BUILDING INVESTEMENT, FINANCE AND AUDIT COMMITTEE … · c) Key documents and related supporting...

BUILDING INVESTEMENT, FINANCE AND AUDIT COMMITTEE MEETING AGENDA

PUBLIC SESSION

Date: October 19, 2016 Time: 8:45 to 9:30 a.m.

Location: Ground floor boardroom, 931 Yonge Street

Agenda

Item Description Action Pre-read Presenter

1) Chair’s Remarks Information Verbal Report Chair

2) Consent agenda

2 a) Approval of Public Meeting Agenda

Approval Agenda Chair

2 b) Chair’s Poll re: Conflict of Interest

Declaration Agenda and Conflict of Interest Policy

Chair

2 c) Confirmation of the Public Meeting Minutes of September 28, 2016

Approval

Minutes Chair

2 d) Business Arising from the Public Meeting Minutes and Action Items Update

Information Action Item List Chair

PUBLIC AGENDA | BUILDING INVESTEMENT, FINANCE AND A UDIT COMMITTEE | October 19, 2016 of 2

Item Description Action Pre-read Presenter

1 e) Access to TCHC Parking Facilities – Supplemental Report

Information BIFAC:2016-136

Senior Manager, Commercial & Business Development

4) Internal Audit Reports

Chief Internal Auditor

4 a) Semi-Annual Statistical Reporting on Complaints Received [deferred from September 28th Meeting]


4 b) Internal Audit Report: TCHC Employees Who are Also TCHC Tenants [deferred from September 28th Meeting]


4 c) Internal Audit Report: Rent Geared to Income Calculation Review 2015 Supplementary Report [deferred from September 28th Meeting]


4 d) Internal Audit Report on Contract Managed Properties


Termination

Public Meeting Minutes

September 28, 2016

Building Investment, Finance

and Audit Committee

Page 1 of 3

The Building Investment, Finance and Audit Committee (“BIFAC” or “Committee”) of Toronto Community Housing Corporation (“TCHC”) held a public meeting on September 28, 2016 in the Main Floor Conference Room, 931 Yonge Street, Toronto, commencing at 11:29 a.m.

Committee Directors Present: Colin Lynch, Chair

Councillor Ana Bailão, Vice Chair

Vincent Gasparro

Kevin Marshman

Ex-officio Director in Attendance Norman “Bud” Purves

Other Directors in Attendance: Robert Carlo

Catherine Wilkinson

Management Present:

Leslie Gash, Acting Vice President, Development Ismail Ibrahim, Director of Compliance and Legal Counsel Mark Johnson, General Counsel and Corporate Secretary Sylvia Kobal, Senior Director, Procurement Graham Leah, Vice President, Asset Management Rose-Ann Lee, Chief Financial Officer and Treasurer (Interim) Ted Millward, Legal Counsel, Corporate Sheila Penny, Vice President, Facilities Management Greg Spearn, Interim President and Chief Executive Officer/ Chief Development Officer

Wayne Tuck, Chief Operating Officer

A quorum being present, the Chair called the meeting to order and Mr. Steven Iserhoff served as recording secretary.

Building Investment, Finance and Audit Committee Public Meeting Minutes September 28, 2016

Page 2 of 3 DEPUTATIONS

Verbal deputations were received at the meeting with respect to the following items

Alan Duddin (Item 4A)

Robert Fredrickson (Item 4A)

ITEM 2 CONSENT AGENDA

Motion carried ON MOTION DULY MADE by Mr. Marshman, seconded by Mr. Gasparro and carried, the BIFAC unanimously approved Consent

Agenda Items 2A, 2C, 2D and 2E as presented.

ITEM 2B DECLARATION OF CONFLICT OF INTEREST

The Chair requested members of the BIFAC to indicate any agenda item in which they had a conflict of interest, together with the nature of the conflict. None were declared.

ITEM 3 FOLLOW UP REPORT ON ACCESS TO TCHC PARKING FACILITIES BY THIRD-PARTY SERVICE PROVIDERS

BIFAC:2016-130

The BIFAC had before it the above-captioned report (BIFAC:2016-130) Valesa Faria, Senior Manager, Commercial & Business Development, presented the report and answered questions. The Committee expressed concern regarding raising parking rates for tenants, and in particular RGI tenants, and requested that further information from Management be provided. The Committee noted there is a strict parking policy for tenants where they are not allowed to park large vehicles in underground parking lots. The Committee went on to state that construction vehicles are now parking on TCHC property and enquired about any related safety issues. Management noted that these vehicles park on surface lots and that the Community Safety Unit (CSU) patrol lots for compliance. The Committee identified issues with the parking sticker program, including the durability of the stickers and whether the bar codes are being electronically scanned. The Committee requested that

Building Investment, Finance and Audit Committee Public Meeting Minutes September 28, 2016

Page 3 of 3

ITEM 4A INTERNAL AUDIT REPORTS: TCHC EMPLOYEES WHO ARE ALSO TCHC TENANTS

BIFAC:2016-123

The BIFAC had before it the above-captioned report (BIFAC:2016-123) The following persons deputed this item:

Alan Duddin (written deputation also provided)

Robert Fredrickson The Committee identified that this report poses a number of questions and that there is insufficient time left at the meeting to discuss them. It was determined that this item and the other remaining reports from the Chief Internal Auditor should be deferred to the next BIFAC Meeting.

Items 4A, 4B and 4C were deferred to the next BIFAC meeting.

TERMINATION

The BIFAC resolved to terminate the public meeting at 11:42 a.m.

__________________

Secretary Chair, Building Investment, Finance and Audit Committee

Management provide additional information on the parking sticker program and potential improvements.

Motion Carried

ON MOTION DULY MADE by Mr. Marshman, seconded by Mr. Gasparro and carried, the BIFAC unanimously received the report for information.

Second motion carried

ON MOTION DULY MADE by Mr. Gasparro, seconded by Mr. Lynch and carried, the BIFAC unanimously approved the following recommendation: That Management provide the Committee with a report with information on the following:

The strategy for parking rates for RGI tenants.

The parking sticker program and potential improvements.

1

BIFAC- Report on Business Arising from the Public Meeting Minutes and Action Item List

# Report No. Description Status Target Date Assigned to 1 BIFAC:2015-143

November 16, 2015 Accessibility in the Built Environment Policy The BIFAC requested Management to report back to the Committee with respect to:

Modifying existing units for compliance with the Standards.

Timelines to achieve full implementation of the Standards by 2025 (as part of the 10 Year Financial Plan).

In progress. Management to report back on this item subsequent to completion of budget process and discussions regarding 10 Year Capital Financial Plan. Target date revised to November BIFAC meeting.

Nov 17, 2016

Vice President, Facilities Management; Acting Vice President, Development

2 BIFAC:2016-108 JULY 21ST, 2016

Impact of Clerical Staff Additions Management to confer with PWC regarding the RGI calculations and their comfort level with the accuracy of the calculations.

In progress. Management reviewed RGI calculations with PWC at the end of September. Chief Internal Auditor’s report on RGI calculations from Q1 to Q3 2016 will provide information on this review.

Nov 17, 2016

Chief Financial Officer/Chief Internal Auditor

3 BIFAC:2016-112 JULY 21ST, 2016

Stand-Alone Properties – Sales and Relocation Update Management to report back to the committee with the following information:

The length of time the properties have been vacant.

The lost revenue from the vacant units.

Information to be provided with the next update on Stand Alone Properties to be provided at the November 17th BIFAC meeting.

Nov 17, 2016

Manager, Business Development

4 BIFAC:2016-130 SEPTEMBER 28, 2016

Follow up Report on Access to TCHC Parking Facilities by Third-Party Service Providers

Report on the agenda for the October 19th meeting.

Oct 19th, 2016

Manager, Business Development

2

# Report No. Description Status Target Date Assigned to Management provide the Committee with a report with information on the following:

The strategy for parking rates for RGI tenants.

The parking sticker program and potential improvements.

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Access to TCHC Parking Facilities – Supplemental Report Item 2E

October 19, 2016

Building Investment, Finance and Audit Committee

Report: BIFAC:2016-136

To: Building Investment, Finance and Audit Committee (BIFAC)

From: President and Chief Executive Officer (Interim)

Date: September 14, 2016

Strategic Plan Priority:

Quality Homes:

Improve Building Conditions

Maximize Land Value and Expand Housing Options for current and Future Residents

Maintain the Condition and Quality of New and Repaired Buildings

Vibrant Communities:

Neighbourhood Building and Improved Community Safety

Economic Opportunities

Supporting Housing Stability

Service Excellence:

Provide Excellent Customer Service

Increase Revenues

Demonstrate Value for Money and Public Accountability

PURPOSE: To provide the BIFAC with additional requested details related to Toronto Community

Housing Corporation (“TCHC”) parking program.

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RECOMMENDATIONS: It is recommended that the Committee receive this report for information purposes.

REASONS FOR RECOMMENDATIONS:

BIFAC Request

At the September 28, 2016 meeting, Management presented the BIFAC with a report on

annual revenues generated from parking fees, costs or range of costs associated with

parking facilities, total number of parking spaces, rationale for TCHC offering parking and

parking strategies (BIFAC 2016-130). The BIFAC received the report for information and

requested additional details with respect to parking rate increases for residential tenants

and improvements to the barcode stickers currently issued to parking clients.

BACKGROUND:

Residential Tenant Parking Rate Increases

In May 2004, the TCHC Board of Directors approved a Revenue Plan aimed at promoting

sustainability by generating revenues from non-subsidized services such as laundry,

cable and parking. The Revenue Plan also focused on promoting equity by ensuring that

charges were being equally applied to tenants across the portfolio.

