The Auditor General for the City of Montréal Releases First Annual Report
MONTREAL, May 18 /CNW Telbec/ - The Auditor General of the City of Montréal, Jacques Bergeron, tabled his first annual report, for the year 2009, at the May 17 City Council Meeting. This report, which will also be tabled at a meeting of the Agglomeration Council on May 20, supplements previous audit reports for the 2009 fiscal year tabled before the City and Agglomeration Councils in April of 2010, respectively, in accordance with the provisions of the Cities and Towns Act.
The Auditor General's primary responsibility is to audit the financial statements of the City of Montréal and of every entity controlled by the City. Moreover, these responsibilities include ensuring compliance with applicable laws and legislation, policies, and directives as well as value-for-money and management audits (including information technology). In 2009, the City Council also gave the Auditor General the mandate of setting up an ethics hotline allowing employees, suppliers and elected officials to report any wrongdoing with regard to the City's business and operations.
The Auditor General's 2009 Annual Report includes several distinct audits and contains follow-up measures on recommendations from previous reports. For every audit carried out, the report outlines findings and makes recommendations aiming to make Montréal a well-run city that meets its citizens' needs.
The Auditor General's 2009 Annual Report is available on the City of Montréal's website at the following url: www.ville.montreal.qc.ca/verificateur. What follows are highlights of the report.
Highlights
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Value-for-Money and Management Audit
Life Safety and Building Security Contracts
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The audit's goal was to ensure that contracts awarded to private security firms complied with the provisions of Article 573 of the Cities and Towns Act, namely that authorization be obtained on a timely basis and that the terms and conditions of the contract be respected.
Among other things, the audit focused on the building housing the headquarters of Montréal Police Department, the Municipal Court building on Bonsecours St. and the building that houses the SPVM equipment and IT infrastructure on Saint-Joseph Boulevard.
1. The Auditor General found that the firm contracted on December 17,
2003 to provide security and surveillance has divested itself of some
of its assets to the benefit of another contractor prior to the end
of its contract (August 16, 2006). The assignment of rights and
responsibilities relevant to the City contract was not formalized
until three months after the new firm began performing its duties,
and no decision summary was prepared in order to extend the contract
by a year.
2. The administrative procedure was also not followed when it came to
renewing the contract. The contract renewal was only approved by the
Agglomeration Council nine months after the expiry date of the
renewal option.
3. No written agreement between the City and the firm hired has been
found that would justify an increase in hourly rates due to an
amendment to the Decree respecting security guards. The SPVM and its
Direction des systèmes d'information nonetheless agreed to pay this
increase in rates. Significant expenses were incurred in 2009 for
building security without any call for tenders, without any written
agreement to modify the terms and conditions for work and payment,
and without the authorization of the Executive Committee, the City
Council or the Agglomeration Council.
4. The Auditor General also compared the hourly rates stipulated in the
contract to the hourly rates billed and found that the rates billed
were higher than those set out in the contract, despite the fact that
the call for tenders specified that all bidders were to provide firm
prices.
5. The Auditor General found that the security clearance investigation
process was not performed consistently for each security guard, as
specified in the call for tenders.
With respect to the contract for the building monitoring and personal security, the Auditor General made several recommendations.
Essentially, the Auditor recommends that the municipal government act with increased thoroughness to ensure a consistent application of terms and conditions, which should be more precisely defined. In addition, there should be better follow-up procedures as well as clear indications, in the decision files, regarding any matter liable to affect billing to allow the municipal government to make enlightened decisions.
Management of Professional Service Contracts
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There are two types of contracts for professional service that can be awarded: those that are related to specific projects, and those known as "open" contracts that are awarded by the authorities following a call for tenders, which can be either public or on invitation.
The Auditor has reviewed the terms and conditions set out in the contracts, certain aspects of how these contracts are managed, and the accountability procedures put in place to control costs and monitor work carried out said contracts.
