms for markups and other charges are correctly applied and pursue recovery or credits of any charges that are not in accordance with contract terms where possible. Yeah, you need a motion to go citywide. And would this not would this not also uh should this not include a specific time period rather than just risk based if you sort of looked at it over a one year or two-year period and just sort of see what's happening across the city. Um that that's up to you counselor I think. Yeah. If you want the motion. No I'm good. I'll counselor if I could just from a a go forward perspective. uh we just awarded our portfolio project management system which we're planning to implement this year and have it up and running in Q1 2027. So while we look back to uh recover funds uh or on overcharges with past projects on future projects everything will be automated in the system and the system has the controls to ensure that these things don't happen in the future. Thank you. Uh I think that's that's good to know. I I think though that I would be helpful to sort of understand what's happening because I mean this similar issues could be happening at TTC. We just don't know or other city agencies. So it'd be good just to have a look back period and just to see how bad the problem is. Those are my questions. Thank you, Councelor Myers. Um, I'm going to ask a couple building on the line of questions from my colleagues. Uh, without charting into the territory of legal advice, um, or sensitive material that we'd have to go into camera, are there, um, industry approaches to how far you can go back in terms of projects? I don't know if there's limitations under the law, but you know, we're not going to go back 20 years. I maybe we could I don't know, but there there's a there's a sensible amount of time that one could go back. Is there any advice on that? Um are is there a hard line that the courts would would say that's it or a contractual term? And if it's not something you can answer here and now, that's fine. But but is there is there a way to figure out the scope of how far back to look understanding that the risk base is another axis. Hi um my name is Eay Ting and I am a solicitor at and the municipal group and I support creme. So there are certain limitation periods. It will depend on the triggering event. So we would have to investigate the timelines, the facts, various situations to determine those specific periods. Could you give us a sense of the order of magnitude of those of those periods? Are we talking in decades or are we talking in years or months? No, no, there's generally like a two-year limitation period from the triggering event. Okay. Depending on the circumstances. So that gives us a sense of how far back to go. Um maybe my question is uh to the city manager or one of the the uh senior team. Um councelor Myers raised an interesting thought. Although the recommendations in the report are directed to Creme to look back in the last uh recent sorry for current capital projects. Is there a way that this could be bridged further into other areas of the city? And maybe you can just talk about how these reports are taken by the management team and applied elsewhere because creme is not the only group that does big work, contract work. You know, we we've we know that um um Toronto Water for instance, the TTC would be an area. Um our engineering and construction services, how are they taking the information out of this and how are they going to look back for similar patterns in their process? Uh so chair we we do circulate particularly uh audits that that do have implications across multiple divisions. Uh my direction is that everybody should look at every audit and reflect on it in terms of does this apply potentially to the work they do and learn from them. But where there's very specific ones, we do share that. Uh, you know, in fact, the the themes report actually was a part of the uh leadership meeting we had earlier this week with 350 of our top leaders and uh we spent time talking about the specific themes and the actions that each division must take as a result of that in terms of the conversations and analysis. So, you know, we we do have systems in place to do that. and and I'm very keen to see this work happen where there's limited ability for me to see followup is of course with our with our external organizations. I certainly can provide advice and guidance for them to review these but that would be up to their own boards and management teams as to how they they action them. Thank you. A little bit of a different question right now to directly to Creme. One of the ideas that the auditor general brought to the committee here to look at was this this notion that both the designer uh also acts as the person that goes and reviews the change order. So it's the two roles that put themselves into conflict. They're effectively overseeing changes to their own design. Could you tell me what some of the common types of reasons are for change orders? And in the case where it's a design issue, how have you made separation of those uh authorities or recommendations or conflict? Sorry, thank you for the question. Uh Mr. chair. Um the the there could be a perceived contact uh conflict with uh how the design errors and omissions are are uh uh sorry cataloged. The the process is that the role of the when the architect or engineer plays role of contract administrator their role is to validate technical validation of the scope against the design and validate if the costs are reasonable. The ownership of determining the categorization of the of the change is the project managers not the consultants. So while the project managers had alluded that uh they relied on the consultants, we're fixing that to ensure that we're we've training our teams to understand that they own the ownership of root cause. Now we've put in place or putting in place that they have to track design errors omissions separately such that at the end of a project if the design and error materials are of material value then we can seek um uh reimbursement on their errors and omissions insurance. So we're putting those in place. The four most common categories of change are first unforeseen site conditions. Second I would say could be client or scope changes uh driven by the client. Uh third of course are errors and emissions. And fourth I would say there's times when authorities have jurisdiction or building inspectors come in and ask for additional changes to uh some of the work that we're doing. But those are probably the four top uh categories. Uh thank you. My time is up. Um, did anyone need a second round of questions? Seeing none, members wishing to speak on I'm sorry. Councelor Croanti, did you have additional questions, sir? Um, well, just a clarification, I guess, on the threshold is the current threshold. Uh, can you just confirm uh what is that amount um uh for review and approvals of change orders? The what is that current threshold? So, thank you for the question. So, um, we're we're changing that. Currently, the the the previous process was project manager and the managers would approve changes. We're as part of our new process, we're tightening up the authorities on change orders. It's more of a tiered approach. Now, counselor, where project managers will have a low threshold, then a manager will have a low threshold. So with tiered what I mean is it goes from a project manager to a manager to a project director to a director all the way up to me depending on the value of the project. So there's more oversight on on on uh on changes. So project managers and the managers don't have the the the authority to make changes based over a certain value. And what are those values? Uh from the lowest to the highest. Yeah, we're following the city's financial levels. But I'm actually going to tighten it up and lower their the levels with respect to project managers and managers. So we follow the city's limits of authority, but with respect to changes, I'm going to tighten that up even further. And to add to