Under this Revenue Plan, parking rates were set at the low end of the market. The

maximum tenant parking charge approved was $75/month for downtown and central

Toronto, and $50/month for all other parts of the City. Tenants currently paying below

these levels continue to be subject to annual increases of $5 to their monthly charge. It

should also be noted that these rates have not increased since mid-2005 as the intent is

to review rates only after all tenants are brought up to the maximum levels set for their

geographic locations.

Barcode Stickers

Upon registering for parking, a client is provided with a barcode sticker to install on their

windshield. The barcode stickers are specifically designed to be difficult to remove which

helps prevent theft and illegal use by non-registered parkers. Also, due to the Canadian

climate, having a stronger adhesive prevents the stickers from peeling off and becoming

lost.

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Under TCHC’s parking procedures, upon cancellation or changing of vehicles, a client is

required to return their barcode sticker. However, as the sticker is difficult to remove, it

often breaks apart. Although TCHC accepts any piece of the sticker as proof of removal,

the process of trying to remove the sticker can be onerous for clients.

In an attempt to improve this process, Management is evaluating various new customer-

focused options and technologies. Some options include phasing out of barcode stickers

and replacing with barcode mirror hang tags that are easier to scan from a distance. In

terms of the actual scanning devices, options for real-time parking enforcement solutions

utilizing mobile devices are being explored.

IMPLICATIONS AND RISKS:

Good customer service is a key element of TCHC’s parking program. As the organization

continues to focus on improving service delivery and sustainability, Management is

reviewing all aspects of the parking program including marketing, registration, account

management, enforcement and physical management of parking facilities. Based on an

initial assessment, is likely that increased collaboration with third-party operators will help

compliment the current parking program and allow the organization to better utilize limited

staff resources, more effectively serve customers, access the latest technologies in the

market and increase revenues.

SIGNATURE:

“Greg Spearn”

Greg Spearn

President and Chief Executive Officer (Interim)

STAFF CONTACT: Valesa Faria, Senior Manager, Commercial & Business Development

416-981-4317

[email protected]

mailto:[email protected]

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Internal Audit Report: Complaints Received January 1, 2016 to June 30, 2016 Item 3A

October 19, 2016




From: Chief Internal Auditor



Service Excellence:



PURPOSE: To provide the Building Investment, Finance and Audit Committee (“the Committee”)

with a statistical report with respect to complaints received by the Internal Audit

Department for the period of January 1, 2016 to June 30, 2016.

RECOMMENDATIONS: It is recommended that the Committee receive this report for information.

REASONS FOR RECOMMENDATIONS:

Complaints Received

The Investigations Unit of the Internal Audit Department is tasked with the responsibility

of reviewing and investigating complaints received about Toronto Community Housing

(“TCHC”) staff, tenants, and contractors. Complaints are received from several

sources, including:

The ‘Do What’s Right’ Hotline (“the Hotline”);

EasyTrac;

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The City’s Fraud and Waste Hotline;

Staff and/or other internal sources; and

Other means (e.g. letters, emails, telephone calls).

Complaint Data

Previous iterations of the Committee requested that complaint data be reported to the

Committee on a semi-annual basis.

Attachment 1 to this report sets out an overview of the nature and scope of complaints

that have been received for the first six months of 2016 (“2016 YTD”), with comparative

data for the same time period in 2015 (“2015 YTD”).

The attachment sets out a number of reporting parameters with respect to the

complaints received, as discussed below.

Source of Complaints – Gross (Table 1)

The data shows that for 2016 YTD there has been decrease in the gross number of

complaints received – a decrease of 49 or 10.4%. For approximately 4 – 5 weeks in the

early spring of 2016 the link to the Hotline portal on the TCHC website was not

functioning properly – this explains the decrease in the gross amounts of complaints

received.

There was, however, a significant increase in the number of complaints by Letter/Email

(from 23 in 2015 YTD to 70 in 2016 YTD). We have no explanation for this increase.

The Hotline consistently produces approximately 55% of the complaints received (2015

YTD 67%). This is in line with previous years’ results. What this tells us is that there are

numerous ways complaints reach us.

Net Complaints Received (Table 2)

Following previous years trends, approximately 26% of the gross complaints received:

Are not fraud related; or

Were reported more than once; or

Do not pertain to a TCHC tenant, building or staff member; or

Reported an unidentifiable address or tenant.

For the information of the Committee about some of these items:

Were reported more than once I – it is not unusual for a complaint to be

submitted to the Hotline, the City’s Fraud and Waste Hotline, and EasyTrac;

Were reported more than once II – for complaints received from the Hotline we

record every time a complaint is received. There have been a number of

instances where a Hotline complaint from the internet portal was submitted 3 – 6

times within a couple of minutes of each other. Though we do not know exactly

why these occurred, we suspect that the complainant may have pushed the

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‘submit’ button several times in a row resulting in numerous duplicate

submissions. Such actions will skewer the number of duplicate complaints

received; and

Do not pertain to a TCHC tenant et al – we often receive complaints about units

that are not TCHC units. Speculating, we suspect that with the sheer size of

TCHC the public may think that TCHC is the only social housing provider in

Toronto, which it is not. So if they have a complaint about a non-TCHC social

housing tenant, they contact us. Such complaints are forwarded to the

appropriate housing provider.

It should be noted that the 284 complaints about tenants represent approximately

0.483% of TCHC’s units (less than ½ of 1%).

Who the Complaints are About (Table 3)

This identifies, on a net complaint basis, who the complaints were about – staff, tenants,

contractors or other. Approximately 91% of net complaints received in 2016 YTD were

about tenants. This statistic has been consistent since the inception of the Hotline on

January 1, 2012.

There was an inexplicable small spike in 2016 YTD in the number of complaints

received about TCHC staff.

Nature of Complaints (Table 4)

This sets out, on a net complaint basis, the broad subject matter of the complaints

received. For staff and tenant complaints, the data is further broken down to more

specific subject matters:

Staff

A ‘Staff Performance Complaint’ is one which relates to a performance issue about

a staff member (e.g. the hallway floors are not being cleaned). These complaints

are not reviewed by the Investigations Unit – they are forwarded to the appropriate

Operating Unit or department for follow up.

‘Staff Complaints – Other’ include all other complaints received about a staff

member. These complaints are reviewed by the Human Resources Department.

The Investigations Unit assists with the review of these matters on request from

Human Resources.

Tenants

Complaints about tenants have been broken down into five main subject areas.

The three main tenant complaint subject areas are set out in the following table:

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Nature of Tenant Complaint 2016 YTD 2015 YTD

No. %1 No. %

Unreported members in a unit 112 36.0 139 43.3

Unit/Room being sublet 89 28.6 67 20.9

Unreported income 51 16.4 58 18.1

Subtotal 252 81.0 264 82.3

These three complaint categories have consistently been the ‘top three’ types of

complaints received since we started to keep these records.

Market Rent Units operate under different rules and regulations than RGI units. As

such they are forwarded directly to the appropriate Operating Unit for follow up.

Distribution by Operating Unit (Table 5)

This shows the number of net complaints received within a particular operating unit

(“OU”).

This allows the reader to compare (i) an OU’s % of Complaints Received to (ii) that

OU’s number of units as a % of Total TCHC units. For example, Operating Unit C

(Weston/Rexdale) contains 4.5% of TCHC’s units and for 2016 YTD it has 2.6% of the

complaints received.

Because approximately 91% of the complaints received are about tenants, this table is

in no way whatsoever a reflection of the quality of service provided by TCHC staff or the

third party vendors who manage the contract managed buildings.

We are not aware of any particular reason why one OU has more complaints (on a %

basis) than other OUs. Nor do we know why a particular OU is in the ‘red’ (more % of

complaints than their population) for one time period and be in the ‘green’ (less %

complaints than their population) for the next time period.

In addition, though the results do fluctuate from year to year, there appears to be a

pattern of some of the operating units being either consistently in the ‘green’ (less % of

complaints than their population) or in the ‘red’ (more % complaints than their

population). The reason(s) behind this phenomena is unknown.

Hotline Usage (Table 6)

Actually two tables (Table 6a and Table 6b), they show how complainants have been

accessing the Hotline.

Nearly 83% of the Hotline complainants have chosen to remain anonymous in YTD

2016 (Table 6a). This consistent with that for YTD 2015.

1 % of all Net Complaints received by TCHC.

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There has been a significant decrease in the number of complaints received from the

Hotline internet portal. As noted above, for 4 – 5 weeks in early spring of 2016 the link

to the Hotline portal on the TCHC website was not functioning properly. We believe that

is the reason for the decrease in complaints received via the internet.

Status of Complaints Received (Table 7)

This table sets out the status of complaints received 2016 YTD and 2015 YTD, as at

September 1, 2016.

It should be noted that these are cumulative status results for the time periods in

question. For example, if a 2015 complaint was closed in 2016, that status will be

reflected in the 2015 column. As such, there will always be a difference between the

current year’s results and the previously reported results.

There were only two unassigned files as at September 1, 2016. The reason why they

were still unassigned is that we have yet to determine what TCHC address is being

complained about.

Due to the volume of complaints received the Investigations Unit has to rely on the good

work of operating unit staff to conduct the review and investigation of most of the tenant

complaints received. This allows for the timely resolution of the complaint. Though this

is not shown in Table 7, 2016 YTD nearly 72% of net complaints received were referred

to Operating Unit and other departmental staff. We are very much appreciative of the

assistance and work conducted by field staff in this regard.

Complaint reviews generally take some time to be completed. As such, a mid-year

analysis of the outcomes of complaints received generally would not be reflective of the

activities that are underway. A more detailed analysis of the results of complaints will

be presented in my 2016 Annual Report.

Future Complaints Statistics Reports to the Committee

I seek guidance from the Committee with respect to the following items:

Frequency of Reporting to the Committee – Complaints statistics are currently

reported to the Committee on a semi-annual basis. Would the Committee like this

reporting frequency to (i) decrease to annually, or (ii) increase to quarterly, or (iii)

remain at semi-annually?

