Ministry of Municipal Affairs and Housing Independent ... · 3/17/2016 · deliver end-to-end...

Ministry of Municipal Affairs and Housing

Independent Review for Housing Services Corporation andits Subsidiaries

Report

by

Weiler & Company

Guelph, Ontario

March 17, 2016

Housing Services CorporationReport by Weiler & CompanyMarch 17, 2016

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INDEX

Page

Executive Summary 3

Objectives and Scope 8

Work Performed 9

Board Remuneration and Board and Employee Expenses 10

HSC Subsidiaries and Related Companies 11

Investment in CIH Canada Inc. (formerly 1891387 Ontario Inc.) 16

Procurement and Contract Management Protocol Policies 17

Other Observations 18

HSC’s Action Plan to Implement the June 1, 2015 Weiler Report 19

Appendices:

Appendix 1 – Board of Director Remuneration Policies

Appendix 2 – Board of Director Expenses Policies

Appendix 3 – Employee Business Expenses Policies

Appendix 4 – Subsidiary Structure

Appendix 5 – Procurement and Contract Management Protocol Policies

Appendix 6 – HSC Action Plan to Implement June 1, 2015 Weiler ReportRecommendation


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EXECUTIVE SUMMARY

Weiler & Company was engaged by the Ministry of Municipal Affairs and Housing (“MMAH”)to review the response and action plans to implement recommendations from the June 1, 2015Weiler Report on the independent review of Housing Services Corporation (“HSC”) and itsSubsidiaries. As part of HSC’s commitment to be more open, transparent and accountable, HSCrequested MMAH to facilitate this independent third party review. MMAH selected Weiler &Company through a competitive bid process.

This follow up to the 2015 review focused on the following:

· Identifying and documenting the implementation of the recommendations of the WeilerReport;

· Confirming and updating the status and documenting the plans by HSC to wind-up itssubsidiary corporations that no longer serve an integral business purpose;

· Reviewing and documenting revisions to current policies (if any) and confirming currentpractices regarding remuneration and expenses paid to employees and board members forHSC and its subsidiary and related companies;

· Reviewing and documenting revisions to current policies (if any) and confirming currentpractices regarding remuneration/compensation and payment of expenses in relation toHSC subsidiaries, including payments to any employees or board members of either HSCor the subsidiaries over the past two years; and

· Reviewing and documenting revisions to current policies (if any) and confirming currentpractices regarding procurement and contract management protocols.

Based on documentation examined in this review, it is our opinion that HSC has satisfactorilyresponded to the June 1, 2015 Weiler Report recommendations and HSC has implemented:

· Board oversight and funding approval for CIH Canada Inc.;· Board oversight and funding approval for Encasa Financial Inc.; and· Amendments to the procurement and contract management protocol policies to apply to

all wholly-owned or controlled subsidiary corporations.

For the year ended December 31, 2015, we also conclude that HSC was in compliance with its:

· Director Remuneration and Expense Policy;· Employee Expense Policy; and· Procurement and Contract Management Protocol Policies.

During the period under this follow-up review we note that HSC continues to take steps toimprove its efficiency through targeted expenditure controls. For example, the totalremuneration for Directors and Officers decreased by 23% and Director and Officers expenses


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decreased by 37% in 2015. We encourage HSC to continue to be vigilant for opportunities tofurther reduce expenditures.

HSC has instituted revised policies enhancing the accountability of its subsidiary and relatedcompanies and to align their policies with those of HSC. HSC continues to be in the process ofwinding up subsidiary companies that no longer serve an integral business purpose.

In an effort to improve transparency, HSC now discloses on its web-site totals of remuneration,taxable benefit and expenses paid to board of directors and senior management in the 2012, 2013and 2014 years. For 2014, HSC has disclosed on its web site the top five reimbursed employeeswith the Travel and Expense total for 2014 for each of the five.

In 2015 and 2016, scanned detailed quarterly receipts supporting the travel expenses reimbursedto all senior management and officers, appropriately redacted for privacy purposes, are availableon the web-site at http://www.hscorp.ca/about-hsc/how-we-work/expense-and-remuneration/

Director Remuneration and Director and Employee Expenses

Effective January 1, 2015, HSC has instituted a new policy on Director remuneration and aDirector and Employee expense policy which substantially reduces remuneration paid to thedirectors of HSC and its subsidiaries and brings the amounts that Directors and Employees areallowed to claim for expenses in line with the Province of Ontario Management Board ofCabinet “Travel, Meal and Hospitality Expenses Directive”.

The new Director remuneration for meetings provides for board members to receive $150 perday; vice-chair $175; chair - $225. The new policy also states that the annual directorremuneration cannot exceed $12,000 for the chair; $9,000 for the vice-chair; and $6,000 forboard members. Encasa’s policy is somewhat different. Encasa directors are remunerated $250per meeting and the Chair of the Board also receives an additional $5,000 per annum. Two ofthe four Directors of Encasa currently have chosen not to take remuneration. Remuneration forthe Director representing HSC on Encasa’s Board of Directors is paid directly to HSC rather thanto the Director.

HSC’s expense policy for meals provides for reimbursement of amounts not to exceed $8.75 forbreakfast, $11.25 for lunch and $20.00 for dinner. Encasa’s expense policy for meals allows forreimbursement at an amount higher than HSC’s policy. Encasa’s policy provides forreimbursement of amounts not to exceed $10 for breakfast, $15 for lunch and $25 for dinner.