that through the chair, during our audit, the samples that we reviewed um and the procedures currently in place, those thresholds are were not currently in place for review and approval. When's the expectation that they will be in place? Yes. So that was one of our findings. Okay. And and so can we get the answer to that though? When when? Yes, please. Sir, when we're putting the new ones in uh within the within the coming weeks. All right. So, you you're not clear on those numbers at the moment, uh Pat, in terms of what That's correct. I'm just working through with our with our team. Um and we'll work through with uh with uh our our um our uh sorry with within the the policies of the city to ensure these the appropriate levels for sign off on change orders is implemented. But I can tell you it is a tiered approach counselor. Yeah. No, that sounds reasonable and sensible. Uh and I was also uh um uh will that be will these thresholds be consistent with what's being done across other departments in the city that you know councelor we'll work with uh all of the divisions to uh provide what our thresholds would be and and and work with Toronto Water ECS parks to ensure that um because at the end of the day we want to follow an industry standard process with respect to approval of changes and ensure that we get consistency across city. Right. Thank you, chair. Those are my questions. Thank you. Uh any further questions on the item? Seeing none, members wishing to speak. I'm going to uh go first because I think the I don't know, Kenor Casanti, did you want to speak to this? Go. Not at the moment, Chair. Go ahead. Okay. I'm sorry I have to check cuz it's hard to tell because of the video technology. So I'll uh I'll speak on it because I think councelor Myers has a motion that the uh the ink is just drawing on. Uh so uh if uh the clerk is ready, I'm going to present a motion when I get my timer started. Uh thank you uh Mr. Clerk. Uh my motion is quite simple. Uh to come back in 2027 with an update on the actions taken in this report. Um, and I want to thank the auditor general and creme. This is a very important report and there's a number of themes in here that unfortunately we've heard similar ones at this committee. Not exactly the same as this, but similar. Uh, and there's a couple of uh nuances in here that are important to talk about. So, the first is of course accountability and diligence in managing public resources. And of course, uh, construction projects are complicated and we heard there's a variety of reasons that change orders happen. Now whether that's a change in circumstances, some unforeseen site conditions, uh somebody along the way changed their mind, you know, that's legitimate. Something had to the plans had to change. Um and and maybe there was an error made. But the key is is that you hold all of the individuals that are involved in that process accountable for each of those and then you review all of the documentation in the financials and then somebody signs off on it. And it is uh it is concerning that this process wasn't as uh rock solid clear as it's supposed to be. And it brings quite a bit of money into question. And if you weigh that against the amount of capital work that happens in this city just within this division, I think we heard there were 1400 projects. I think what you see collectively at the table is the counselors have a sense that the problem is bigger than what's just contained within the samples of the report. So I'm grateful that this is here. I'm also really grateful to hear uh that it appears that work is already underway to change the process and make improvements and that is evidenced in the responses in the report and the questions today. So I think it's uh prudent of the committee to say come on back in one year and tell us how well you've done to implement these changes. I think my uh colleagues will have something else to say about the scope of where we look. But most certainly this is one of those recurring themes is contract management and it seems to be uh something we spend a lot of time at at audit committee and the implementation of these recommendations just uh moves the bar forward on that whole idea on contract management. So I hope you'll support the extra report back. I think that's healthy and and prudent in this and uh you know I look forward to seeing uh all of the great work that is going to be implemented uh and confirmed through that report. With that, I will ask if there's other members wishing to speak. Councelor Myers, please go ahead. Thank you. Uh, I will be moving a motion that is it ready to be displayed. Okay. So, I can just speak in the meantime. Uh, one, I just want to thank the auditor general. I thought the report was very clear and succinct. Uh, I thought it uncovered a lot of value. I've seen similar reports come to TTC in terms of some of the audits that we've done there. So that's kind of what prompted my questions in terms of is this something that is just limited to Creme. No, this is obviously something on a deeper more systemic level. Uh I also want to thank Pat Mtoso and the Creme team uh for taking the time to meet with me. I believe it was yesterday uh and explain uh sort of what they were doing and answering a lot of my questions and for accepting the auditor general's report recommendations. Uh so I will just read my uh amendments and these are two amendments uh four uh recommendation four. So it replaces executive director creme with the city manager and it changes for B uh to review uh current to review capital projects over the last two years from May 1st 2024 to May 1st 2026. that sort of provides a broader scope and that would increase the review to not just focus on Creme but also look at other city divisions such as water, transportation, uh TTC um and you know police and also just to uh remove the reference to Creme in uh item C. So again this looks at all the city's capital work happening. Uh thank you very much. So, I I have a question for the mover, and I I'm doing this in a friendly manner. Um, I understand that the city's complete total of change orders are in the billions of dollars range uh through the time period. So, I wondered if you would see it as a friendly amendment to change the scope to high-risk projects over the last at least the last two years. Uh thank you for the question. I thought that was already in there in the uh when it says and recently completed prioritize based on risk. That's how I interpreted it, but if we can make we just want to make sure that it's scoped and it's not every single Yeah, I know it's I know it's not protocol, but I'll just jump in. Sorry, I took that as on the recently completed capital projects. If that is for all the capital projects based on risk, then then we're fine. So, we can make that clearer then since there's a bit of confusion. Just I as as as exciting as it would be to review every single change order, um there has to be a balance to the resources we have. Thank you to the chair and the mover. Thank you, chair. I know we're sliding out. I want to make sure these motions are in order. So, is there something we need from the auditor general on this? Yeah, sorry. I know this is out of protocol. Uh just if it's possible to make the motion on top of our recommendations instead of changing our recommendations so that we can follow up properly. The clerk, can you just copy the motion and do it as an amend additional? Okay. So the clerk advises we'll stand this down. Uh so we've got the two. So that's a Would you consider it a friendly motion uh councelor Myers if we made it an amend additional as opposed to just a change of the Yes, I would. Councelor Myers sees that. So, we'll take a moment to make those changes to make sure it stays in order. Uh, and thank you. Um, and we'll come back to the item if there's anyone else to speak to it. Thank you, chair. I just I'll just make some very brief comments and uh I also Okay, great. Yep. Go ahead, sir. Am I good? Yeah. Thank you. So, um I too want to thank the auditor