Nature of Information Reported On –

o Is there any information currently being provided that the Committee finds

redundant or not meaningful?

o Is there any other information or data that the Committee would like to see

in future reports?

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IMPLICATIONS AND RISKS:

The review and investigation of complaints about staff, tenants and contractors is an

integral part of TCHC’s risk management strategy. It also serves to ensure that there is

accountability with respect to the actions of tenants and staff. Regular updates to the

Committee about complaints received will assist in the identification and mitigation of

risks faced.

SIGNATURE:

“Michael Vear”

Michael Vear, CPA, CA, CPA (Illinois)


ATTACHMENT: 1. Internal Audit – Complaints Received January 1, 2016 – June 30, 2016 (with

comparatives for 2015)

STAFF CONTACT: Michael Vear, Chief Internal Auditor

416-981-4065

[email protected]

Siu On Wong, Manager of Investigations

416-981-4229

[email protected]



Table 1Source of Complaints - Gross

- this shows the sources of ALL complaints received

No. % No. % No. %

Fraud Hotline 234 55.6 317 67.4 (83) (26.2)

EasyTrac 55 13.1 71 15.1 (16) (22.5)

Other City Fraud Line 3 0.7 4 0.9 (1) (25.0)

Call In - Telephone 0 0.0 2 0.4 (2) (100.0)

Staff/Internal Emails 59 14.0 47 10.0 12 25.5

Letter/External Emails 70 16.6 28 6.0 42 150.0

Walk In/Person 0 0.0 1 0.2 (1) (100.0)

Fax/Other 0 0.0 0 0.0 0 0.0

421 100.0 470 100.0 (49) (10.4)

Attachment 1Internal Audit - Complaints Received

January 1, 2016 - June 30, 2016 (with comparatives for 2015)

2015 Change 2015 to 20162016

Page 1

Item 3A - BIFAC:2016-123

October 19, 2016 Attachment 1



Table 2'Net' Complaints Received

- this table eliminates duplicate complaints, complaints about non-TCH properties, and non-fraud related complaints toto arrive at the 'true' (or 'net') number of complaints received

No. % No. % No. %

421 100.0 470 100.0 (49) (10.4)

Other Matters

Item Reported is Not Fraud 18 4.3 24 5.1 (6) (25.0)

Item Reported More Than Once 68 16.2 99 21.1 (31) (31.3)

Not a TCH Tenant or Unit 24 5.7 26 5.5 (2) (7.7)

Address Unknown 0 0.0 0 0.0 0 0.0

Total Other Matters (B) 110 26.1 149 31.7 (39) (26.2)

'Net' Complaints Received 311 73.9 321 68.3 (10) (3.1)(A) - (B)

'Gross' (Table 1) (A)Total Complaints Received

20152016 Change 2015 to 2016

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Table 3'Net' Complaints Received Were About

- this table identifies if the 'net' complaints received were about Staff, Tenants, Contractors, or Other

No. % No. % No. %

Staff 26 8.4 10 3.1 16 160.0

Tenants 284 91.3 304 94.7 (20) (6.6)

Contractors 0 0.0 0 0.0 0 0.0

Other 1 0.3 7 2.2 (6) (85.7)

311 100.0 321 100.0 (10) (3.1)Total 'Net' Complaints

20152016 Change 2015 to 2016

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Table 4Nature of Complaints

- this sets out the general nature of the 'net' complaints received

No. % No. % No. %

StaffStaff Performance Complaints 6 1.9 3 0.9 3 100.0

Staff Complaints - Other 20 6.4 6 1.9 14 233.3

Waste 0 0.0 1 0.3 (1) (100.0)

Total Staff Complaints 26 8.4 10 3.1 16 160.0

TenantsUnreported Extra Members in Unit 112 36.0 139 43.3 (27) (19.4)

Unit/Room Being Sublet 89 28.6 67 20.9 22 32.8

Unreported Income 51 16.4 58 18.1 (7) (12.1)

Miscellaneous Fraud 16 5.1 10 3.1 6 60.0

Over housed Unit 7 2.3 14 4.4 (7) (50.0)

Market Rent Units 9 2.9 16 5.0 (7) (43.8)

Total Tenant Complaints 284 91.3 304 94.7 (20) (6.6)

Contractor 0 0.0 0 0.0 0 0.0

Other 1 0.3 7 2.2 (6) (85.7)

Total 'Net' Complaints 311 100.0 321 100.0 (10) (3.1)

20152016 Change 2015 to 2016

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Table 5Distribution by Operating Unit

- this shows the distribution of the 'net' complaints received by Operating Unit (OU)- it also compares (i) the OU's % of Complaints Received to (ii) the OU's number of units as a % of Total TCH units

means the OU's % of Complaints Received is LESS than it's % of Total TCH units

% of Total Units

% of Total Units

No. %

OUA - Seniors & Single Family East 8 2.6 11.6 6 1.9 13.3 2 33.3OUB - Seniors & Single Family West 10 3.2 11.0 19 5.9 11.0 (9) (47.4)OUC - Weston/Rexdale 8 2.6 4.5 15 4.7 5.4 (7) (46.7)OUD - York Black Creek 8 2.6 6.1 14 4.4 6.1 (6) (42.9)OUE - Etobicoke South High Park 16 5.1 7.3 20 6.2 7.3 (4) (20.0)OUF - Yorkdale Lawrence 25 8.0 3.7 17 5.3 3.7 8 47.1OUG - Willowdale Don Valley 13 4.2 4.1 29 9.0 4.1 (16) (55.2)OUH - Scarborough 15 4.8 3.9 13 4.0 5.1 2 15.4OUI - Scarborough Southwest 17 5.5 5.8 31 9.7 5.8 (14) (45.2)OUJ - Grange Bathurst St Lawrence 22 7.1 6.3 18 5.6 6.3 4 22.2OUK - Central Sherbourne 49 15.8 5.8 22 6.9 6.7 27 122.7OUL - Don Valley Beaches 16 5.1 5.2 25 7.8 5.2 (9) (36.0)OUM - Central Parliament 19 6.1 3.2 14 4.4 3.2 5 35.7

26 8.4 6.6 15 4.7 5.7 11 73.321 6.8 4.8 16 5.0 4.0 5 31.330 9.6 10.1 32 10.0 7.1 (2) (6.3)

Corporate Offices/Staff 1 0.3 N/A 5 1.6 N/A (4) 0.0Rent Supplement 5 1.6 N/A 7 2.2 N/A (2) (28.6)Non-TCHC 2 0.6 N/A 3 0.9 N/A (1) (33.3)Other Unknown 0 0.0 N/A 0 0.0 N/A 0 0.0

Total 'Net' Complaints 311 100.0 100.0 321 100.0 100.0 (10) (3.1)

OUW - Contract Managed WestOUX - Contract Managed CentralOUY - Contract Managed East

Complaints No. %

2016

Complaints No. %

2015 Change 2015 to 2016

means it is GREATER than

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Table 6Hotline Usage

- these two tables show how complainants have been accessing the Do What's Right Hotline- Table 6a analyzes whether or not complainants choose to remain anonymous- Table 6b shows how complainants access the Do What's Right Hotline (e.g. internet, telephone etc.)- Tables 6a and 6b are based on the 'gross' number of complaints received on the Do What's Right Hotline (refer Table 1)

No. % No. % No. %

Table 6a - Anonymous vs. Not Anonymous

Anonymous 194 82.9 262 82.6 (68) (26.0)

Not Anonymous 40 17.1 55 17.4 (15) (27.3)

234 100.0 317 100.0 (83) (26.2)

Table 6b - Method Used to Access Hotline

Internet 61 26.1 138 43.5 (77) (55.8)

Telephone 172 73.5 179 56.5 (7) (3.9)

Email 1 0.4 0 0.0 1 100.0

Letter 0 0.0 0 0.0 0 0.0

234 100.0 317 100.0 (83) (26.2)

2016 2015 Change 2015 to 2016

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Table 7Status of Complaints Received

'- for 'net' complaints received up to June 30th of the year noted, this sets out the status of the complaint as atSeptember 1, 2016

No. % No. % No. % No. %Tenants

Unreported Extra Members in Unit 2016 44 39.3 22 19.6 46 41.1 0 0.0

2015 81 58.3 43 30.9 15 10.8 0 0.0

Unit/Room Being Sublet 2016 23 25.8 26 29.2 39 43.8 1 1.1

2015 25 37.3 32 47.8 10 14.9 0 0.0

Unreported Income 2016 21 41.2 2 3.9 28 54.9 0 0.0

2015 25 43.1 18 31.0 15 25.9 0 0.0

Miscellaneous Fraud 2016 7 43.8 3 18.8 5 31.3 1 6.3

2015 4 40.0 4 40.0 2 20.0 0 0.0

Overhoused Unit 2016 4 57.1 3 42.9 0 0.0 0 0.0

2015 9 64.3 5 35.7 0 0.0 0 0.0

To Be AssignedComplaints Received

10

14

112

51

89

58

16

7



139

67

Unfounded FoundedClosed In Progress





Table 7 (cont'd)Status of Complaints Received

No. % No. % No. % No. %

Staff

Other 2016 11 55.0 4 20.0 5 25.0 0 0.0

2015 6 100.0 0 0.0 0 0.0 0 0.0

Waste 2016 0 - 0 - 0 - 0 -

2015 1 100.0 0 0.0 0 0.0 0 0.0

Contractor 2016 0 - 0 - 0 - 0 -

2015 0 - 0 - 0 - 0 -

Other 2016 0 0.0 1 100.0 0 - 0 -

2015 2 28.6 5 71.4 0 - 0 -

Total 2016 110 37.2 61 20.6 123 41.6 2 0.7

Total 2015 153 50.7 107 35.4 42 13.9 0 0.0

NB: 2016 and 2015 Total Complaints Received will not agree to Table 4 because this table does not include Staff Performance Complaintsnor Market Rent Complaints. These complaint types are automatically referred to an Operating Unit.