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Subsidiary and Related Companies

HSC currently has three 100% owned and controlled subsidiaries;

· HSC Insurance Inc. (“HSC Insurance”) which operates as an insurance sub-broker;· 2242392 Ontario Inc. (“g3”) which provided property construction and management

services related to energy conservation, but is currently inactive; and· Green Light On A Better Environment (Globe) Inc. (“Globe”) which provides energy

conservation programs.

HSC has initiated the process to dissolve g3 and Globe.

HSC holds 100% of the issued shares of CIH Canada Inc. (“CIH”), but The Chartered Institute ofHousing (“CIH UK”) holds an option to acquire 50.1% of the shares at any time for a nominalpurchase price. As a result, HSC effectively holds a 49.9% interest in CIH. CIH was formed toadvance the principles of housing education, accreditation and membership in Ontario and inother provinces.

HSC previously held a 66.7% interest in Asset Management Centre Inc. (“AMC”) which hasbeen inactive since 2012. AMC was dissolved in 2015.

HSC currently holds a 40% interest in Encasa Financial Inc. (“Encasa” formerly called SHSCFinancial Inc. (“SHSCFI”)). Prior to September 30, 2014, HSC owned 100% of SHSCFI. Onthat date HSC sold 20% of SHSCFI to each of the following organizations:

· Co-operative Housing Federation of Canada;· Co-operative Housing Federation of BC; and· BC Non-profit Housing Association.

On November 4, 2014, SHSCFI changed its name to Encasa Financial Inc. Encasa is anInvestment Fund Manager licensed by the Ontario Securities Commission and manages capitalreserves for prescribed social housing providers in Ontario. Since September 30, 2014, Encasa isoffering similar services to social housing providers in British Columbia. Although HSC holds40% of the shares, it appoints one of four directors and that director has only one vote of four.

Refer to Appendix 4 for the structure of HSC’s ownership in its subsidiaries and non-controlledrelated companies.

Investment in CIH Canada INC. (“CIH”) (Formerly 1891387 Ontario Inc.)

During the 2009 to 2011 period, HSC investigated various approaches to developing a programthat would result in professional designations for social housing workers and a professionalbody. During 2011/2012, HSC determined that the best option would be some form ofassociation with The Chartered Institute of Housing (“CIH UK”) as it had such a program in


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place. HSC engaged a lawyer with international experience to assist in negotiating theagreement and engaged KPMG to review tax implications.

After reaching an agreement with CIH UK, HSC issued a Challenge Request for Proposal(“RFP”) to solicit competitive bids to better CIH UK terms. No responses to the RFP werereceived.

HSC’s management advised us that CIH was formed in response to concerns expressed by thesocial housing sector that there was a need to establish professional standards and a vehicle toshare best practices in the industry.

Based on the documentation and information provided, it appears that HSC took reasonable stepsin negotiating the agreement with CIH UK.

Since CIH is still a relatively new venture, it represents a higher risk to HSC as it may notbecome self-sustaining in the near to mid-term resulting in the need for HSC to provideadditional funding.

Procurement and Contract Management Protocol Policies

HSC has both a procurement policy and a contract management protocol policy. Under theprocurement policy, goods and services shall be acquired competitively, through open andtransparent procurement procedures, to meet specific needs with the objective of obtaining thebest value for the funds to be expended. The procedures to be followed for the acquisition andapproval of goods and services shall be based on the “Competitive Methods and ApprovalTable” as determined by the estimated value of such goods and services, as outlined in Appendix5.

The procurement policy applies to all procurements by HSC relating to goods and servicesexcept for goods and services purchased from governmental and non-profit organizations andutilities (e.g. hydro) and other similar goods and services. The evaluation team for eachprocurement project must ensure there are no undeclared internal direct or indirect conflicts ofinterest. Proponents are also required to declare any real or perceived conflicts of interest in theirproposal submission. All conflicts must be declared in writing to the evaluation team.

Once awarded contractors are then required by their individual contracts with HSC to clarify anddisclose any potential conflicts of interest that may arise, in a manner similar to that of HSCemployees.

Under the contract management protocol policy, all contractual arrangements must be approvedby the CEO and/or the Board of Directors, as applicable, before any work can begin. There areguidelines that need to be followed before any type of contract can be put into place, as outlinedin Appendix 5.

There is also a requirement to advise the procurement employees at HSC of any changesrequired to an executed contract (e.g. extension of contract term, additional services, and


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additional fees). This includes any work that is deemed to be required during the contract termbut is not reflected in the executed contract.

In our view, HSC’s Procurement and Contract Management Protocol Policies are comparable tothe policies followed by the Ontario government and establish appropriate oversight over thepurchasing function. The policies were reviewed by HSC and the policies now state that theyapply equally to the subsidiary companies.

Other Significant Observations

· InnoServ Inc. is owned by Toronto Community Housing (44%) and InnoServ Share Trust(“Trust”) (56%). HSC did not hold an ownership interest in InnoServ Inc. HSC is abeneficiary of the Trust (90% to fund green energy loans). InnoServ Inc. was created todeliver end-to-end solar energy services to the social housing sector, but never performedwell and ceased operations in 2013. InnoServ recently made a loan repayment of$100,000 to HSC. InnoServ Inc. was dissolved in November 2015 and the trust waswound up.