general and uh and and creme for for uh you know working together to res resolve some very important issues that are you know we currently have to that we have to deal with right now but we're dealing with taxpayer dollars and we have to be far more respectful as to how we manage it and uh so we got two good motions on the table that I'm I'm prepared to support both of those motions and but this report highlights the the importance of doing these type of audits uh and this audit was quite restricted restricted to eight projects that were reviewed and 105 change orders. So I think it's something that we have to expand in a broader way across the city and look at other opportunities of uh you know uh doing a better job uh and in uh in managing uh these very important dollars that we desperately need for capital projects and uh and and we know what we go through every single budget season. So there's uh a lot of work to be done in this area and I look forward to the followup on on this report. Um and I do understand there's never really been an audit of this scope uh with creme uh and uh so that again highlights how important this is and uh and and to ensure also service level consistency uh across the board and as this is a a partnership we have with our uh with people who provide those service levels and we have to make sure that everybody uh is uh uh satisfied that we're working together uh for the same purpose. So uh Mr. chair. Thank you. And uh I'll I'll support these two motions and uh the report. Thank you, Councelor Croissanti. Okay. The uh the clerk has advised that uh it takes just a moment to get the system to work and all of the typing that needs to be done. So uh rather than stand the item down, we're just going to take a couple of more seconds. So here's so the amend additional from councelor Myers is coming up on the screen. I just want to make sure that this is satisfactory. So this is an entire new recommendation. You've left Mr. Clerk, you've left the auditor general's one intact. So this would be and so this is so the effect of this motion is to take a broader review beyond just the scope of creme and as we discussed it would be scoped uh for high-risk change orders and councelor Myers that's satis that's satisfactory okay was that everything that needed great uh thank you to the clerk uh great work in a short period of time so on the amendment from councelor I mine first. Uh, all those in favor, any opposed, that carries on the amendment from councelor Myers. All those in favor, any opposed, that carries, and on the item as amended. All those in favor, any opposed, that is carried. Uh, thank you to staff, the members, and to the clerk uh for your diligence in the just getting that item wrapped up. Okay. Uh, back to the item list. We're going to go to our second item, and I will give the title of that in a sec. AU12.2 two is the investigation into the procurement of the pay it platform. Madame auditor general, you indicated that you wanted to make a comment on this and then we will uh u go through the committee procedures. Thank you chair. Yes, I've have some uh opening remarks with regards to this report. So, this investigation was in response to city council's request for further investigation into the procurement of the pay platform following my office's 2024 audit report on the procurement and implementation of pay's unsolicited proposal. This was a forensic investigation where the approach included interviewing 18 current and former city staff, senior management, and relevant stakeholders, all completed under oath, except for current employees who are required to fully cooperate. reviewing and analyzing city email accounts of 12 relevant current and former city staff and senior management as well as personal emails produced voluntarily or under summons by some individuals and reviewing various electronic documents including those on the city servers and online procurement system. We undertook sufficient work to address two lines of inquiry. However, there were limitations such as lack of availability of cityissued electronic devices due to the passage of time. Most had been decommissioned or redeployed to other users. Lack of availability of certain electronic records due to the passage of time. Lack of ability to interview one key former senior management member. The lack the length of time that has passed since the procurement may have affected interviews ability to recall events fully or accurately. And despite these limitations, based on the detailed analysis and the evidence obtained, we have gathered and reviewed sufficient appropriate information to provide a reasonable basis for our findings, conclusions, and concerns. Our investigation examined two lines of inquiry. First, we examined the detailed scoring breakdown and whether any wrongdoing occurred. We determined the then senior corporate buyer in PMMD removed the detailed scoring breakdown, but there was conflicting and insufficient evidence to conclude on who directed them to do so, who approved the change, or why it was made. Throughout the investigation, we considered whether there was any indication of wrongdoing in the procurement process. Based on our interviews and reviewing the available evidence, no wrongdoing was identified related to the detailed scoring breakdown removal in the call document. Second, we examined whether there was any non-compliance with city policies and why. The investigation confirmed certain findings from the audit report such as city staff and then senior management not always following city policies and processes during the unsolicited proposal process and procurement of the pay it platform. And we identified further observations such as the use of personal emails to conduct city business, the sharing of confidential reports prior to their publication dates, and communication with pay during the blackout period of the procurement. Emailing a city report prior to the publication date is a violation of the confidentiality requirements of the Toronto public service bylaw and the use of personal email is a violation of the city's acceptable use of information technology assets policy. Although the correspondence we reviewed indicated a breach of the city's bylaws and policy as well as a close working relationship between a city staff member and pay it based on the available information. the email contents and the volume of personal emails reviewed. This did not meet the threshold of wrongdoing as defined in the Toronto Public Service bylaw as outlined in our report. We also did not identify indications of wrongdoing in relation to the procurement of pay it. In our report, we also made other observations related to the potential reasons and motivation for city staff and then senior management not complying with city policies and bylaws. We found that in general some past staff and then senior management felt an overall pressure to accelerate the pay at procurement for various reasons including tight timelines which were accelerated because of the co9 pandemic. Since almost seven years have passed since the pay it unsolicited proposal and procurement began. I believe that further investigative work is unlikely to yield any further relevant information or benefits that would materially impact the findings of this investigation. Looking forward, this investigation reinforces the importance of the recommendations from our 2024 audit report aimed at improving the unsolicited proposal policy and process and the conducting a Swiss challenge procedure. Although still subject to my office's verification, my understanding is that management has made good progress in implementing the recommendations from our 2024 audit. This report also reinforces the importance of management's leadership and commitment to ensuring openness, fairness, and transparency in city procurement. While the senior leadership team involved in this procurement have retired from the city, the current senior leadership team can continue to model and promote a culture that encourages compliance