302

20

0

0

7

296

6

1

1

0

In Progress To Be AssignedComplaints Received Founded

ClosedUnfounded



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Internal Audit Report: TCHC Employees Who Are Also TCHC RGI Tenants Item 3B

October 19, 2016







Service Excellence:


PURPOSE: To provide the Building Investment, Finance and Audit Committee (the Committee) with

the Internal Audit report TCHC Employees Who Are Also TCHC RGI Tenants.

RECOMMENDATIONS: That the Committee receive the Internal Audit report TCHC Employees Who Are Also

TCHC RGI Tenants for information.

REASONS FOR RECOMMENDATIONS: Background

There are a number of Toronto Community Housing Corporation (TCHC) employees

who are also TCHC Rent-Geared-To-Income (RGI) tenants (Employee/Tenants).

The Internal Audit Department (IAD) wanted to determine if there are situations where

Employee/Tenants do not declare:

They were part of the RGI household; or

Their income from TCHC despite being on the TCHC lease.

Such a situation would pose a risk of fraud, as well as non-compliance with the Housing

Services Act, if RGI households that include TCHC staff are misrepresenting their

income. There would also be a reputational risk to the organization.

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Findings

A very small sample of Employee/Tenants did not declare their TCHC salary, or

increase in TCHC salary, for the purpose of their household’s RGI rent calculation. IAD

reported those exceptions TCHC management for resolution.

IAD also came across a number of administrative errors with respect to some

Employee/Tenant household RGI calculations and reported them to TCHC

management for resolution.

The main concern, however, is how should TCHC, which in these cases is both

employer and landlord, treat employees who are also members of a TCHC RGI

household with respect to disclosure of their employee’s income to their landlord.

This review raised a number of questions. For example, should TCHC:

As the employer, automatically disclose to TCHC, the landlord, the Employee/Tenant’s annual income for RGI rent calculations? Or not?

Perform an annual review of all Employee/Tenants to ensure that the appropriate income amounts have been reported?

Require all TCHC employees, regardless of where they live, to acknowledge an obligation to disclose their income to TCHC if they are, or become, RGI tenants in a TCHC unit?

Treat Employee/Tenants with the same privileges as other TCHC RGI tenants with respect to reporting income (which is self-reporting income as opposed to the tenants’ employer directly providing income information to TCHC)?

Receive a complaint (e.g. through the TCHC Do What’s Right fraud hotline) that alleges an Employee/Tenant has not declared their TCHC income for RGI rent calculations, should this be reviewed as an HR/employee matter or a landlord/tenant matter?

These are complex issues for which IAD does not have a solution. This report

recommends that management find them.

This report includes two Recommendations related to the queries noted above.

Management has agreed with our Recommendations. Management’s Action Plan with

respect to these Recommendations are included in this report.

IMPLICATIONS AND RISKS: It is a risk of fraud, as well as non-compliance with the Housing Services Act, if RGI

households that include TCHC staff are misrepresenting their income. There would also

be a reputational risk to the organization.

In addition, it is important that TCHC, the landlord and the employer, set out protocols

that will treat TCHC employees who are also RGI tenants with the same level of respect

accorded to other RGI tenants.

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SIGNATURE:

“Michael Vear”



ATTACHMENT: 1. Internal Audit Report: TCHC Employees Who Are Also TCHC RGI Tenants


416-981-4065

[email protected]

Genevieve Ségu, Manager Internal Audit

416-981-4397

[email protected]



Toronto Community Housing Corporation Internal Audit Department 1700 Finch Avenue East, Toronto ON M2J 4X8

TCHC Employees Who Are Also TCHC RGI Tenants

REPORT

September 7, 2016

Item 3B - BIFAC:2016-124


TCHC Employees Who Are Also TCHC RGI Tenants September 7, 2016

Page 1

Table of Contents EXECUTIVE SUMMARY ------------------------------------------------------------------------- 2

1.0 BACKGROUND ---------------------------------------------------------------------------- 4

2.0 ENGAGEMENT OBJECTIVES AND SCOPE -------------------------------------- 4

2.1 Engagement Objectives ------------------------------------------------------------- 4

2.2 Engagement Methodology and Scope ------------------------------------------ 4

3.0 DETAILED FINDINGS -------------------------------------------------------------------- 5

3.1 Non-Compliance with Income Reporting Requirements ----------------- 5

3.2 Sharing Payroll Information Between TCHC Departments -------------- 6

3.3 Complaints About TCHC Tenants Who Are Also TCHC Employees - 7

APPENDIX A: MANAGEMENT’S ACTION PLAN ---------------------------------------- 8




Page 2

EXECUTIVE SUMMARY

Background

There are a number of Toronto Community Housing Corporation (TCHC) employees who are also TCHC Rent-Geared-To-Income (RGI) tenants (Employee/Tenants).

The Internal Audit Department (IAD) wanted to determine if there are situations where Employee/Tenants do not declare:

• They were part of the RGI household; or • Their income from TCHC despite being on the TCHC lease.

Such a situation would pose a risk of fraud, as well as non-compliance with the Housing Services Act, if RGI households that include TCHC staff are misrepresenting their income. There would also be a reputational risk to the organization.

Findings

A small sample of Employee/Tenants did not declare their TCHC salary, or increase in TCHC salary, for the purpose of their household’s RGI rent calculation. IAD reported those exceptions TCHC management for resolution.

IAD also came across a number of administrative errors with respect to some Employee/Tenant household RGI calculations and reported them to TCHC management for resolution.

The main concern, however, is how should TCHC, which in these cases is both employer and landlord, treat employees who are also members of a TCHC RGI household with respect to disclosure of their employee’s income to their landlord.

This review raised a number of questions. For example, should TCHC:

• As the employer, automatically disclose to TCHC, the landlord, the Employee/Tenant’s annual income for RGI rent calculations? Or not?

• Perform an annual review of all Employee/Tenants to ensure that the appropriate income amounts have been reported?

• Require all TCHC employees, regardless of where they live, to acknowledge an obligation to disclose their income to TCHC if they are, or become, RGI tenants in a TCHC unit?

• Treat Employee/Tenants with the same privileges as other TCHC RGI tenants with respect to reporting income (which is self-reporting income as opposed to the tenants’ employer directly providing income information to TCHC)?

• Receive a complaint (e.g. through the TCHC Do What’s Right fraud hotline) that alleges an Employee/Tenant has not declared their TCHC income for RGI rent calculations, should this be reviewed as an HR/employee matter or a landlord/tenant matter?




Page 3

These are complex issues for which IAD does not have a solution. This report recommends that management find them.

We would like to take this opportunity to thank staff and management of the Legal, Asset Management and the Human Resources Departments for their cooperation and assistance during this audit.

CONTACT

Barb Kapeluch Business Analyst Internal Audit Department 416-981-4209 [email protected]

Genevieve Segu, CPA, CMA, CIA, CRMA, CISA Manager, Internal Audit Internal Audit Department 416-981-4397 [email protected]

Approved

Michael Vear, CPA, CA, CPA (Illinois) Chief Internal Auditor Internal Audit Department 416-981-4065 [email protected]




Page 4

1.0 BACKGROUND

According to the Housing Services Act (the Act), Housing Providers are required to review income of RGI households at least once every 12 months. The Act also states that households receiving RGI assistance must report any changes to the household composition, income and/or assets within 30 days of the change occurring.

There are a number of TCHC employees who are also TCHC RGI tenants (Employee/Tenants).

2.0 ENGAGEMENT OBJECTIVES AND SCOPE

2.1 Engagement Objectives

The objectives of this assignment were to determine if:

• Employee/Tenants in RGI units are declaring themselves as part of the household;

• Employee/Tenants are reporting TCHC income;

• Rent is being calculated properly for Employee/Tenant households; and

• There are opportunities for improvement, as appropriate.

2.2 Engagement Methodology and Scope

Our methodology included:

• Reviewing policies, procedures and forms relevant to the process;

• Analyzing data;

• Examining a sample of Employee/Tenant tenancy files; and

• Performing an analysis on our findings.

In 2014, out of the 1,540 employees working for TCHC, 5% (76) lived in a RGI unit managed by TCHC.

Internal Audit reviewed the tenant files of 15 units where an Employee/Tenant was identified. This represented approximately 20% of the identified Employee/Tenants. Since Internal Audit used a risk based approach to select the tenant files, the results of the audit are not to be extrapolated over the population of 76 employees that are also TCHC tenants.




Page 5

3.0 DETAILED FINDINGS

3.1 Non-Compliance with Income Reporting Requirements

Six of the fifteen (6/15) files reviewed were non-compliant with the income reporting requirements under the Act.

3.1.1 Salary Not Reported

Two households did not report the salary of the TCHC employee in the household’s income. IAD referred these two files directly to the Human Resources (HR) Department for review and follow up. 3.1.2 Increase in Income Not Reported

One household did not declare the increase in income of the TCHC employee included in the household.

Management has informed Internal Audit that they have updated the household’s rent calculation retroactively.

3.1.3 Delay in Reporting Increase in Income

Three households waited until their next rent review date to declare the income or increase in income of the TCHC employee included in the household instead of the required 30 days. Since then, two of the employees have left TCHC’s employment.

For these three files, Management has informed Internal Audit that they have updated the household’s rent calculation retroactively.

Risk of Data Manipulation

As a compensating exercise, we reviewed the names of the Employee/Tenants and compared them to the names of employees who have the ability to make changes in the system that charges the tenant’s account, Housing Management System (HMS).

None of these Employee/Tenants had or have access to changing data in the HMS system.

Lost Revenue

For the households in 3.1.1 and 3.1.2, Internal Audit estimated a potential revenue loss of approximately $15,300 for the year 2015.