1. The Auditor found that not all of the City's business units applied
equally strict standards when it came to the planning and defining in
writing the mandates awarded. It is the Auditor's opinion that it
would be clearly advantageous for the City's business units to
develop a shared methodology based on best practices in order to
define and delimit more effectively the scope of projects under their
control.
The Auditor General recommends to the Direction générale to develop
and then provide a common methodology specifying, among other things,
the procedure needed to document the results of the approaches
carried out, the evaluation of estimated cost of professional fees
and the analysis performed to support the recommendation to entrust
the required services to an external firm.
2. As for calls for tenders, the Auditor believes that the disclosure of
information concerning the cost of professional fees as well as the
estimated cost of work for implementation is likely to provide inside
information to eventual bidders.
He recommends to the Direction générale to consider the possibility
of not disclosing said information.
3. The contract approval process has also been audited. The Auditor
notes that business units currently operate under no clear guidelines
when costs estimated by these units diverge noticeably from tenders
received for said requested services.
He recommends establishing an administrative structure identifying
the actions to be taken when such a discrepancy occurs.
4. Requests for additional credit deserve better control. According to
the information available, there is no guideline specifying the
conditions to be met as well as the acceptable limit for mandates
awarded by mutual agreement to the same firm, without reopening the
tendering process, and that the information provided to the
authorities does not always clearly cover all the facts allowing for
an informed decision.
The Auditor General recommends that the Direction générale provide
specific guidelines.
5. The approval of proposals received from firms within the scope of
open contracts for professional services brought the Auditor General
to raise some questions, especially with the power delegated to
public servants, their authority level in granting professional
services contracts, the mandate authorization process, and the use of
the amounts thereby allocated.
He recommends that the Direction générale should design an
administrative structure to ensure tighter control and better
transparency.
6. The audit work raised questions on the sharing of the roles and
responsibilities between the City and consulting firms. The Auditor
General believes that the methods must be re-examined by the
municipal government since, in his view, the responsibilities given
to external firms greatly contribute to the weakening of the
mechanisms that the municipal government could rely upon to keep its
control on implemented projects.
The Auditor recommends that the Direction générale re-examine its
methods.
7. The audit work revealed that, generally speaking, the follow-up
mechanisms ensure that the professional services are provided as
expected. However, the audit failed to establish that provisions
concerning the monitoring of said work had been standardised within
the City, that the controls implemented in this regard were
consistently rigorous, that the deadlines set had been met and that
the accountability was governed by an established administrative
framework.
The Auditor General's report includes a series of specific
recommendations on this issue.
Management of the vehicle fleet
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Following the reform of 2002, the boroughs and central services of the City of Montréal are now responsible for the management of their fleets of vehicles. In accordance with the mandate given pertaining to the sound management of vehicle fleet-related activities, the Auditor General has examined the maintenance and repair of the vehicles, and the fuel supply and distribution.
1. The audit work has led the Auditor to issue a recommendation to the
Direction du matériel roulant et des ateliers regarding the
conclusion of agreements between business units and the Centre des
services partagés - Matériel roulant et ateliers (CSP-MRA) about the
planning of human resources, work volumes and the budgets required to
support the expected levels of service and to supervise all
interactions between the CSP - MRA and its clients. These agreements
may even have an impact on the financial results of the CSP - MRA,
which still has not succeeded in balancing its budget since its
inception. Such agreements would provide guidelines for
responsibilities of parties, pricing, maintenance and the performance
of preventive maintenance, and measureable criteria for customer
satisfaction.
2. With regard to the vehicles of the Service de sécurité incendie de
Montréal (SSIM), the Auditor General notes that external firms
perform mandatory inspections more quickly than the CSP - MRA, meet
almost all the objectives set by the SSIM and, moreover, charge lower
hourly rates than the CSP - MRA.
The Auditor General recommends that the Direction du matériel roulant
et des ateliers adapt its business processes pertaining to the
maintenance and repair of firefighting vehicles according to the best
practices in the industry.