with city policies and bylaws. That concludes my opening remarks. Back to you, chair. Thank you, Madam Auditor. Are there questions of staff on this item? Councelor Myers, go ahead. Thank you through your chair. So uh and you touched a bit on this. Why did staff think pay was so urgent? Why why did staff think implementing pay was so urgent? So through the chair there were a number of reasons. Um part of it was the need for a digital transformation. uh it the it did start prior to co 19 pandemic but it was accelerated by the pandemic and there were also some advantages in terms of the um the upfront um uh John if I can refer to you in terms of the some of the benefits that they saw in terms of going through with pay it. So I understand the need for digital transformation and obviously during co but why did staff feel the need to go with pay it in particular like what was so what was so important about going with pay it when there were other companies that could provide the same service question. Uh yeah I'm through the chair I don't I don't have uh information other than what's in our report to respond to that. So the majority of what I'm able to comment on was through our interviews and so I don't have any further information on that. Okay. Um did anyone say that the pressure came from anyone holding political office? So through the chair uh there were no comments during the interviews related to that. Um and just to note that my mandate does not include uh examining the mayor and counselors. That would be a matter for the integrity commissioner. Okay. And I'm just going to ask this just so it's on the record. Did you ask if there was ever any pressure from political office holders? So through the chair, yes, we did ask that question. And what was the response? And just my understanding is just a a general overall pressure in terms of delivering on results. Did the Toronto lobbyist uh registar report any lobbying by pit in the period leading up to the events? So through the chair that would be a matter for the lobbyist registar to answer not able to answer that. Okay. Um if possible could we have the lobbyist registar there at council when this comes before them just make a note. Okay. Thank you. Um so you noted in the audit that staff were using personal email and personal phones. um did they provide a reason as to why they were using personal emails and personal phones? So through the chair uh in one instance uh there was a comment that sometimes they needed to be able to print from home um and the other reason was outlined in our report. um in terms of the person felt was told they were um to be mindful of FOI requests, but we did not find any evidence um to to show that that was a further issue. And how many of the staff involved were using personal email and personal phones? I'm going to uh refer that to Sean Macintosh. Yeah. through the chair, we we um found two two staff were using personal email and phone. Thank you. And one staff member said it was to print from home and one staff member said specifically it was to uh evade or not have to comply with an FOI request. Yeah. One one staff member was specific about the FOI um issue. And did they mention why they were concerned about an FOI issue? I think in in the report we we did outline their their concerns of um when they joined the city they did not have a personal phone and um uh various of their uh senior people had kind of expressed that you know that's probably a a something to be mindful of going forward. Sorry I didn't understand that. Can you just repeat that? Just to clarify through the chair, at the time they joined the city, they did not have a personal phone and so their supervisor told them that that would be a good thing to have. Got it. Okay. So, they weren't saying that they wanted the personal phone to evade um FOI with respect to pay it specifically, just in general. Just in general. Yeah. They were told that it would be good to have a personal phone. Okay. Okay. Thank you very much. Further questions? There's just one question, Mr. Chair. Mr. Croissanti. Uh, yes. Thank you. Uh, you re uh reiterated, I believe, in the report, the need to implement the nine recommendations from the 24 audit. Um, and I'm just wondering why uh it it sounds like they uh there was maybe some hesitancy to implement these recommendations and and would you know the status of that? So through the chair I I don't think there was hesitancy to implement them. Uh management has been making progress. Um I need to still verify those through our follow-up review. Uh I think manage could management could probably speak further to that in terms of the progress they've been making. Sure, chair. There is there is zero hesitancy on the recommendations coming out of this report. Uh and it is become kind of a required reading and has already changed some of the um signatures and the documents that senior leaders must sign in terms of their delegated authority and their understanding of their authorities uh as they execute their duties. So just to be really clear uh we are we are not hesitating on any of them. The auditor general is correct. Some of them have taken some time to implement, but the ones that we could do very quickly, we have done. So, thank you, chair. That's it. Thank you. I've got a couple. Uh, so there there's a a variety of observations here. One of them was um communication during the procurement blackout period. And I just wondered if somebody could explain a little bit um clearer to me what was communicated and why and whether or not that changed the integrity of the procurement process. So I'll start off through the chair. Um we did um look at the communication during that period. Um it was not of the nature that would materially impact the procurement process. Um Sean, do you have further details to add? Yeah, I I I would say the ex uh through the chair the exhibit does show the communication um and it was administrative as as noted in nature and I think it was somewhat of a unique situation because um pay it had previously um submitted uh and then subsequently there was the Swiss challenge. So there was some clarification um provided about uh their new submission is the use of external email uh overlap the issue of the communication during the procurement blackout period. I can't tell because there's black bars of redactions here. Are they were they unique issues or are they convergent or issues? I I through the chair or to the chair that they would be unique issues. So the communication um are two separate. Yeah. Okay. So the communication using outside emails did that impact the procurement process? So through the chair no it did not materially impact the procurement process. Okay. I guess to the management team. Um can you tell us a little bit about at least what we have now in terms of training to ensure that uh it is clear or is it clear to people that um they're not supposed to use external email or procure or or make contact during the restriction periods during the procurement uh through the chair. Um so there is a number of training available uh on through our portal as well as training was made made available specifically for the UP process on how and when it should be used. Uh in regards to training regarding communications, um every solicitation that we issue, uh we do an overview with the client regarding how it's supposed to be run and the knowledge that they are not to communicate with the potential proponents um is always indicated. It's also indicated in our documentation as a responsibility to potential biders. Um, in regards to communication uh through outside uses, I would have to pass it on to our friends in IT. So, chair, if I can just jump in on the the use of a personal device. Um, there is no um provision anywhere that, you know, allows for us to use our personal devices for for city business. And it's that is a a rule that's in place for a variety of reasons. The least of which is around procurement. And so just to be real clear, lots of us, including myself, we have