Though the dollar amounts are not material to TCHC’s operations, there is a potential reputational risk, and also a possible loss of confidence from our clients and other stakeholders.




Page 6

3.2 Sharing Payroll Information Between TCHC Departments

As noted above, there were three instances where a TCHC employee who is a member of a TCHC RGI household did not follow the income reporting rules set out in the Act.

This raises the following questions:

• How does the corporation mitigate this risk? • Alternatively, should the corporation even be trying to mitigate this risk?

Direct Exchange of Information

By mitigating the risk, should there be an automatic exchange of the TCHC employee’s annual income information from the Payroll Department to the household’s Tenant Services Coordinator (TSC)1 to calculate the Employee/Tenant’s household’s Annual Review? When the employee receives an increase in salary, should this information be automatically shared with the TSC so that they can revise the rent calculation for the household?

The Honour System

Alternatively, the reporting of annual income by an RGI household, or increases in income, for purposes of RGI rent calculations is essentially based on the honour system. Within certain reporting requirements, RGI tenants will submit the requisite documents and information to their TSC. TCHC does not receive this information directly from the source of this income.

As such:

• Why should TCHC employees, who are also members of a RGI household, be treated any differently?

• Why should there be an automatic exchange of income information from their employer, which happens to be TCHC, to their landlord, which also happens to be TCHC. Should there not be an expectation that the Employee/Tenant will fully and timely report their income?

Another consideration, should all TCHC employees, regardless of where they live, be required to acknowledge an obligation to disclose their income to TCHC if they are, or become, RGI tenants in a TCHC unit?

We do not have the answer to these questions.

There are currently no policies or procedures in place to address the sharing of information about employees who are also RGI tenants of TCHC.

Recommendation #1

Management develop a policy and/or protocol with respect to the internal identification and sharing of annual income information between TCHC

1 Tenant Services Coordinators are responsible for calculating a household’s RGI rent amount.




Page 7

departments of TCHC employees who are also TCHC RGI tenants, if appropriate.

3.3 Complaints About TCHC Tenants Who Are Also TCHC Employees

Where it comes to management’s and/or staff’s attention that allegedly a RGI household:

• Does not appear to be declaring all of the household income; and/or • Includes a person who is not on the lease,

there are mechanisms and procedures in place to review such allegations.

If such a complaint is made about, or is related to, a TCHC employee who is also a member of an RGI household, the review of such an allegation becomes problematic, as there are no policies/procedures in place to follow. Is it a:

• Landlord/tenant matter (following the normal processes of a tenant complaint)? or

• Human Resources/Professional Conduct complaint?

And, depending on the answer, how and by whom should such a complaint be reviewed?

Again, we do not have the answer to these questions.

Recommendation #2

Management develop a policy and/or protocol with respect to the review of complaints received involving RGI tenants who are also TCHC employees and who allegedly:

• Did not disclose their TCHC income for RGI calculation purposes; or

• Have not been included on the household’s lease.




Page 8

APPENDIX A: MANAGEMENT’S ACTION PLAN

# Recommendation Agree/Disagree

Management’s Action Plan

Timeline

1 Management develop a policy and/or protocol with respect to the internal identification and sharing of annual income information between TCHC departments of TCHC employees who are also TCHC RGI tenants, if appropriate.

Agree A policy and/or protocol will be developed, taking into consideration such things as the Ontario Municipal Freedom of Information and Protection of Privacy Act (MFIPPA).

Q2-2017

2 Management develop a policy and/or protocol with respect to the review of complaints received involving RGI tenants who are also TCHC employees and who allegedly:

• Did not disclose their TCHC income for RGI calculation purposes; or

• Have not been included on the household’s lease.

Agree A policy and/or protocol will be developed, taking into consideration such things as MFIPPA.

Q2-2017



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Internal Audit Report: Rent Geared to Income Calculation 2015 Supplementary Report Item 3C

October 12, 2016







Service Excellence:



the Internal Audit report Rent Geared to Income Calculation 2015 Supplementary

Report.

RECOMMENDATIONS: That the Committee receive the Internal Audit report Rent Geared to Income Calculation

2015 Supplementary Report for information.


During their audit of Toronto Community Housing Corporation’s (TCHC) 2014 year-end

financial statements, TCHC’s auditors (PricewaterhouseCoopers (PwC)) noted errors

made in Rent-Geared-to-Income (RGI) rent calculations in 2013 and 2014.

Management rectified the identified errors and created an action plan approved by the

Board to prevent such errors from occurring in the future.

The Board also requested the Chief Internal Auditor to include RGI rent calculation

reviews as part of the Internal Audit Work Plan. The intent of the review was to conduct

of 3

an independent review of RGI calculations and support PwC’s 2015 year end audit

work.

PwC selected a sample of 100 RGI calculations throughout 2015 for their and IAD’s

review that was conducted in two phases:

First tranche, 75 files: In our October 20, 2015 report, Rent Geared to Income Calculation Review 20151, we reported on RGI calculations of 75 tenant files over the period of January 2015 to August 2015, inclusive; and

Second tranche: 25 files: This supplementary report sets out the results of our review of the remaining 25 RGI calculations for the period of September 2015 to December 2015.

Findings

In the current sample of 272 RGI calculations we found:

No instances where the RGI calculation resulted in an overcharge of rent to the tenant;

2 instances where the RGI calculation resulted in an undercharge of rent to the tenant; and

The net $ error rate amounted to 0.46% ($39 per month on a sample of $8,520 per month).

Similar to our previous report, we continued to find deficiencies in the availability of

supporting documentation for RGI calculations.

These findings were communicated to management.

No further recommendations are made in this report as we will follow-up in the fall of

2016 on the recommendations made in the October 2015 report.

IMPLICATIONS AND RISKS: The 2015 RGI calculation review program was developed to decrease the following risks to the Corporation:

Overcharging tenants;

Incurring revenue loss by undercharging tenants; and

Losing confidence from tenants, shareholders, and the public if all tenants are not treated fairly and not in alignment with its mandate.

1 This report was presented at the November 16, 2015 meeting of the Building Investment, Finance and Audit Committee. 2 This supplementary review was based on 27 tenant files with a RGI calculation during the time period of September 2015 to December 2015, inclusive. The sample size and actual files were selected by PwC and included 2 additional files to make up for the first sample where two tenants were market rent at the time of the review rather than being RGI tenants.

of 3

SIGNATURE:

“Michael Vear”



ATTACHMENT: 1. Internal Audit Report: Rent Geared to Income Calculation 2015 Supplementary

Report


416-981-4065

[email protected]


416-981-4397

[email protected]



Toronto Community Housing Corporation Internal Audit Department 1700 Finch Avenue East, Toronto ON M2J 4X8

Rent Geared to Income Calculation Review 2015

Supplementary Report

September 6, 2016

Item 3C - BIFAC:2016-125


Rent Geared to Income Calculation Review 2015 Supplementary Report

September 6, 2016 Page 1

EXECUTIVE SUMMARY

Background

During their audit of Toronto Community Housing Corporation’s (TCHC) 2014 year-end financial statements, TCHC’s auditors (PricewaterhouseCoopers (PwC)) noted errors made in Rent-Geared-to-Income (RGI) rent calculations in 2013 and 2014.

Management rectified the identified errors and created an action plan approved by the Board to prevent such errors from occurring in the future.

The Board also requested the Chief Internal Auditor to include RGI rent calculation reviews as part of the Internal Audit Work Plan. The intent of the review was to conduct an independent review of RGI calculations and support PwC’s 2015 year end audit work.

PwC selected a sample of 100 RGI calculations throughout 2015 for their and IAD’s review that was conducted in two phases:

• First tranche, 75 files: In our October 20, 2015 report, Rent Geared to Income Calculation Review 20151, we reported on RGI calculations of 75 tenant files over the period of January 2015 to August 2015, inclusive; and

• Second tranche: 25 files: This supplementary report sets out the results of our review of the remaining 25 RGI calculations for the period of September 2015 to December 2015.

Audit Objectives

In agreement with senior management, the objectives of this audit were to:

• Determine whether tenant RGI calculations were made in accordance with TCHC policies and procedures and relevant legislation;

• Ascertain the error rate of RGI calculations, based on a sample; • Assess the completeness of the rent review documentation; and • Identify opportunities for improvement, as appropriate.

Methodology and Scope

Our methodology included:

• Examining documents in a sample of tenant files; • Using an Audit tool designed by Internal Audit to verify RGI calculations; and • Performing an analysis on our findings.

This review was based on 27 tenant files with a RGI calculation during the time period of September 2015 to December 2015, inclusive. The sample size and actual files were selected by PwC and included 2 additional files to make up for the first sample where two tenants were market rent at the time of the review rather than being RGI tenants.

In making their sample selection PwC excluded tenant files from contract managed buildings (approximately 21% of TCHC’s tenants).

1 This report was presented at the November 16, 2015 meeting of the Building Investment, Finance and Audit Committee.





Terminology

For purposes of this report:

• An overcharge means that the RGI rent calculation resulted in the tenant being charged rent greater than what was supposed to be; and

• An undercharge means that the RGI rent calculation resulted in the tenant being charged rent less than what was supposed to be.

When this was first brought to management’s and the Board’s attention for fiscal 2014, it was decided that tenants reviewed in the sample who were:

• Overcharged would receive a refund of the amount overcharged retroactively for a two year period; and

• Undercharged would be charged the correct amount of rent on a go forward basis.

Findings

In the current sample of 27 RGI calculations we found:

• No instances where the RGI calculation resulted in an overcharge of rent to the tenant;

• 2 instances where the RGI calculation resulted in an undercharge of rent to the tenant; and

• The net $ error rate amounted to 0.46% ($39 per month on a sample of $8,520 per month).

Similar to our previous report, we continued to find deficiencies in the availability of supporting documentation for RGI calculations.