· Over the past two years, HSC and BC Housing have supported Housing PartnershipCanada (“HPC”) by exploring the creation of a dedicated lending institution foraffordable housing providers across Canada, to finance the regeneration and developmentof their assets. A preliminary report on a Feasibility Study will be delivered in the Springof 2016. The Feasibility Study was funded by 17 federal, provincial, local and sectororganizations, including HSC. The anticipated organizational structure for this entity is aFederal non-share corporation. HSC management states it is committed to ensuring duediligence, sector consultation, financial scrutiny and risk assessment is conducted prior tothe final approval of the new corporate entity.


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OBJECTIVES AND SCOPE

The overall objective of the engagement was to perform a follow up review and verification, onbehalf of the Ministry of Municipal Affairs and Housing (“MMAH”), of the actions taken byHSC (including its wholly-owned subsidiaries and partly controlled entities) in response to therecommendations set out in the June 1, 2015 report from Weiler & Company (herein called “theWeiler Report”).

This review documents and validates the implementation of recommendations from the WeilerReport, which HSC has initiated since that review.

MMAH has not provided any administrative funding to HSC since 2004. The Weiler Reportarose from the responses from the Chair of the Board of HSC, made on a voluntary basis, toenquiries made by the Minister of MMAH. The Board Chair stated that the Board had revisedHSC’s policies, in particular the Remuneration and Expense policies, so that they are now fullyconsistent with the Management Board’s Directives. It is part of HSC’s commitment to be moreopen, transparent and accountable. The 2015 review, and this follow up review are both basedon a voluntary request by HSC.

This follow up review’s scope concentrated on:

1) Identifying and documenting the implementation of the recommendations of the WeilerReport;

2) Confirming and updating the status and documenting the plans by HSC to wind-up itssubsidiary corporations that no longer serve an integral business purpose;

3) Reviewing and documenting revisions to current policies (if any) and confirming currentpractices regarding remuneration and expenses paid to employees and board members forHSC and its subsidiary and related companies;

4) Reviewing and documenting revisions to current policies (if any) and confirming currentpractices regarding remuneration/compensation and payment of expenses in relation toHSC subsidiaries, including payments to any employees or board members of either HSCor the subsidiaries over the past two years; and

5) Reviewing and documenting revisions to current policies (if any) and confirming currentpractices regarding procurement and contract management protocols.


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WORK PERFORMED

Set out below are the significant documents reviewed and procedures performed which wererelied upon in developing this report, including our findings and recommendations:

· We reviewed Directors’ minutes and relevant committee minutes for 2015 for HSC andits subsidiaries;

· We examined the draft financial statements for HSC for 2015, and the audited financialstatements for HSC, g3, Globe, HSC Insurance Inc., AMC and CIH for 2014. We alsoexamined the Encasa Notice to Reader financial statements for the nine months endedSeptember 30, 2014. As of September 30, 2014, Encasa was no longer a wholly-ownedor controlled subsidiary, therefore the financial results for 2015 were not within the scopeof this review;

· We reviewed current policies for Director remuneration and Director and employeeexpenses;

· We reviewed staff counts for 2014, 2015 and 2016 and payroll records for 2015 and early2016 to examine employee remuneration changes;

· We reviewed expense claims for Directors and a sample of employee expense claims for2015 to confirm compliance with the revised company policy in effect January 1, 2015;

· We reviewed procurement documents for a sample of procurements to confirmcompliance with the company policy;

· We reviewed contracts and invoices for a sample of procured goods and services toconfirm compliance with company contract management protocols;

· We reviewed the HSC action plan submitted in response to the June 1, 2015 WeilerReport and related documents to support the implementation of that action plan; and

· We interviewed senior employees of HSC.

Throughout our review we received full cooperation from HSC management and staff.


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BOARD REMUNERATION AND BOARD AND EMPLOYEE EXPENSES

Board of Director Remuneration

Effective from January 1, 2015, HSC’s Board of Directors approved a revised remunerationpolicy for directors, setting out fees that directors will be paid for meeting attendance at bothBoard and Committee meetings. The revised policy reduces amounts to be paid to Boardmembers. HSC employees and employees of its subsidiaries who serve on any Board ofDirectors within the group are not allowed to accept remuneration as a Director.

The new Director remuneration for meetings provides for board members to receive $150 perday; vice-chair $175; chair - $225. The new policy also states that the annual directorremuneration cannot exceed $12,000 for the chair; $9,000 for the vice-chair; and $6,000 forboard members. The prior policy did not impose annual maximum remuneration.

Encasa’s policy is somewhat different. Encasa directors are remunerated $250 per meeting andthe Chair of the Board also receives an additional $5,000 per annum. Two of the four Directorsof Encasa currently have chosen not to take remuneration. Remuneration for the Directorrepresenting HSC on Encasa’s Board of Directors is paid directly to HSC rather than to theDirector.

Appendix 1 sets out the January 1, 2015 policy for Board of Director remuneration for HSC andits subsidiaries, other than Encasa. Based on our review of remuneration paid, HSC and itssubsidiaries are following the current policy.

Board of Director Expenses

Effective from January 1, 2015, HSC’s Board of Directors approved a revised expense policy fordirectors setting out the type and amount of expenses that directors are allowed to claim. Therevised policy reduces amounts to be paid to Board members and aligns HSC’s policy with theProvince of Ontario Management Board of Cabinet “Travel, Meal and Hospitality ExpensesDirective”.