He also recommends that the Direction des ressources financières et
matérielles du Service de sécurité incendie de Montréal takes the
necessary measures to renew its fleet of heavy vehicles, according to
the requirements of the Insurers' Advisory Organization's national
policy.
3. With regard to fuel supply, distribution and reconciliation,
the Auditor General recommends that the report on fuel consumption be
reviewed to include all relevant information to assist decision
makers to analyze and verify the relevance of the data collected in
order to better control vehicle and fuel use.
4. With regard to vehicle fleet management, four boroughs have been
audited: Mercier-Hochelaga-Maisonneuve, Rosemont-La Petite-Patrie,
Verdun and Saint-Laurent. Generally speaking, the Auditor General
noted some problems with the CSP-MRA. He also noted, for all or some
boroughs, an absence of controls or framework policies concerning
vehicle inventories, acquisitions and disposals, vehicle rentals,
vehicle maintenance and repair, billing processes, application of
warranties and satisfaction with the services offered by the CSP-MRA.
The report contains recommendations that are specific for each
borough audited.
Facilities and infrastructures - Société du parc Jean-Drapeau
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The audit work mainly focused on ensuring that the municipal government has a general overview of the quality of the facilities and infrastructure located on the site of the Parc Jean-Drapeau.
1. Despite numerous initiatives by the Société, the Auditor General
found that no formal approval has been granted by the City concerning
development directions for parc Jean-Drapeau.
The Auditor General recommends that the Direction générale address
the relevant authority in order to determine the role to be played by
the Société du parc Jean-Drapeau in updating the master plan.
2. It appears that the facilities and infrastructure have reached a
level of disuse that raises concerns with respect to their safety and
reliability, not to mention that many of them do not meet current
standards and regulations. However, the detailed description of the
condition of the premises, waterworks and sewers, road networks and
bridges, and the power system remains incomplete to this day.
Among other things, the Auditor General recommends that the nature of
the infrastructure maintenance work and the sharing of roles and
responsibilities relevant to said work be made clear in a memorandum
of understanding with the Société du parc Jean-Drapeau and that a
general plan for the maintenance and development of these facilities
be established.
Sale of the Marc-Aurèle-Fortin land site
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The land, located in the Western part of Rivière-des-Prairies, has been the subject of two unsuccessful calls for proposals in 2001, as part of the "Opération Habiter Montréal" municipal program. Finally, a development agreement covering a five-year period, was reached between the City of Montréal and a contractor in 2008.
The objective of the audit work was to examine the various measures taken by the City of Montréal to select a promoter for the development of a residential project on the Marc-Aurèle-Fortin site.
1. The audit work revealed that the amount for the opening bid
corresponded to the market value of the land, even if no documented
opinion had been provided to determine the most appropriate market
value. This documentation would give the Executive Committee more
detailed information when approving the call for proposals and the
amount of the opening bid.
The Auditor General recommends that the Direction stratégies et
transactions immobilière documents, in its discussion paper,
the means used to determine the opening bid based on the market value
in order to show the relevance of the method used and the factors
considered, and adjust the decision-making arguments accordingly.
2. The Auditor has noticed some irregularities, especially regarding
proposal evaluation criteria, the submission deadline to the
Executive Committee and the availability of all data relevant for an
informed decision and the authorization level required.
Among other things, the Auditor General recommends to the Service de
mise en valeur du territoire et du patrimoine to comply with the
provisions of documents applicable to open calls for proposals,
especially when it comes to obtaining the required approvals.
3. Although the City Council had approved the development agreement
according to the information disclosed, the Auditor General is of the
opinion that the Council had not been aware of some relevant
elements.
He recommends to the Direction stratégies et transactions
immobilières the disclosure of any new important facts that have
arisen since the selection of the applicant and that are likely to
affect the financial analysis in the meantime.