personal devices. The issue is not that you should get a personal device. You should have a personal device because you should keep your personal and work uh situations separate. The use of the personal device is never um you know something that should be happening to conduct city business for all of the reasons that were highlighted in the Auditor General's report, but just in in in general, it's it's not allowed uh within our policies from an IT perspective. So, uh, yes, most of us, I would imagine, have our personal devices so that we can do have our personal friends, family, and other things we do outside of work have that through a device, but it should never be used for work. And quite frankly, I know there there could have been workarounds even on the printing issue, which would have been acceptable under our IT policies, even in a pandemic. Uh, so I I I find it to be I don't want our staff ever looking for an excuse as to why they had to use their personal device. There's always a way with the support of our technology services for us to uh find ways even if people are in tough situations about how they may have to print or or get information that we can do it that's acceptable under a technology use. Uh so thank you Mr. City Manager. Yeah, I can relate to to that issue, but I just want to be specific on the difference between a personal device which could have a city email installed into it under the proper circumstances versus an external email provider, you know, whether it's a Gmail or or you know, I'm just I don't know what it was, but I'm just picking a company out there, a common one. Um, is is there is that allowed and are people clear in what they're allowed to do and not do with external email? Uh, through the chair. So, uh, it is very explicit in our acceptable use policy um that we are not to use personal devices for city business. uh we don't allow um our city email to be on lo like loaded onto a personal device. So we do have a policy in place. It's been in place for quite some time. Um we are going to reissue the policy as per the recommendations. Um but it is very explicit. In the instance where an employee might use their personal device, we're also very explicit that it's open to an FOI. Uh with the indulgence of the committee, I'm going to ask one final question just for my clarity. Was the use of the external email as a result of forwarding an email from the city to that account for instance uh to print or was it about exchanging messages back and forth in an an email system which is outside of the city and and how did that information come back into the city's folders or did it? I just want to get clarity on that. just we don't have to go through all the details but just which case was it? So through the chair it was both uh there were both situations where the individual emailed from their city email to their personal email and then the external email um as well as a situation of emailing to their personal email to print from home I believe. But did their external email account uh involve back and forth with a third party that never came back to the city? like the the data never Okay, the answer is yes. Thank you. Any further any further questions on this? Councelor Meyer, second round. Yes, just quickly just to follow up on uh where you were leaving off, councelor Holiday. Um, so in that email exchange between the employee who using their external email and a an outside party, do we know what those conversations entailed or what those emails entailed? So through the chair, yes, we do know from the personal emails that we reviewed, what were they? What was the nature of the emails? Uh, I'll refer that to Sean. Yeah, through the chair I I would say generally the the nature of the emails are um with regards to the reports that were coming to to council or the respective committee. So as we had noted um they were sharing the report um soliciting uh feedback on on the reports. I that's those were that was generally the the topic or if it was coming um to committee you know maybe a little bit of discussion on on that. What type of feedback were they soliciting? So, um there were sections in the report that were um like factual accuracy with regards to information being provided um about pay it would be um the the general topic but I would say and we've we've noted in the report they were not specific as to um we need you to look at page X and provide feedback. Um, so I think that's where we were we were stating it would be um, you know, it's it's reasonable provide or to get factual accuracy, but we should only provide a certain section of the report um, to have that process done. And who were they corresponding with? Oh yeah, through the chair they were corresponding with pay it. So they were corresponding with pay directly using their personal email. Is there any reason why they couldn't have used their city issued email? Is there any chair? No, there's no reason why they couldn't have. Were they asked why they didn't just use their city email to correspond with pay? Uh yeah, through the chair they were um I you know it wasn't a um I guess a good uh the reason was they just thought that this was was the best best way. Um there I would say there's not a really a good reason. They just thought that um it was important to or sorry the the behaviors that they had thought were demonstrated by other people to keep keep this quiet. Something along those lines. Maybe not keep quiet but keep it um offline. So they purposely were using their personal email to evade city rules and procedures that would uh be in place had they used their work email. I.e. the FOI or having their re their emails reviewed by the AG through the chair. This is the individual that made the comment about being mindful being told that they needed to be mindful of FOI requests, right? I but I thought that was because they were using their they didn't have a city email, city phone. Yeah. So that was the they were told just in general and that it would be good to have a a personal phone but my understanding is that that would have been the reason in terms of using their personal email. Okay. Okay. Thank you. Second round. I'm going to ask as well. I want to get clarity on this. This is um it's a bit confusing. Uh so there are a variety of issues that were brought up. One of them was um communication during a restricted period of a procurement. One of them was the use of an external email, a personal email system, never mind the device. And finally, the third was about uh sharing a contents of a report uh before it was final. I I'm just paraphrasing. Do I understand from the answers that the use of the personal email system was linked to the issue of sharing the the report prior to it being finalized through your chair? Yes. Okay. Uh so in other words it was late in the process that the personal email was used. Is that a is that a a correct understanding because the reports come at the end right through the chair? Yes. Based on the available emails that we obtained. Yes. Okay. Uh all right. So the the the the project or the file was very mature in its state when that particular circumstance occurred that you've reported on that they were exchanging uh emails about the report. That's correct. Yes. And can I just get some clarity on what what was it that they were talking about with the report in a general sense? So in general through you chair um seeking factual accuracy in terms of some of the information uh in included in the report which included non-public information about pay it. So they were getting clarification on company information and they could only get it from pay it. Yes. Okay. But instead, so through your chair, instead of using city email and sending just a draft excerpt, they sent the full report using personal email. Right. I see. So that was the there was another comment about sharing just the part of the report. You've highlighted to us that the whole document was sent instead of just the section that says, "Hey, uh, we we need you you you to verify something