HSC’s policy, which also applies to all subsidiaries except Encasa, provides for reimbursementof amounts not to exceed $8.75 for breakfast, $11.25 for lunch and $20.00 for dinner. Encasa’sexpense policy for meals is higher than HSC with amounts not to exceed $10 for breakfast, $15for lunch and $25 for dinner.

Appendix 2 sets out the January 1, 2015 policy for Board of Director expenses for HSC and itssubsidiaries, other than Encasa. Based on our review of expenses paid, HSC and its subsidiariesare following the current policy.


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Employee Business Expenses

In early 2014, HSC commenced a process that resulted in an updated employee manual in 2015,including revisions to the employee business expense policy. The revised policy reducesamounts that employees can claim for business expenses and aligns HSC’s policy with theProvince of Ontario Management Board of Cabinet “Travel, Meal and Hospitality ExpensesDirective”.

The policy applies to all employees of HSC and its subsidiaries, except Encasa, withreimbursement not to exceed $8.75 for breakfast, $11.25 for lunch and $20.00 for dinner.Encasa’s policy for employee expenses is the same as those for its directors which is amounts notto exceed $10 for breakfast, $15 for lunch and $25 for dinner.

Appendix 3 sets out the revised employee business expense policies. Based on our review ofexpenses paid, HSC and its subsidiaries are following the current policy.

HSC’s review of the travel expense reports can involve as many as four separate individuals inthe review process. The amount of effort is not proportional to the routine nature and the amountof expense involved in many employee and director expense reimbursements. The currentreview process is costly for HSC in terms of staff resources, but extremely thorough. It would bebeneficial for HSC to explore other options to increase the efficiency in the review process, suchas the use of expense report management software or creating alternative approval processesbased on expense thresholds and delegations of authority determined by senior management.

Some organizations use a per diem allowance as an efficient method of reimbursing Director andEmployees when incurring business related expenses. A per diem allowance is not aligned withthe principles of the Ontario Travel, Meal and Hospitality Expense Directive and therefore thisoption is not available to HSC. We encourage HSC to continuously evaluate its operations forexpense control while remaining aligned with the Directives of the Province of Ontario.

HSC SUBSIDIARIES AND RELATED COMPANIES

For the purposes of this report, the term “subsidiary company” refers to any entity in which HSCholds a 100% ownership interest. The term “related company” refers to any entity in which HSChas an ownership interest but not a controlling interest.

Currently, HSC has 4 subsidiary companies (comprising 3 controlled companies and 1 non-controlled company) as well as 1 related company. Each company is discussed below.

Refer to Appendix 4 for the structure of HSC’s ownership in these five companies.


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HSC Insurance Inc. (formerly SoHo Insurance Inc.)

HSC owns 100% of HSC Insurance Inc.

HSC Insurance Inc. was incorporated in 2005 to provide insurance brokerage services to socialhousing providers in Ontario. As a registered broker under the Registered Brokers Act ofOntario, HSC Insurance Inc. must comply with a number of regulations including ongoing andcontinuous supervision by a qualified Principal Broker and maintenance of a minimum equityrequirement.

HSC is required to coordinate and administer insurance programs for prescribed social housingproviders. HSC Insurance Inc. collects premiums from the prescribed social housing providers,acts as sub-broker for the mandated insurance program and earns a sub-brokerage fee.

As part of the insurance program, HSC established a Property Claims Trust Fund (“PCTF”), aform of self-insurance, that each of the prescribed social housing providers is required tocontribute to each year. The PCTF was established to reduce insurance premiums and is used topay individual claims to a maximum limit per claim. If an individual claim exceeds themaximum limit per claim or if the aggregate claims exceed the annual balance in the PCTF, theinsurance provider is obligated to pay the excess. HSC Insurance Inc. manages the PCTF claimson behalf of HSC.

HSC Insurance Inc. also acts as an administrator to provide non-mandated tenant’s insurance fortenants of prescribed social housing providers. In 2014, HSC entered into an agreement withMarsh Canada Limited and XN Financial Services to outsource the administration of the tenantinsurance program. Before negotiating with Marsh Canada Limited and XN Financial Services,HSC had offered the outsourcing arrangement to the incumbent insurance provider and nointerest was expressed. Once an arrangement was agreed to in principle, a challenge RFP wasissued with no responses. Since no responses were received, the contract was awarded to MarshCanada Limited and XN Financial Services. HSC Insurance Inc./HSC earns a 5% fee based onpremiums and is eligible to receive a dividend based on annual gross loss ratios.

At December 31, 2015, HSC Insurance Inc. was indebted to HSC by way of a Promissory NotePayable in the amount of $292,000, bearing interest at bank prime, repayable in monthlyinstallments of $1,500 and due January 1, 2020. HSC Insurance Inc. is making the requiredmonthly installments.

HSC Insurance Inc. pays an annual administrative fee to HSC to cover management, financialand accounting services provided by HSC. The fee for 2015 was $180,626.

At December 31, 2015, HSC Insurance Inc. had a payable of $104,795 owing to HSC.

In February, 2015, HSC sent a letter to HSC Insurance Inc. requesting that HSC Insurance Inc.adopt the Province of Ontario Management Board of Cabinet “Travel, Meal and Hospitality


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Expense Directive” and “Government Appointees Directive” as it relates to Board expenses andremuneration, with effect from January 1, 2015. These policies were adopted by HSC InsuranceInc., effective January 1, 2015.