No further recommendations are made in this report as IAD will follow-up in the fall of 2016 on the recommendations made in the October 2015 report.

We would like to take this opportunity to thank staff and management in the following areas:

• Asset Management; • all of the Operating Units; and • Finance

for their cooperation and assistance during this audit.

Prepared by: Barb Kapeluch Business Analyst Internal Audit Department 416-981-4209 [email protected]

Reviewed by: Genevieve Segu, CPA, CMA, CIA, CRMA, CISA Manager, Internal Audit Internal Audit Department 416-981-4397 [email protected]





Approved

Michael Vear, CPA, CA, CPA (Illinois) Chief Internal Auditor Internal Audit Department 416-981-4065 [email protected]





DETAILED REPORT

1.0 RGI Calculations Compliance

Findings:

Errors Per Number of RGI Calculations Reviewed

With respect to the number of RGI calculations reviewed for the second stage review:

• No overcharges were detected; and • 2/27 files were noted as the TSC having undercharged the rent calculation.

Dollar Value of Errors Noted

• The following table summarizes the dollar value of the errors made in the second stage of the 2015 sample for undercharges, showing that the undercharges of $39 represent a 0.46% error rate ($39 per month on a sample of $8,520 per month).

In this table:

• $ Sample Error means the dollar amount of the rent calculation error for all of the errors noted for a one month period; and

• $ Sample Population means the dollar value of the monthly rent for all tenants included in the sample tested.

$ Rent

Undercharged

$ Sample error ($39)

$ Sample population $8,520

% Error (0.46%)

The nature of the errors found have been communicated to management for rectification and further training to staff.

Mitigation Strategy

When the matter of errors in RGI calculations arose with respect to the TCHC 2014 fiscal year end, the Board approved an action plan to address the issues raised.

Included in that action plan was the creation of the role of Administrative Audit Assistant (AAA) for each TCHC operating unit. The responsibilities of this position includes the review of all annual RGI calculations prior to the tenant being notified of same.

Although at the time of our review the AAAs were not yet fully deployed, management indicated that, as part of the AAA implementation, they are also tracking the nature of the errors in order to identify training needs.

2.0 Completeness of Rent Review Documentation

In our October 2015 report we noted a number of deficiencies in the availability of supporting documentation for RGI calculations.





In this supplementary review we continued to find deficiencies in appropriate documents to support the RGI calculations, such as:

• Missing documentation; • Documents other than those prescribed by the RGI Manual were used for rent

calculations; and • Missing signatures on the Income and Assets Review Form.

Although the poor documentation is not a direct link to calculation errors, we had to rely on previous rent reviews.

Mitigation Strategy

During the current review we obtained the necessary documentation to rectify some of those documentation deficiencies.

We also understand that the AAAs’ responsibilities includes obtaining adequate supporting documentation prior to processing Annual Rent Reviews.

3.0 Previous Recommendations Made

In our October 2015 report we made a number of recommendations with respect to RGI calculations and tenant file documentation.

We will report on the status of those recommendations as part of our annual follow up review of recommendations made in Internal Audit reports.



Toronto Community Housing Corporation

Internal Audit Department

1700 Finch Avenue East, Toronto ON M2J 4X8

Contract Managed Buildings Audit

REPORT

October 6, 2016

Item 3D - BIFAC:2016-137


Contract Managed Buildings Audit October 6, 2016

Page 1

Table of Contents

EXECUTIVE SUMMARY -------------------------------------------------------------------------------- 2

Background ---------------------------------------------------------------------------------------------- 2

Audit Objectives ----------------------------------------------------------------------------------------- 2

Methodology and Scope ------------------------------------------------------------------------------ 2

Findings --------------------------------------------------------------------------------------------------- 3

1.0 OPERATIONAL KEY PERFORMANCE INDICATORS --------------------------------- 5

1.1 Vendors’ compliance with Key Performance Indicators ------------------------------ 5

1.2 Key Performance Indicators (KPI) -------------------------------------------------------- 6

2.0 RECORDS RETENTION ------------------------------------------------------------------------ 7

3.0 CONTRACT MANAGED VENDOR BUDGETS ------------------------------------------- 8

3.1 Annual Budgets -------------------------------------------------------------------------------- 8

3.2 Operating vs. Capital Expenses ----------------------------------------------------------- 8

3.3 Monitoring Budget Variances -------------------------------------------------------------- 9

3.4 Periodic Assessment of Savings Realized ---------------------------------------------- 9

4.0 TCHC RESOURCES REQUIRED TO ADMINISTER CM CONTRACTS ---------- 10

5.0 CONTRACT MANAGED BUILDINGS – THE VALUE PROPOSITION ------------ 10

APPENDIX A: MANAGEMENT’S ACTION PLAN ----------------------------------------------- 12




Page 2

EXECUTIVE SUMMARY

Background

Subsequent to a public Request for Proposal (RFP) process, in 2012 TCHC entered into contracts with third party property managers to subcontract property management of 12,017 units in 58 communities, including 2 seniors’ buildings1. This was the continuation of a property management subcontract program from prior years. These buildings are known throughout TCHC as the ‘contract managed buildings’ (CM buildings).

Prior to TCHC issuing the next RFP for contract managed buildings, management asked Internal Audit to do a review of the contract managed buildings.

The signed contract (CM contract) for each of the four vendors (the CM vendors) selected includes a right-of-audit as well as full access to the premises. This is the first time TCHC exercised the right-of-audit. All agreements are for three years, plus two one-year renewals. As at the date of this report, the agreements with the CM vendors are in the last one-year renewal period.

The CM buildings contracts are administered and monitored by the TCHC Contract, Compliance & Delivery Unit (CM Unit) of the Asset Management Department.

Audit Objectives

The objectives of this assignment were to provide CM vendors and TCHC management with an objective and independent assessment of the vendor’s compliance with the terms of the contract in the following areas:

• Rent Geared to Income (RGI) calculations; • Finance; • Work orders; and • Daily operations of the buildings.

In addition, we looked at the content and effectiveness of the following during the course of our review:

• The Corporation’s RFP and CM contracts; and • Key Performance Indicators.

Resources did not permit us to review arrears, vacancy management, and annual unit inspections of the CM buildings.

Methodology and Scope

Our methodology included, but was not limited to:

• Reviewing policies, procedures and forms relevant to the process; • Interviewing staff; • Examining documents; and • Performing analytical work.

1 In 2012, via a RFP, 427 additional units were added to the CM building portfolio to bring the number of units in the CM building portfolio to 12,444.




Page 3

Sample sizes for work order and RGI calculations assessment were identical for each vendor. Samples were chosen randomly.

Sample sizes were chosen to provide an indication of a vendor's (i) compliance or non-compliance with certain terms of the contract and (ii) ability to meet certain performance measurements. As such, we caution the reader that there are inherent limitations in the results set out in this document.

Findings

Vendor Performance

We found that the CM vendors:

• Were not in compliance with the Key Performance Indicators (KPIs) that we reviewed; and

• Consistently exceeded annual operating budgets.

Key Performance Indicators

With respect to the KPIs we reviewed we found that:

• Some of the KPI targets for the CM vendors were unrealistic and generally unachievable;

• We also found that some KPI targets for direct managed buildings were not met by TCHC;

• There were KPIs not included in the CM contract that should possibly be included in the next RFP process for CM buildings; and

• The KPIs set out for the CM buildings were not necessarily in alignment with the KPIs used for direct managed buildings.

Some of these observations are in alignment with the findings contained in the final report from the Mayor’s Task Force on Toronto Community Housing2, in particular Recommendation 26:

That (TCHC) review current private sector management contracts adopting clear performance standards to ensure equity in tenant services, adequate small capital repairs and fair wages for staff...

Vendor Operating Budgets

CM vendor budgets did not include a budget for capital expenditures as TCHC is responsible for capital expenditures.

More importantly, there was no clear direction from TCHC to the CM vendors on the delineation between operating expenses and capital expenses. As such, there is an incentive for CM vendors to delay making operating repairs so that operating repairs turn into a capital expenditure.

TCHC Administration, Monitoring, and Performance Assessment of the CM Contracts

We found that there was insufficient monitoring and review by TCHC over the course of the CM contracts of:

2 Transformative Change for TCHC, A Report From the Mayor’s Task Force on Toronto Community Housing January 26, 2016




Page 4

• CM vendors not achieving KPI targets; and • CM vendor budget over spending.

In addition, to our knowledge, over the course of the CM contracts there has been no effective reporting about the savings that have been achieved by using CM vendors.

There is a cost in staff resources to effectively administer, monitor, and assess the performance of the CM vendors. We are not convinced that this function has been adequately resourced.

The Value Proposition in Having Contract Managed Buildings

The value proposition with respect to having CM buildings must take into consideration not only the financial aspects of the contracts (including the cost of administering the contracts), but also other things such as the quality of customer service provided, and the level of customer satisfaction upon receiving those services.

We have recommended that a thorough review of the ‘CM building value proposition’ be made prior to issuing the next RFP for CM buildings.

Recommendations

We have made six Recommendations in this report to address the matters noted above.

More importantly, the Recommendations in this report address issues relating to

(i) The development, structure and oversight of the current CM contract for the purpose of strengthening the accountability of a future contract, as well as

(ii) Addressing the value for money and strategic implications of the CM building initiative.

Management’s Action Plan with respect to our Recommendations is attached to this report as Appendix A.

As well, the CM vendors have acknowledged our detailed findings, and the CM Unit has indicated that improvements have been ongoing.

We would like to take this opportunity to thank the staff and management of the TCHC Asset Management Department, particularly the CM unit, and the Finance Department for their cooperation and assistance during this audit.