for us." Correct. And is that normal? Like is that normal for staff to say, you know, here's a paragraph here. I'm working on a report that concerns you. I need to have this information clarified. Is that a routine thing? So through you, chair, I can only speak for our office. And so um when when we are working with an external stakeholder and we need to clear something factually, we would only send them a draft excerpt and um require them to maintain the confidentiality of it. Okay. Uh thank you. That's very helpful. Yeah. Uh um um give me a sec to get the Go ahead, Councelor Myers. Third third round. Just to clear it up. So, was this particular employee one of the new employees or was this a senior employee? Through the chair. Uh this uh individual was um a staff member and uh is no longer with the city. So, uh, but were they at the time were they one of were they a new employee that maybe they didn't know or was this an employee that's had been senior? They were relatively new. Relatively new. Okay. Is there any reason why the emails can't be shared with counselors? Um, I'll have to refer to legal on that. We do have exhibits at the back of the report. Okay, thank you. Uh, was that all the questions? Councelor Myers questions. Thank you. Okay, just checking any further questions. Seeing none, members wishing to speak. Uh, would someone like to move the recommendations? Councelor Meer moves the recommendations. All those in favor? Any opposed? That carries. Okay, just back to the list. Uh our next item is AU12.4 which is future contract considerations for smart track and other capital project agreements. Uh questions of staff. Mr. Myers. Uh just if you just give it a second there's a bit of movement here to get everyone in their spot. I won't start your clock yet. Yeah. As large as the room is, there still never seems to be enough seats. So, I think everyone's in place. Councelor Myers, why don't you go ahead? Thank you. Three you chair. I just want to go uh to 4A. No, no invoices have been received to date. Uh and just to read a little bit, it says since the inception of the project in 2018, there have been approximately $184 million in cost occurred that are attribut attributable to city's portions of funds. Um despite be efforts from transit expansion to follow up invoices from Metroinks, no invoices have been received to date. uh invoices and associated supporting documentation documentation capture costs at a level of granularity that allows the city to assess the valid validity and appropriateness of expenses charged to the city. So it goes on to say there is a risk given the amount of time that has passed since the costs were incurred. the city may have difficulty assessing the validity of billings that pertain to prior years and in addition having not built the city since the project inception in 2018 that may impact the city's ability to obtain financing to pay out large sums of money that have accumulated over the years. So, I guess my first question is, is the $184 million um sufficient to cover the expected bill uh coming from Metroinks Chair? The $184 million is the current um amount that's attributable to the city of Toronto. And how much money has the city set aside to pay this amount through the chair? So the city has uh recognized the expenses based on some of the preliminary estimates. So the full suns uh the full funds uh are available. Uh I would note there is um pretty significant cash flow management that the city undertakes in terms of reviewing uh where we would need to provide funds to an outside organization. That would be the element where we have to model this in terms of that work uh becomes more challenging as the amount becomes larger and more material in terms of being able to access those funds quickly to make prompt payments. So if Metroinks came with a bill of I don't know $250 million, would the city be able to handle it? uh to the chair we would um but it would ensure that there's an extra layer of planning to be able to accommodate uh a payment of that size. Is it normal practice that the city would enter in such an agreement with such amounts of money and not include something standard like an audit clause even if it is with another level of government. um to the chair. We've uh it is it is the province of Ontario's um asset and therefore they're the ones that have set the requirements. Um so I don't believe that they would ever agree to have the city audit uh their their um their project. Did the city ever ask for this? as a result of the of the kind of the auditor's um previous report, we did we've been we've asked and they basically confirmed back to us that no, they will not allow uh the city auditor to uh to audit their their project. At the time of when this was being negotiated, did anyone ask from the city to have an audit clause or to have a system in place to get a more detailed breakdown of the billings? I understand why they would say no to the audit clause. I don't understand why they would say no to having a detaile providing detailed invoices. Uh chair to be clear uh metrolinks is required to provide detailed breakdown for any information that they provide through to the city. So that is a requirement under the uh smart track main agreement. With regards to the question that you had about should a request have been made for the audit uh provision that was not made at the time. Excuse me. And was there a reason that was not made that request? No, I do not believe so. Okay. And has the city asked at this point for a sort of a detailed breakdown of what were the accumulated costs thus far? uh chair um as a as when uh Metroink submits through their invoice uh for the work completed to date, they will be required to submit a detailed um breakdown of all the material and labor costs associated with uh that. In that breakdown, how was the city going to tell what was work that was within the scope of the project versus what was work that was added on? because Metroinks is coupling in other projects. How is that how is the city supposed to tell that we're not paying for additional work done by Metroinks outside of the scope of the smart track program? Chair um transit expansion has a three- tier uh kind of approach to uh reviewing invoices. The first one is uh staff reviewing the information. The second is that we've retained a cost consultant who will be uh their function is to act as an independent review of the information that's been submitted through by Metroinks and they will be looking at the separation of the invoices to ensure that work that was attributable to uh Metroinks' projects aren't being funded by uh the city of Toronto. and they're also going to look at the eligible versus ineligible costs and provide a recommendation to staff. Once that occurs, both of those will come to me and I'll do the I'll do a final review. In the event that Metroinks disputes the categorization, what recourse does the city have to not pay? Um chair through the smart track main agreement there is a spute dispute resolution mechanism that can be um enacted and that's the process that we will follow. So I'm just looking again here I understand what you've given up uh what you've said but in the auditor general report it says there is a risk that given the amount of time that has passed since costs were occurred the city may have diff difficulty assessing the validity of billings that pertain to prior years. So how are you going to assess the validity of the billing that have that uh have incurred in prior years? Chair, we have been uh through my division uh engaging with Metroinks to like so they've been explaining to us the work that's been done. We've been able to um as part of our review process know kind of the the uh amount of of of well actually the work that that's going on. we're reviewing the work that's going on. Um, so we're we're able to determine the level of of sub the the information that would be included in a submission, we'd be able to make an assessment as to whether or not it's actually reasonable or