2242392 Ontario Inc. (“g3”)

HSC owns 100% of 2242392 Ontario Inc., operating as g3.

g3 was incorporated in 2010 to provide property construction and management services relatedto energy conservation. The company is currently inactive. In February 2015, the Board ofDirectors approved a motion to take the necessary steps to wind up the company. In February2016, HSC received the consent to dissolve the company and will file the Articles of Dissolutionby the end of April 2016.

At December 31, 2015, g3 had a payable in the amount of $52,740 owing to HSC.

The book value of HSC’s investment in g3 at December 31, 2015 was $1.

Green Light On A Better Environment (Globe) Inc. (“Globe”)

HSC owns 100% of Globe.

Globe was incorporated in 2007 to provide energy conservation programs to social housingproviders.

Globe revenues have been declining and, currently, Globe has only one customer, Enbridge GasDistribution Inc. (“Enbridge”). All existing schedules of work under the Services Agreementbetween Globe and Enbridge were completed, invoiced and finalized prior to commencing thedissolution of Globe. Any new business relationship with Enbridge would be set up with HSC.

In February 2016, HSC received the consent to dissolve the company and will file the Articles ofDissolution by the end of April 2016.

At December 31, 2015, Globe had a note payable to HSC bearing interest at bank prime in theamount of $750,773. In addition, at December 31, 2015, Globe had an account payable to HSCin the amount of $22,633.

Since Globe had a shareholder’s deficiency of $755,327 at December 31, 2015, HSC will not beable to fully recover its note receivable and account receivable from Globe on the dissolution ofthe company.

In February, 2015, HSC sent a letter to Globe requesting that Globe adopt the Province ofOntario Management Board of Cabinet “Travel, Meal and Hospitality Expense Directive” and“Government Appointees Directive” as it relates to Board expenses and remuneration, with


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effect from January 1, 2015. Globe confirmed that it had adopted these policies, effectiveJanuary 1, 2015, at its February 24, 2015 Board meeting.

Encasa Financial Inc. (“Encasa”) (Formerly SHSC Financial Inc.)

HSC owns 40% of Encasa.

SHSCFI was originally incorporated in 2002 and is an Investment Fund Manager licensed by theOntario Securities Commission. The Company manages capital reserves for prescribed socialhousing providers in Ontario and, subsequent to the sale, is offering similar services to socialhousing providers in British Columbia.

Until September 30, 2014, HSC owned 100% of SHSC Financial Inc. (“SHSCFI”). On that dateHSC sold 20% of SHSC Financial Inc. to each of:

· Co-operative Housing Federation of Canada;· Co-operative Housing Federation of BC; and· BC Non-profit Housing Association.

This left HSC with a 40% ownership. HSC determined that by engaging additional socialhousing providers as partners, there would be an opportunity to broaden the base of socialhousing providers willing to place reserve funds with SHSCFI, thereby allowing SHSCFI toincrease the funds under management. As summarized in our 2015 report, we were satisfied thatHSC conducted reasonable due diligence prior to entering into the sale agreement and receivedfair value for its 60% interest in SHSCFI. Each of the four shareholders is entitled to appointone director and each director has one vote. The chair does not have a second or deciding vote.

At December 31, 2015, Encasa had repaid all its outstanding debt to HSC.

In February, 2015, HSC sent a letter to Encasa requesting that Encasa adopt the Province ofOntario Management Board of Cabinet “Travel, Meal and Hospitality Expense Directive” and“Government Appointees Directive” as it relates to Board expenses and remuneration, with aneffective date of January 1, 2015. Encasa responded in a letter dated March 12, 2015 stating thatBoard members would receive $250 per meeting (regardless of length, preparation time or traveltime) and the Chair would receive an additional monthly allocation amounting to $5,000annually.

Encasa has also stated that its current expense policies are comparable to those of HSC with anallowable maximum meal reimbursement of $10.00 for breakfast, $15.00 for lunch and $25.00for dinner. HSC’s policy provides for reimbursement of amounts not to exceed $8.75 forbreakfast, $11.25 for lunch and $20.00 for dinner. As of the review of Encasa’s policy inDecember 2015, mileage is paid at the Canada Revenue Agency rate of $0.55 per km for the first5,000 kms and at $0.49 per km thereafter. For comparison, HSC policies provide forreimbursement of mileage at $0.40 per km on the first 4,000 kms in Southern Ontario. Please


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see Appendix 2 for the complete chart for mileage reimbursement. The Canada RevenueAgency has updated their mileage rates for 2016 to $0.54 per km for the first 5,000 kms and$0.48 per km thereafter. The amendment to align the expense policy to these rates has beentabled for the March 2016 Encasa Board meeting.

Encasa is not wholly-owned or controlled by HSC, therefore HSC cannot enforce adherence tothe Province of Ontario Management Board of Cabinet “Travel, Meal and Hospitality ExpenseDirective.” Encasa’s management maintains a different position than HSC on expenses.

CIH Canada Inc. (“CIH”) (Formerly 1891387 Ontario Inc.)

HSC holds a 49.9% interest in CIH.

Although HSC owns 100% of the shares in CIH, The Chartered Institute of Housing (“CIH UK”)holds an option to acquire 50.1% of the shares at any time for a nominal purchase price. As aresult, HSC effectively holds a 49.9% interest in CIH.