The same appreciation is extended to the CM vendors’ site staff and Head Office staff. Prepared by: Genevieve Segu, CPA, CMA CIA CRMA CISA Manager, Internal Audit Approved by: Michael Vear, CPA, CA, CPA (Illinois) Chief Internal Auditor, Internal Audit Department




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1.0 OPERATIONAL KEY PERFORMANCE INDICATORS

1.1 Vendors’ compliance with Key Performance Indicators

We reviewed three KPIs for all CM vendors:

• Work Order Completion; • Building Condition; and • RGI Calculation.

The Work Order and Building Condition KPIs are important because they mitigate the risk that the building could further deteriorate, causing potential injury or damage to occupants, staff or visitors.

The RGI calculation KPI is important to mitigate the reputational risk that tenants are not treated in a fair and consistent manner. There is also a financial risk that the RGI revenue is not properly calculated.

As summarized in Table 1 below, the CM vendors, for the most part, have difficulties achieving the KPIs as set out in the contract, although their performance varies across the KPIs examined. Notably, we found one company standing out as being the best performer across all 3 KPIs, and one, at the other end of the spectrum, standing out as being the weakest performer across the 3 KPIs reviewed.

We identified significant weaknesses in two areas: Work Order Completion and RGI Calculations and we have provided our detailed findings to each vendor for their resolution.

Table1: CM Vendors compliance with KPIs

Definition KPI Result

Work Orders

% of the 50 work orders sampled for each vendor that were compliant with the timelines for resolution of the work orders:

• 24 hours for essential repairs; and

• 5 days for other categories of repairs.

80% Only one vendor was compliant.

The others ranged between 64% and 72%.

Building Condition

% of the 158 items on the TCHC CM Unit building assessment checklist that are completed (observed by IAD and a Community Housing Supervisor for two buildings for each vendor). The items related to the buildings’ exterior and interior (though not the tenant units).

100% None of the vendors met the required KPI for building conditions (100%).

The compliance rates ranged from 81% to 95%.




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RGI calculations

% of 15 files for each vendor that were in compliance with the requirements for RGI calculations and documentation.

100% Only one vendor was compliant.

The others ranged between 73% and 93%.

At the time of this report, the TCHC CM Unit is actively following up with the CM vendors on the resolution of our detailed findings for Building Operations and RGI Calculations.

1.2 Key Performance Indicators (KPI)

As part of the scope of the review, and in order to understand the vendors’ non-compliance, we then looked at some of the KPIs contained in the RFP.

Developing realistic and achievable KPIs

As noted in Table1 above, with respect to the three KPIs we reviewed:

• Only one CM vendor was compliant with the Work Order completion KPI of 80% work orders completed within the requisite timelines; and

• Only one CM vendor was compliant with the RGI calculation KPI of 100% accuracy.

For buildings that are directly managed by TCHC, there were also difficulties in meeting the following KPI targets:

• Work Order completion: in August 2015 none of the direct managed operating units met the KPI of 80% work orders being completed within 5 business days; and

• RGI Calculations: for the year ending December 31, 2015, none of the direct managed operating units reached the KPI of 100% RGI calculation accuracy3.

These findings are an indication that the evaluation of the performance of both direct managed buildings and CM buildings might not be based on realistic and/or achievable targets.

Establishing all relevant KPIs

We found that TCHC did not establish performance indicators, reporting frequencies and targets to measure some other CM Contract items, such as:

• Measuring vendor’s performance e.g. o number and type of tenant complaints; o length of time to respond to tenant complaints (monthly); o tenant satisfaction; o % of repairs completed on time; and average # of days to complete

repairs; and

3 During the external audit of TCHC’s 2015 financial statements, the external auditors found that there was inaccuracy in the RGI calculation process (though within an acceptable level with respect to materiality on TCHC’s financial statements).




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• Meeting TCHC’s Green Plan goals for energy and water conservation, waste reduction and diversion as set out in the 2012 RFP.

Periodic monitoring of KPIs

Out of the three KPIs that we reviewed, we found that TCHC does not monitor them equally, as follows:

• Work Orders are monitored and their completion status are discussed monthly with each CM vendor;

• The building inspections are performed once a year; and • RGI calculations are not reviewed.

Recommendation #1

TCHC Asset Management:

a) Review currently used operating unit KPIs to ensure that they are adequate and relevant for performance monitoring purposes, and achievable. Develop new KPIs as required;

b) Align KPIs for CM vendors with those of direct managed buildings; c) Review the KPIs periodically to ensure they are remain adequate and

relevant; and d) Periodically monitor performance results of KPIs for CM vendors.

2.0 RECORDS RETENTION

In order to establish that the proposed cost saving targets for the 2012 CM contract awards were reasonable, we sought to review the supporting documentation of the information that was presented to, and approved by, the TCHC Board of Directors (the Board) when they approved the 2012 CM contract awards to the four vendors.

Other than the documents that were presented to the Board, TCHC Management was not able to provide us with:

• A business case or other information that outlined the objectives, background, and rationale for the decision to continue to contract out the management of some of TCHC’s properties; and

• Information to support the basis on which the net savings identified in the report to the Board were developed.

As such, we were unable to ascertain the reasonableness of the net cost savings that were estimated to be achievable by using CM vendors.

We have no reason to believe that the aforementioned documents, information, and analysis do not exist. Simply, management could not find it.

We were able to establish that this stems from a lack of succession planning with respect to institutional knowledge and records retention, as follows:

• The staff who performed the requisite analysis, developed the 2012 RFP, analysed and recommended the CM contract awards, and implemented the CM vendor contracts are no longer with the organization; and




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• The individuals who have administered, or who are now currently administering, the CM Vendor contracts were/are not in possession of the information necessary to support the 2012 business case(s) related to the contract.

Recommendation # 2

For future CM contract awards TCHC Management establish a central repository ensure that, at a minimum, the following information and documentation is properly stored and/or archived:

a) The rationale and justification for the contract, documented in an approved business case. The documentation should include the assumptions, data and information used to identify any savings or benefits;

b) Benchmarks and processes to monitor, assess and report on whether the benefits/savings are being achieved; and

c) Key documents and related supporting documents that must be retained; their format (paper and/or electronic) and retention periods.

Such repository should have restricted (i) access to its contents and (ii) ability to delete records from it.

3.0 CONTRACT MANAGED VENDOR BUDGETS

3.1 Annual Budgets

Each CM vendor submits an annual operating budget that is approved by TCHC management. The budgets include such items as maintenance and repairs, supplies, and such other operating expenses.

With the exception of one vendor in the first year of the contract, all of the vendors exceeded their budget in each of the contract years.

3.2 Operating vs. Capital Expenses

TCHC is responsible for capital expenses in CM buildings. The CM vendor budgets include only operational expenditures.

A difficulty arises because the CM vendor contracts and budgets do not include a clear policy, guidelines or other criteria to enable the CM vendor to determine when an expenditure is to be classified as a capital item.

In fact, it was determined from discussions with the CM vendors, some capital expenses were being charged to the CM vendors’ operating budgets, which resulted in overspending of the annual budget.

Though since the audit commenced TCHC provided capital expense guidelines to the CM vendors, throughout most of the contract the CM vendors were using their own capital policy.

This lack of distinction between operating and capital expenditures leaves TCHC open to potential budget manipulation, erosion of potential cost savings, and ineffective use of public funds. In particular, the structure of the CM vendor contracts is such that it incentivises CM vendors not to complete maintenance repairs, which would come out of their operating budgets, but rather convert said expenditures into capital expenses,




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Recommendation # 3

For future CM contract awards TCHC Management, in developing the budget requirements for the CM vendors:

a) Update the Internal Capital Expense framework to include clear policies, guidelines, and thresholds and provide the updated document to each vendor; and

b) Ensure that the operating budget and capital plan takes into consideration the work that will be required to maintain and/or refurbish the aging buildings in the vendors’ portfolio.

3.3 Monitoring Budget Variances

The CM vendors’ property accountant prepares monthly financial reports on the significant budget variances and forwards them to TCHC CM Unit Manager. During the course of the contract, however:

• TCHC did not enforce the CM vendors’ compliance with their respective budgets. That is, any over-budget spending was not actively resolved by management; and

• TCHC did not exactly know the source of the overspending. It was represented to us that during the term of the contract, the CM unit’s corrective actions were to identify and report to the CM Vendors their concerns with their overspending and attempt to resolve financial issues relating to capital as they came up. We could not obtain supporting documents for such analysis or whether the vendors were asked for an explanation of their variance.

Senior Management acknowledges that the cross functional nature of contract management and finance, along with the lack of proper and/or adequate staffing complement, are contributing factors of the break down in the accountability for the financial aspects of the contract.

3.4 Periodic Assessment of Savings Realized

Throughout the term of the current CM vendor contracts, we are not aware of any meaningful assessment by management of the savings realised, or not, by using CM vendors to operate the CM buildings.

Recommendation # 4

With respect to the CM vendor contracts, TCHC Management develop a process to, periodically throughout the year, report on:

a) The CM vendors’ financial performance (e.g. budget to actual expenses, capital vs. operating expenditures, etc.); and

b) The savings realised by TCHC through using CM vendors to operate the CM buildings.




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4.0 TCHC RESOURCES REQUIRED TO ADMINISTER CM CONTRACTS

In this report we have noted that:

• All KPIs necessary to assess the performance of the CM vendors are not necessarily being monitored;

• There is no internal review of RGI calculations made by the CM vendors; • Budget overspending is not being reviewed nor resolved in a meaningful way to

determine root-cause reasons behind the overspending; • There has been no determination of any savings realised through the use of CM

vendors to manage the CM buildings; and • There does not appear to be a true cross functional relationship between the CM

Unit and Finance staff, which would provide for more meaningful and effective administration, monitoring, and assessment of the CM contracts.

We do recognize that at the time of this audit, the CM unit did not have its full complement of staff in place.

We do, however, question whether the complement of staff assigned to properly administer, monitor, and assess performance of the CM contracts (as noted above) is sufficient.