Preliminary Study on the Acquisition of Goods and Services
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The Auditor General assessed the relevance of carrying out a detailed audit into the efficiency of current practices used in acquiring goods and services in light of the high number of purchases under $100. The Auditor General decided that there was no need to review this matter further at this time, because the data available does not allow for an assessment of the economic rationale behind the practices already identified and recommended by the Direction de l'approvisionnement aiming to reduce small orders. Moreover, even if these practices turn out to be justified, the Direction does not have the authority to impose them on its various business units.
In addition, the risk factors associated with purchasing led the Auditor General to evaluate the monitoring structure for this function. The Auditor General concluded that the City of Montréal does not possess an adequate monitoring structure to ensure the efficiency of the purchasing function and, therefore, operational compliance with the principles set out in the Policy.
Therefore, the Auditor General recommends that the Direction générale identify the primary risks in terms of inefficiency and non-compliance with the City's Politique d'approvisionnement, identify management practices and performance indicators to be used to ensure best practices, and assess the relevance and legitimacy of imposing these practices and strategies aiming to mitigate risk and improve accountability on all business units, including boroughs.
Outsourcing Project for Telecommunications Services
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The Auditor General reviewed this proposed transformation project carefully given its critical importance in terms of the overall operations of the City as well as the significant financial resources at play. The Auditor's mandate was initially to examine how outsourcing was being managed, but as this operation has not yet been initiated, attention was focused rather on examining the current state of the project, analyzing the causes of the delay, and identifying issues related to the operational phase set to come into effect in 2011. It should be mentioned that certain warning signs led the Auditor to examine the purchasing process for telecommunications services.
The Auditor found that the outsourcing project was facing significant delays, as the planned timeframe for taking over the telephone cable infrastructure and the data transfer was to be completed for the end of 2008. Yet, at the time of the audit, only about 11% of the Centrex telephone lines had been successfully migrated; for data transmission, the number of network outlets migrated was assessed at 20%. Moreover, several issues requiring measures liable to have a major impact on the project's overall finances have been identified and discussed. Among these issues is a necessary clarification of the "service at the outlet" model, the billing of subcontractors, the management of the security component as well as the SPVM's role under the contract for data transmission.
The Auditor carried out an analysis of the project history which revealed several problems which have led to the current state of affairs; his report distinguishes between issues of immediate concern, post-migration issues and external issues. Among the most pressing matters is the need to strengthen the governance of the outsourcing project by adopting measures with the following objectives:
- implementing a governance structure to formalize the frequency and
content of accountability reports, particularly regarding finances,
priority issues and the objectives of the outsourced
telecommunication services; and
- updating the assessment of the main issues and risks relevant to the
migration and the management of outsourced contracts, as well as
mitigation measures already in place and those to be put in place,
according to specific timelines.
Actions must then be carried out by the municipal government with regard to the project's finances including, among others, the appraisal of certain associated costs and the finalization of the financial model to be presented to the decision-making authorities.
Finally, the results of the audit identify serious irregularities surrounding the process for purchasing telecommunications service contracts (subject to said audit). Under the circumstances, given the limited investigative powers granted the City's Auditor General, and pursuant to the provisions of the Cities and Towns Act, the Bureau du vérificateur has reported this matter to the police and promised its full cooperation. In order to avoid interfering with any future investigation, the Auditor General wishes to make no further comment on this issue.
Follow-up on Recommendations from Previous Years
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It is the policy of the Bureau du vérificateur's to follow-up on recommendations made in the year subsequent to their publication in an annual report. Of the 697 recommendations that have been made since 2005, the follow-up undertaken in March 2010 has shown that 77% (538) have been carried out, while 17% (116) are currently in the process of being carried out. Two situations remain of concern: the "management and maintenance of buildings" and the issue of "fire prevention services."
Following a detailed assessment of the state of each of the relevant buildings, a strategic plan for the integrated management of municipal buildings (date of report to be announced) specified that the annual deficit for maintenance had reached $42 million, and the accumulated deficit reached $1 billion, a depreciation index of 24%. According to the Auditor, if additional sums are not allocated in this area in the coming years, this index could cross the 30% threshold, thus significantly increasing the risk of breakdowns in services in the City's day-to-day operations.