not. And then back to the point, we're bringing in with the not with the cons cost consultant on board, we're now going to have that added extra layer of overview, oversight that will ensure that we've um carefully looked at all of these uh items going all the way back to when the project started. Okay. So, is that uh what the what the AG's report saying, is that not true or inaccurate? Sorry, I'm not sure what your question is. So, it says there is a risk that the city may have difficulty. So, you're saying there's not going to be any difficulty. Chair chair, the the I'm sure they and I agree with the auditor waiting until we get an invoice, a large invoice at this point in time is not the appropriate way to for Metroinks to have submitted through the information. Um that said, we once we start the review, we'll have better information about whether or not there is discrepancies in the information that's been provided by Metroinks. Is there a reason that you have not been asking for annual invoices from Metroinks? Chair, we have been asking for um invoices from Metroinks since the inception of the project as we're required to do as part of the Smart Track main agreement. The issue here is that Metroinks has not been able to provide us with the information, the invoices uh to date. Have you? So, it's not because we're not asking for it. Final question. Have you ever reported this to council? Uh, chair, we have come back to council um eight times in this cycle alone. Every time that we've come back, we've reported that information um in terms of where the project is both in uh public con in the public session as well as in confidential. Just to be clear, I'm asking did you ever report to council that you have asked for invoices and not received them? Last question. uh chair um I you know what offhand I cannot but I'm sure that as part of our submission um within the documentation there is probably information about um metro links um submitting through invoices to us thank you I'll have a second round further questions yes please I'm going to have my my turn Uh it's to uh Mr. Toyo. Has Metro Links failed an element of their agreement by not providing invoices or providing backup for the invoices to the extent that that can be answered because I understand there are some confidential provisions. Uh sorry chair can you repeat the question? Um, I understand there is some confidentiality about some of the agreements, but to the extent that you can answer in public, has Metro Links failed to live up to their obligations under the agreement by not providing invoices or the backup for the invoices? At yes, at this point in time, I would say yes. Okay. Um, my next question is a little bit more general and I don't know if it's the transit office or the CFO or even the city manager that needs to answer it. I have some sense that the lack of transactions that have occurred could result in cost to the city or does it result in cost to the city and that's on the transaction sense the invoices and if there's a dispute does that represent uh a potential for additional cost to the city and where would that money come from? um to the chair. Uh in terms of additional costs to the city, uh this is not an instance where there would be additional costs. Uh the the challenge is more as it relates to our our our cash flow management process and being able to accurately predict the timing of that cash flow in terms of the transaction when it would occur. That's in the case uh regarding the transactions. In the case that there is a dispute between the city and Metro links uh over this process, I'm I'm going to imagine that it's going to take time of public servants and potentially consultants to work through the dispute resolution process. Who pays for that? Um chair, each party um does their own um evaluation and then at the end of it there's a determination as to to who the cost is attributed. as part of the dispute mechanism. You are correct. Dispute resolution mechanism. Thank you. Uh and I just to round out I I'm I'm fairly s certain I heard this, but it it sounds like the transit expansion office and maybe more broadly the Toronto Public Service has been tracking these projects diligently. So you have a fairly good idea of where they're at and what the costs have been acred to date. You just have no idea what Metro links will say from their perspective on those numbers. Chair, that is correct. We we track the estimated estimate at completion. So that is information that's provided to us. We have a good understanding of kind of where the project is in terms of its um life cycle. Um so we we do have a good sense of where it should be. We to your point we just do not have the information from Metroinks to validate it. Okay. So to finalize my question, if it's been a long time and you have a fairly good sense, in my opinion, uh there is at least a potential risk if not an elevated risk that there will be a difference in opinion between Metro Links and the city because of all the time passed and therefore there will be some dispute uh process that occurs. Do we have contingency somewhere to cover the costs as we go through that process or is it even material? I don't know. But it's, you know, multiple uh hundreds of millions of dollars here on the table. So should we be worried about that? Uh chair um the the project itself. So so first of all the the project is capped. Our our contribution to this project is capped. Secondly, within within the project itself, there is contingency. Uh contingency is primarily used for obviously un unforeseeable unforeseen conditions. Um could the contingency be used for this? That would be a determination that we need to have a discussion um uh with Metroins further about. In light of the report, and this may be an intergovernmental agency question uh or the transit uh uh expansion office comment, is there optimism or pessimism in light of the focus of this report that we will see an invoice with the backup soon? Chair, I spoke with the CEO of Metroinks yesterday and we expect to get an invoice this month. Great. Thank you. Those were all my questions. I think there's an interest in the second round, Mr. Myers. Uh, thank you. Could someone from the city manager's office or maybe procurement um help me understand, is it normal practice to not have received an invoice for a city project of this magnitude for this long? and if not what is the normal pract or even not even normal practice what are the city guidelines saying so through the chair um I would say that is not normal practice um now it might be normal practice for larger capital infrastructure projects that are with the province uh but from a standard contract perspective that we release no um typically we do indicate uh timings within contracts on when invoices are supposed to be given. So it could be based on a completion percentage, a stage or um if it's a smaller project just total value. That's typically when we would see these invoices. So we it should so whether it's the province or the federal government or anybody. It's still Toronto city taxpayer money. Should we not have received an invoice at least on an annual basis in terms of what is happening, how many costs have been incurred so that the city is understanding whether or not it has sufficient money to cover the cost from a standard contractual practice. Yes. Um we would also though follow what's written in the contract. So that would also be something we'd have to consider if it is noted in there that it is a recurring annual. And are there city uh procurement policies that sort of detail when these invoices are supposed to be given? Um that would be more of a accounts payable process to the to the chair. It would vary. You may see milestone payments. You may see timing payments. It would be dependent on the nature of the award itself. Um I I would also like to make a note um in terms of our ability to pay we were relying on the estimates that came forward in terms of putting forward acrruels within our our uh our financials. So