CIH was incorporated as 1891387 Ontario Inc. on March 5, 2013. The corporate name has beenchanged to CIH Canada Inc. Under the terms of a co-operation agreement between HSC andCIH UK, CIH was formed to advance the principles of housing education, accreditation andmembership. CIH offers, for a fee, courses leading to various levels of accreditation andmembership in a professional body (Chartered Institute of Housing Canada).

At December 31, 2015, CIH had an unsecured, non-interest bearing loan payable to HSC in theamount of $125,000 and an account payable to HSC in the amount of $16,649.

Effective January 1, 2015, CIH adopted Board of Director expense policies which are the sameas those adopted by HSC. Meals in Canada are to be reimbursed at the rate of $8.75 forbreakfast, $11.25 for lunch and $20 for dinner. Expenses for meals in the UK are in the sameamounts as those in Canada but are expressed in UK pounds rather than in Canadian dollars.CIH does not provide any remuneration to Board members or the Chair.

Asset Management Centre Inc. (“AMC”)

HSC owned 66.7% of AMC at the time of the Weiler Report.

AMC was incorporated in 2008 to provide capital asset management support to social housingproviders. The company has been inactive since 2012.

Steps were taken in October 2015 which completed the dissolution of AMC. Although AMC hasbeen dissolved, HSC and the other two shareholders continue to have access to AMC’s capitalasset management tools.


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INVESTMENT IN CIH CANADA INC. (“CIH”) (FORMERLY 1891387 ONTARIO INC.)

During the 2009 to 2011 period, HSC (then SHSC) investigated various approaches todeveloping a program that would result in professional designations (including an education andqualification program) for social housing workers and a professional body.

During 2011 – 2012, HSC determined that the best option would be some form of associationwith The Chartered Institute of Housing (“CIH UK”) as it had such a program in place and hadbeen active in this area for around 30 years.

Due diligence and negotiations with CIH UK was undertaken during 2012 and a letter of intentto form a Canadian “partnership” between HSC and CIH UK was signed in March 2013.

In March 2013, HSC engaged a lawyer with international experience to assist in negotiating theagreement and engaged KPMG to review tax implications.

Having reached an agreement in principle with CIH UK, HSC decided to issue a Challenge RFPin late February 2013 to solicit competitive bids to better CIH UK terms. A feature of theChallenge RFP was that CIH UK had the opportunity to match any proponent’s bid and if itchose to do so, the contract would be awarded to CIH UK. No responses to the RFP werereceived.

1891387 Ontario Inc. was incorporated in March 2013 to be used as the corporation for the CIHCanada initiative. Although HSC holds 100% of the shares of CIH, CIH UK holds a nominalvalue option that it can exercise at any time to acquire 50.1% of the shares, thereby providing itwith control of the corporation. A shareholder agreement entered into by the parties effectivelyprovides for 50/50 control.

Both HSC and CIH UK contributed $125,000 to CIH to provide working capital by way of loans.

In January 2015, the corporation legally changed its name to CIH Canada Inc.

HSC’s management advised us that CIH was formed in response to concerns expressed by thesocial housing sector that there was a need to establish professional standards and a vehicle toshare best practices in the industry.

Based on the documentation and information provided, it appears that HSC took reasonable stepsto identify a partner to develop a program that would result in professional designations(including an education and qualification program) for social housing workers and a professionalbody and in negotiating the agreement with CIH UK.

Since CIH is still a relatively new venture, it continues to represent a higher risk to HSC as itmay not become self-sustaining in the near to mid-term resulting in the need for HSC to provideadditional funding.


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PROCUREMENT AND CONTRACT MANAGEMENT PROTOCOL POLICIES

HSC has adopted both a procurement policy and a contract management protocol policy.

Under the procurement policy, goods and services shall be acquired competitively, through openand transparent procurement procedures, to meet specific needs with the objective of obtainingthe best value for the funds to be expended. The procedures to be followed for the acquisitionand approval of goods and services shall be based on the “Competitive Methods and ApprovalTable” as determined by the estimated value of such goods and services, as outlined in Appendix5.

The procurement policy applies to all procurements by HSC relating to goods and servicesexcept for goods and services purchased from governmental and non-profit organizations andutilities (e.g. hydro) and other similar goods and services. The evaluation team for eachprocurement project must ensure there are no undeclared internal real or perceived conflicts ofinterest. Proponents are also required to declare any real or perceived conflicts of interest in theirproposal submission. All conflicts must be declared in writing to the evaluation team.

Contractors are required by their individual contracts with HSC to clarify and disclose anypotential conflicts of interest, in a manner similar to that of HSC employees.

Under the contract management protocol policy, all contractual arrangements must be approvedby the CEO and/or the Board of Directors, as applicable, before any work can begin. There areguidelines that need to be followed before any type of contract can be entered into, as outlined inAppendix 5.

There is also a requirement to advise the Procurement employees at HSC of any changesrequired to an executed contract (e.g. extension of contract term, additional services, andadditional fees). This includes any work that is deemed to be required during the contract termbut is not reflected in the executed contract.

In our view, HSC’s Procurement and Contract Management Protocol Policies are comparable tothe policies followed by the Ontario government and establish appropriate oversight over thepurchasing function. The policies now state that they apply equally to the subsidiary companies.