There is a risk that public funds are not being used economically or effectively, resulting in a negative impact on the public’s perception of the vendors, TCHC and their reputations.

Recommendation # 5

With respect to CM vendor contracts, TCHC Management

a) Formally align responsibility for all aspects of the CM vendor contracts (administration, monitoring, performance assessment, RGI calculation reviews, financial performance, etc.) under one unit; and

b) Assess the staffing complement required to properly and adequately administer, monitor, and assess performance of the CM vendor contracts, and staff accordingly.

5.0 CONTRACT MANAGED BUILDINGS – THE VALUE PROPOSITION

A key purpose of entering into contracts with third party vendors to operate a portfolio of TCHC buildings was to realise cost savings, which could then be used towards operational and capital repairs on its buildings.

We have noted in this report the challenges experienced by TCHC with respect to this program.

What has not been addressed is the value proposition of entering into these third party contracts.

There are two parts of this value proposition:

Financial

Has money actually been saved? To our knowledge there has been no meaningful reporting on what has been saved by using the CM vendors.




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Does the required internal cost of monitoring CM contract performance take away from any savings realised?

Customer Service and Satisfaction The value of the CM initiative must be assessed in tandem with the quality of customer service provided, and the customer satisfaction with the services provided. Simply – what was the value of the initiative compared to the money spent?

Though we have not reviewed these items in this engagement, we note that TCHC Client Satisfaction surveys conducted in both 2012 and in 2015 indicated an inequitable service delivery between CM buildings and direct managed buildings, where CM clients rated their satisfaction as lower than direct managed clients.

TCHC management has indicated that they are currently reviewing both financial information over the life of the contract as well as more detailed customer satisfaction ratios.

Lastly, from a purely strategic standpoint, TCHC, over the years, has built its operations to increase its competency to directly service its tenants. This competency was subcontracted to CM vendors who were globally not compliant and over budget. This might pose an operational and reputational risk to TCHC.

TCHC should strive to use leading practices in order to reduce operational, financial and reputational risk with respect to utilizing CM vendors to operate and maintain the CM units.

Recommendation # 6

TCHC Management consider the value for money proposition and strategic implications of the CM buildings initiative prior to issuing the next RFP for CM vendors.




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APPENDIX A: MANAGEMENT’S ACTION PLAN


Management’s Action Plan Timeline

1 TCHC Asset Management:

a) Review currently used operating unit KPIs to ensure that they are adequate and relevant for performance monitoring purposes, and achievable. Develop new KPIs as required;

b) Align KPIs for CM vendors with those of direct managed buildings;

c) Review the KPIs periodically to ensure they are remain adequate and relevant;

d) Periodically monitor performance results of KPIs for CM vendors.

Agree New realistic KPIs, aligned with TCHC direct-management operations, will be included as part of new RFP. Vendors will be evaluated on their performance against the KPIs, with incentives for exceeding the KPI targets and liquidated damages for not meeting the targets.

Issuance of RFP (Prior to December 31, 2016)

2 For future CM contract awards TCHC Management establish a central repository ensure that, at a minimum, the following information and documentation is properly stored and/or archived:

a) The rationale and justification for the contract, documented in an approved business case. The documentation should include the assumptions, data and information used to identify any savings or benefits;

b) Benchmarks and processes to monitor, assess and report on whether the benefits/savings are being achieved; and

Agree Business case for contract management to be provided to the Business, Investment, Finance, and Audit Committee on October 19, 2016. Benchmarks and KPIs to monitor CM vendors to be included a part of new RFP to be issued in 2016. Repository for documents, with restricted access, completed.

October 19, 2016 for repository and business case. December 31, 2016 for Benchmarks and KPIs (as part of new RFP).




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c) Key documents and related supporting documents that must be retained; their format (paper and/or electronic) and retention periods.

Such repository should have restricted (i) access to its contents and (ii) ability to delete records from it.

3 For future CM contract awards TCHC Management, in developing the budget requirements for the CM vendors:

a) Update the Internal Capital Expense framework to include clear policies, guidelines, and thresholds and provide the updated document to each vendor; and

b) Provide the successful candidates with a detailed operating budget and capital plan that takes into consideration the work that will be required to maintain and/or refurbish the aging buildings in the vendors’ portfolio.

Agree New Capital Repair Guidelines developed and provided to all CM vendors. Structure of new RFP will ensure that future operating and capital budgets align with operational needs.

Completed. December 31, 2016 for Benchmarks and KPIs (as part of new RFP).

4 With respect to the CM vendor contracts, TCHC Management develop a process to, periodically throughout the year, report on:

a) The CM vendors’ financial performance (e.g. budget to actual expenses, capital vs. operating expenditures, etc.); and

Agree New reporting protocols to be developed to report on contract-management performance to the Board of Directors. The reports will include:

- Financial performance of CM vendors relative to budget; and

June 30, 2017




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b) The savings realized to TCHC by using CM vendors to operate certain TCHC buildings.

Financial performance of CM vendors relative to direct-managed properties.

5 With respect to CM vendor contracts, TCHC Management

a) Formally align responsibility for all aspects of the CM vendor contracts (administration, monitoring, performance assessment, RGI calculation reviews, financial performance, etc.) under one unit;

b) Assess the staffing complement required to properly and adequately administer, monitor, and assess performance of the CM vendor contracts, and staff accordingly.

Agree Assessment of requirements to monitor CM vendor contracts is ongoing. The assessment involves evaluating resources to monitor the CM vendors under the framework of the new contracts.

May 1, 2017

6 TCHC Management consider the value for money proposition and strategic implications of the CM buildings initiative prior to issuing the next RFP for CM vendors.

Agree Action is completed and business case for contract management to be provided to the Business, Investment, Finance, and Audit Committee on October 19, 2016.

October 19, 2016



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Internal Audit Report: Contract Managed Buildings Audit Item 3D

October 19, 2016





Date: October 11, 2016


Quality Homes:

Improve Building Conditions

Maintain the Condition and Quality of New and Repaired Buildings

Service Excellence:




the Internal Audit report Contract Managed Buildings Audit.

RECOMMENDATIONS: That the Committee receive the Internal Audit report Contract Managed Buildings Audit.


Subsequent to a public Request for Proposal (RFP) process, in 2012 TCHC entered

into contracts with third party property managers to subcontract property management

of 12,017 units in 58 communities, including 2 seniors’ buildings1. This was the

continuation of a property management subcontract program from prior years. These

1 In 2012, via a RFP, 427 additional units were added to the CM building portfolio to bring the number of units in the CM building portfolio to 12,444.

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buildings are known throughout TCHC as the ‘contract managed buildings’ (CM

buildings).

Prior to TCHC issuing the next RFP for contract managed buildings, management

asked Internal Audit to do a review of the contract managed buildings.

The signed contract (CM contract) for each of the four vendors (the CM vendors)

selected includes a right-of-audit as well as full access to the premises. This is the first

time TCHC exercised the right-of-audit.

Findings

Vendor Performance

We found that the CM vendors:

Were not in compliance with the Key Performance Indicators (KPIs) that we reviewed; and

Consistently exceeded annual operating budgets.

Key Performance Indicators

With respect to the KPIs we reviewed we found that:

Some of the KPI targets for the CM vendors were unrealistic and generally unachievable;

We also found that some KPI targets for direct managed buildings were not met by TCHC;

There were KPIs not included in the CM contract that should possibly be included in the next RFP process for CM buildings; and

The KPIs set out for the CM buildings were not necessarily in alignment with the KPIs used for direct managed buildings.

Some of these observations are in alignment with the findings contained in the final report from the Mayor’s Task Force on Toronto Community Housing2, in particular Recommendation 26:

That (TCHC) review current private sector management contracts adopting clear performance standards to ensure equity in tenant services, adequate small capital repairs and fair wages for staff...

Vendor Operating Budgets

CM vendor budgets did not include a budget for capital expenditures as TCHC is

responsible for capital expenditures.

More importantly, there was no clear direction from TCHC to the CM vendors on the

delineation between operating expenses and capital expenses. As such, there is an

2 Transformative Change for TCHC, A Report From the Mayor’s Task Force on Toronto Community Housing January 26, 2016

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incentive for CM vendors to delay making operating repairs so that operating repairs

turn into a capital expenditure.

TCHC Administration, Monitoring, and Performance Assessment of the CM Contracts

We found that there was insufficient monitoring and review by TCHC over the course of

the CM contracts of:

CM vendors not achieving KPI targets; and

CM vendor budget over spending.

In addition, to our knowledge, over the course of the CM contracts there has been no

effective reporting about the savings that have been achieved by using CM vendors.

There is a cost in staff resources to effectively administer, monitor, and assess the

performance of the CM vendors. We are not convinced that this function has been

adequately resourced.

The Value Proposition in Having Contract Managed Buildings

The value proposition with respect to having CM buildings must take into consideration

not only the financial aspects of the contracts (including the cost of administering the

contracts), but also other things such as the quality of customer service provided, and

the level of customer satisfaction upon receiving those services.

We have recommended that a thorough review of the ‘CM building value proposition’ be

made prior to issuing the next RFP for CM buildings.

Recommendations

We have made six Recommendations in this report to address the matters noted above.

More importantly, the Recommendations in this report address issues relating to

(i) The development, structure and oversight of the current CM contract for the

purpose of strengthening the accountability of a future contract, as well as

(ii) Addressing the value for money and strategic implications of the CM building

initiative.

Management’s Action Plan with respect to our Recommendations is attached to this

report as Appendix A.

IMPLICATIONS AND RISKS: In the contract managed buildings program there is a risk that public funds are not being

used economically or effectively, resulting in a negative impact on the public’s

perception of the contract vendors, TCHC, and their reputations.

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SIGNATURE:

“Michael Vear”



ATTACHMENT: 1. Internal Audit Report: Contract Managed Buildings Audit


416-981-4065

[email protected]


416-981-4397

[email protected]



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