so again we have reflected the expectation in terms of the payments and that's been accounted for. So I guess understanding that you know we're in this situation now where we haven't received an invoice for eight years. the city h believes it has sufficient contingency. What can be done to make sure that something like this does not happen again on a similar project? So, you know, chair, I I think this is as I've had conversations, this is a rare occurrence that we would see this kind of of gap. Um, in this instance, the CEO of Metroinks and I had a conversation. Both of us uh understanding now that we're aware of this uh unacceptable practice and we are going to both change our business practices um in order to make sure that this doesn't occur on this particular project. But in my conversations, this isn't something that routinely happens. So I think the the the best answer to your question is we need to escalate these so that uh you know we can deal with it at senior levels within the organization and if necessary um bring to council for consideration uh in the future. But just so we're clear this is not something that we're routinely bumping into where we need to change an entire practice. Most times both parties are it's in their best interest to have invoices back and forth. We rarely see a situation where somebody doesn't want to bill us for money. As a corporate lawyer, I agree. I I haven't seen this. This is why I'm a bit perplexed. Um, so I guess in the request to Metroinks, were these requests made verbally or were they written? Chair requests were made both uh verbally and written. Were the written requests made on a yearly annual basis? like what frequency were the yearly requests made for the ones that were written? Uh generally chair generally these requests were made on a monthly basis uh requesting that Metelings you know submit through the invoices for that particular month and to obviously kind of tell us where you know what their what their overall costs were. So for eight years on a monthly basis, written requests were being made to Metroinks to provide invoices and nobody from Metroinks ever provided an invoice and nobody at the city ever decided to tell council, "Hey, there's a problem here. This is not normal." Uh, chair, we we work very closely with Metro Links. And that's not what I'm asking. I just want to know, did anybody ever say, "Hey, this is a red flag. Something's not right. If we're requesting these invoices monthly over eight years and we have not once gotten it, council, you should know. So, explicitly through to council, no. Thank you. Thank you. Are there further questions? Seeing none, members wishing to speak. Mr. Myers, thank you. Do you want to move the recommendations if you're speaking? I will move the recommendations as well. Thank you very much. Uh uh so again I again thank madam auditor general uh for this report again it was an internal audit. Sorry I'll mad auditor general because we're in that habit here. It was uh thanks to internal audits the credit. So I will share the credit. I will share the praise. Uh thank you uh thank you to the internal audit team for uncovering this. Um, and I think it sort of goes back to a lot of the questions and concerns that counselors have had over this entire project from its inception. Putting aside now whether or not there's value in the project itself, I think there's a lot of legitimate questions that have been raised in terms of why is this project so unique. I I understand that obviously the province is our partner on this project, but that doesn't uh exclude us from doing or preclude us from doing our proper due diligence and having council informed that you know for however many days or however many months over um over however many years we've been consistently asking for invoices and not a single invoice has been provided. That's just not normal. Um, and I also find it concerning that at no time in all the reports that have been coming to council over the smart track project, cost escalations, uh, project scope changes that this issue has never come up. Uh, we've seen repeatedly uh, Metroinks change, not changing, but we've seen reports saying, you know, the scope of the project has changed. Metroinks has uncovered new issues, the costs have increased, but I've never once seen in any of those reports, but we have requested the invoice from Metro Links and we have never received it. So, I'm quite concerned over this practice and I do hope the city manager uh takes appropriate action. And again I also understanding that you know this division is also in charge of the waterfront east uh rapid transit line which we are all very excited about but we don't want to see something similar happening with the smart track program uh happen in that project because in that project in particular from my understanding it is clear that all over billing uh comes directly from the city. So that project has to be tight and uh we need to make sure that the lessons learned from Smart Track are applied with Waterfront East and hopefully one day Scar Bro East. Thank you. Thank you. Uh other members wishing to speak I'd make a brief comment as well. Uh uh thank you to the to the uh director of internal audit but also the chief procurement officer because you both co-signed the report. Uh and obviously the transit expansion office and the city manager's office. This is important. Uh this audit uh it talks a little bit about the inner workings of the relationship between two governments. I'm not sure how many people had a pause to say oh well one government didn't build the other. But obviously the audit committee is concerned because of the implications and the mechanics of that. But here's my take on it. This is different than the previous audit where it was the city contracting with an external provider and you know we talked about change orders in that case and having the right backup and uh you know potentially people don't get paid if they don't submit the backup. This is a little different in that you've got two orders of government on both sides of the equation. So there's there's really one taxpayer. So if one government doesn't bill the other, the taxpayer is still paying. Here's the part I really worry about. Uh as time goes on, and I believe uh the transit expansion office when they tell me they've been very carefully keeping track of this, and they have a pretty good sense of where these projects are at and how much money has been spent and what those bills should say. If so much time has passed that Metroink sends us something that's different, we have a dispute. And it's not like it's going to be a couple of dollars rounding error. It's in the millions probably just because of the sheer size of the project and how far it is along. And there in lies the problem. One taxpayer is going to pay either way. But if you then go and spend time fighting back and forth over uh um something in that invoice that doesn't line up, then all of the money goes to the various uh consultants and people that spend time on that. And that's what I worry about. And so that I think is the lesson out of this is it's important to, you know, eat a sandwich in small bites instead of one big one. Uh because you run the risk. So I I'm really happy that this was flagged and that it's been brought to council's attention. And I think that ultimately prompted that conversation that the city manager alluded to between leaders in the two organizations who've agreed to to fix this pretty soon. Uh, I just hope the bills line up and that uh people are reasonable on that because what I don't want to see is a whole bunch of money spent fighting over money that everyone in this room is going to pay for either way. Um, but thank you for that. So on the uh on the uh recommendations uh from councelor Myers uh that he moved all those in favor any opposed that carries. Mr. Clerk, I'll just check those that is the last item of business. Thank you everybody. We are adjourned.

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