Appendix 5 sets out the procurement and contract management protocol policies.

We reviewed the procurement process and contract management protocol for a sample ofprocurements during the 2015 fiscal year. The procurement process is in compliance with thecompany policy. All suppliers for procurements over $10,000 were selected using a competitiveprocess. HSC uses Bonfire Sourcing Software, which provides a comprehensive sourcingsolution to help manage their procurement process. We have determined that Bonfire provides acomprehensive evaluation report for submissions documenting the entire evaluation process,including complete scoring and comments by all individuals of the evaluation team for eachsubmission.


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During the year, HSC had one unsolicited proposal for a project. In response to the proposal,HSC tendered a Challenge RFP to provide an opportunity for other suppliers to compete todeliver the project. No proponents responded to that request. The proposal was for Sector ITServices to customize and develop software tools for not-for-profit housing providers. Theproposal was submitted toward the end of a previous project for a Consultant for Sector DataManagement Solution. The purpose of the first project was for HSC to assemble and manage theSector Data for the benefit of housing providers. The second project will create the software forthe purposes of assembling and managing the Sector Data.

We concluded that the procurement practice and contract management protocols are incompliance with the company policies.

OTHER OBSERVATIONS

InnoServ Inc. (“InnoServ”)

HSC does not hold an ownership interest in InnoServ. InnoServ is owned by TorontoCommunity Housing (44%) and InnoServ Share Trust (“Trust”) (56%). HSC is a beneficiary ofthe Trust (90% to fund green energy loans). The Trust has never distributed any funds to thebeneficiaries nor is it expected to do so in the future.

InnoServ was incorporated in 2007 to deliver end-to-end solar energy services to the socialhousing sector. InnoServ never performed well and ceased operations in 2013.

HSC had a loan receivable at December 31, 2014 in the amount of $946,947 resulting fromservices provided to and funds advanced to InnoServ. HSC has not increased its advances toInnoServ since 2012. This loan has been fully provided for in HSC’s financial statements asuncollectible since 2011. During 2013, InnoServ repaid $20,000 and during 2015 HSC receivedan additional payment from InnoServ of $100,000.

In November 2015, InnoServ was dissolved and the Trust was wound-up.

Housing Partnership Canada (“HPC”)

Over the past two years, HSC and BC Housing have supported Housing Partnership Canada(“HPC”) by exploring the creation of a dedicated lending institution for affordable housingproviders across Canada, to finance the regeneration and development of their assets. Apreliminary report on a Feasibility Study will be delivered in the spring of 2016. The FeasibilityStudy was funded by 17 federal, provincial, local and sector organizations, including HSC. Theanticipated organizational structure for this entity is a Federal non-share corporation. HSCmanagement states it is committed to ensuring due diligence, sector consultation, financialscrutiny and risk assessment is conducted prior to the final approval of the new corporate entity.


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HSC’s ACTION PLAN TO IMPLEMENT THE JUNE 1, 2015 WEILER REPORTRECOMMENDATIONS

The June 1, 2015 Weiler Report on the independent review, on behalf of the Ministry ofMunicipal Affairs and Housing (MMAH), of HSC’s activities, particularly with regard to itsefficiency, effectiveness, accountability and transparency in delivering services to its members,resulted in a few recommendations for changes.

CIH Canada Inc.

Issue

CIH was formed to advance the principles of housing education, accreditation andmembership. CIH offers, for a fee, courses leading to various levels of accreditation andmembership in a professional body (Chartered Institute of Housing Canada). Since this isa new line of business for HSC and HSC holds a 49.9% interest in CIH, there is a higherlevel of risk involved in this company becoming self-sustaining in the near to mid-term.The risk is that this venture may not attain success or HSC may be required to provideadditional significant funding to CIH until it reaches the point where it becomes self-sustaining.

Recommendation #1

HSC should assign oversight responsibility with respect to any future funding of CIH to anexisting committee of HSC’s Board of Directors; perhaps the Executive Committee. TheCommittee should be provided with at least quarterly updates on CIH’s performancerelative to targets and budgets. The Committee’s approval should be required before HSCadvances any future funding to CIH.

Implementation

The HSC Service Design and Growth Committee has taken the responsibility for oversightof CIH. The Committee reports quarterly to HSC Board of Directors. All requests, in the2015 fiscal year, for additional funding, or waiver of shareholder management fees havebeen approved by the HSC Board of Directors.


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Encasa Financial Inc.

Issue

HSC sold a 20% interest in SHSCFI (now Encasa) to each of Co-operative HousingFederation of Canada (“CHFC”); Co-operative Housing Federation of BC (“CHFBC”) andBC Non-profit Housing Association (“BCNHA”) leaving HSC with a 40% ownership.Subsequent to the sale, Encasa began offering its Investment Fund Manager services tosocial housing providers in British Columbia as well as Ontario and has plans to expand toother provinces. Each of the four shareholders of Encasa has the right to appoint onedirector and each director has one vote. As a result of expanding into new territories andHSC’s significantly reduced influence over Board of Director decisions, we see a higherlevel of risk to HSC.

For example, if Encasa is unable to attract significant new funds to manage from socialhousing providers outside of Ontario, Encasa’s income will not grow and, going forward,HSC will have, in effect, reduced its entitlement to 60% of its income from Ontario toCHFC, CHFBC and BCNHA.