Regarding fire prevention services, the Auditor General found that 19 of the recommendations were still "in the course of being carried out." This situation is all the more alarming given that Montréal's Service de sécurité incendie has posponed the timeline on more than half of these recommendations to 2013.
The Auditor General would like to take the opportunity provided by the tabling of this report to comment on areas of particular interest and to make recommendations where appropriate.
Setting the Auditor General's Budget
The Bureau du vérificateur général is responsible for carrying out audits of the financial statements of the City of Montréal and of the nine entities under its control, as well as monitoring value-for-money and ensuring the legislative compliance of the above-mentioned entities. The Bureau's budget is currently based on the operating budget of the City rather than its consolidated budget.
This budgeting method is inappropriate for two reasons: first, because it is the consolidated financial statements that are being audited; and second, because using part of the current budget to carry out the audits leads automatically to a reduced value-for-money for the City and the entities it controls.
The Auditor General therefore recommends that the City Council adopt a resolution stating that the Auditor General's budget will be based on the consolidated budget rather than the operating budget. Barring such an amendment, the Auditor General cannot guarantee its ability to offer the municipal government and, ultimately, the city's taxpayers, the full range of services they are entitled to expect.
Process for Awarding Contracts to Entrepreneurs by Governing Bodies
A review of the City's databases identified 21 contracting firms that have been awarded a significant portion of the city's contracts; a detailed analysis determined the number and value of contracts awarded to these firms by borough councils between 2006 and 2009.
The total value of the contracts awarded for this period by the city's three governing bodies (Executive Committee, City Council and Agglomeration Council) to these firms ranged from $481,000 to $104.5 million for a total of $812 million. The value of the contracts awarded by the boroughs to these same firms ranged from $108,000 to $23 million, for a total of $159 million. The Auditor noticed that in certain boroughs, contracts are awarded to a number of contractors while in others, practically all contracts are awarded to the same contractor.
The municipal government reports that it has already implemented a series of measures, and is planning to establish further measures, in order to manage and monitor more effectively the process for awarding contracts by the various entities under the City's management. The Auditor General will conduct a review of how awarded contracts have been allocated in 2011, and, in the light of the findings, assess the need and relevance of further audits.
Follow-up on Recommendations in Special Reports
The Faubourg Contrecoeur Project
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The Bureau du vérificateur général found that of the 12 recommendations issued, all had been carried out or were in the process of being carried out except for one: to obtain supporting documents to justify the $16 million deducted from the sale price to cover costs for soil rehabilitation, construction of a noise barrier, architectural work on building acoustics and fees incurred by the Société d'habitation de développement de Montréal (SHDM). The other recommendation that was not reported on by the administrative unit as to what measures had been taken pertained to compliance with certain conditions set out in the bill of sale of the site to the SHDM.
Management of the SDHM Project
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In this case, the Auditor found that significant efforts had been made by the Société in order to carry out the recommendations. Therefore, 24 of the 31 recommendations set out in the audit report have been carried out and 4 are in the process of being carried out. The others were withdrawn because the "Logement abordable au Québec" program no longer exists.
Water Meters
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The Auditor General is of the opinion that it is still too early to assess the effectiveness of the measures put in place by the municipal government, but wishes to stress that an updated and exhaustive assessment will be made in 2010 on how these recommendations were applied.
The public hearing regarding the 2009 Annual Report will take place at a joint open meeting of the Standing Committee on Administration and Finance of the Agglomeration Council and the Standing Committee on Administration, Finances and Human Capital of City Council, to be held in the Council Chamber at Montréal City Hall on June 9 at 19 h.
All citizens are welcome to attend and to ask the Auditor General any questions they may have.
For further information: Patricia Lowe, Relations avec les médias, (514) 872-5467; Source: Bureau du vérificateur général
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