Recommendation #2

HSC should assign oversight responsibility with respect to any future funding of Encasaand any expansion of Encasa’s business to an existing committee of HSC’s Board ofDirectors, perhaps the Organizational Performance Committee. The Committee should beprovided with at least quarterly updates on Encasa’s performance relative to targets andbudgets and any changes to its business or expansion plans. The Committee’s approvalshould be required before HSC advances any future funding to Encasa to ensure HSC doesnot provide a disproportionate share of any funding. The committee should also provideguidance to HSC’s Board of Directors representative on Encasa’s Board to help ensureHSC’s best interests are maintained.

Although the shareholders’ agreement provides that unanimous approval is required for allsignificant decisions, including changes to the business plan, HSC should consider, in thefuture, the possibility of negotiating a revised Board of Director composition which wouldincrease the total number of Directors to five and allow HSC to appoint two Directors.This would provide HSC with representation on the Board of Directors comparable with itsownership interest in Encasa.

Implementation

The HSC Organizational Performance Committee has taken the responsibility for oversightof Encasa. The Committee reports quarterly to HSC Board of Directors. There were norequests in the 2015 fiscal year for additional funding. The HSC Board of Directors alsoapproves significant decisions for Encasa, such as technical amendments to Encasa’sBusiness Plan.


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The Chair of the Board of Directors wrote a letter dated November 5, 2015 requesting thatthe Encasa Board of Director representation be added to the December 2015 Board ofDirectors meeting. This request was discussed at the December 2015 Encasa Shareholdersmeeting. The Encasa Board of Directors concluded at their meeting that the increase inHSC Board representation recommendation from the Weiler Report should not besupported at that time.

Procurement and Contract Management Protocol Policies

Issue

HSC’s procurement and contract management protocol policies do not state that they applyto HSC’s subsidiaries as well as to HSC. We do not believe that the subsidiaries haveprocurement and contract management protocols policies of their own. As a result, itappears that the subsidiaries could enter into contacts without the benefit of appropriateoversight over the purchasing function.

Recommendation #3

HSC’s procurement and contract management protocols policies should be amended tospecify that the policies apply to the subsidiaries of HSC, as well as to HSC, itself.Alternatively, it would be acceptable for a subsidiary to develop its own procurement andcontract management protocols policies.

Implementation

HSC’s Procurement and Contract Management Protocol Policies now state that the policiesshall apply equally to HSC and all of its wholly-owned or controlled subsidiaries.

In August 2015, HSC wrote letters to the Chairperson of the Board of Directors for each oftheir subsidiaries requesting that the subsidiary adopt the HSC procurement and contractmanagement protocols policies. Four of the five remaining subsidiaries responded to thatletter by adopting the proposed policies and procedures. Encasa responded to HSC’s letterby stating they are in the process of updating their policies and procedures as they areneeded. Encasa indicated that they would consider HSC’s policies when adopting anychanges to their current policies and procedures.

In December 2015, Encasa reviewed their Board, IRC, Staff Expenses & HospitalityPolicy. No significant changes were made except to update the mileage rate to agree to the2015 rate stipulated by Canada Revenue Agency, $0.55 per km for the first 5,000 kms andat $0.49 per km thereafter.

Housing Services CorporationReport by Weiler & CompanyMarch 17, 2016 Appendix 1

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BOARD OF DIRECTOR REMUNERATION POLICIES

Policies Effective January 1, 2015

Board Members shall receive remuneration in the form of a daily per diem based on the Provinceof Ontario Management Board of Cabinet “Government Appointees Directive”.

The daily per diem Board rates shall be as established under the Directive, which are currently asfollows:

Board Members: up to $150 per dayVice-Chair: up to $175 per day

Chair: up to $225 per dayWhere less than three hours of work is involved in a day, one-half of the established daily ratemust be paid.

The following are the maximum annual remuneration levels (inclusive of all per diems and othersimilar amounts) payable to Board members:• Board Members: $6,000 annually

• Vice-Chair: $9,000 annually• Chair: $12,000 annually

In recognition of the additional expectations of a Committee Chair as outlined in the “BoardRoles and Responsibilities”, Committee Chairs will be remunerated at the rate for Vice-Chair forparticipation in Committee meetings for which they Chair.The job description of the Board Chair, as identified in the “Board Roles and Responsibilities”document, requires the Board Chair to undertake a number of corporate activities in conjunctionwith the CEO, and as a representative of the Corporation. In recognition of this added role andresponsibility, and with prior approval of either the CEO or the full Board, the Board Chair willbe permitted to charge the per diem rate for daily work over and above attendance andparticipation in Board or Committee meetings, subject in all instances to the maximum $12,000annual remuneration outlined above.

Members of the Board who are not the Chair and who are requested by the CEO to undertakework on behalf of the Board may charge the daily per diem rate where such work has been pre-approved by the CEO, subject to the annual maximum remuneration outlined above.Members of the Board who serve on additional Board of Directors by virtue of their role as anHSC Board member (i.e. subsidiary boards) may only claim remuneration from thoseorganizations for that role to the levels articulated in this policy. HSC staff who serve onsubsidiary boards are not entitled to remuneration in any form.


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BOARD OF DIRECTOR EXPENSES POLICIES

Effective January 1, 2015

Travel ExpensesTravel expenses incurred while traveling on HSC business, whether locally or out-of-town, maybe reimbursed. It should be noted that, when making rail or air reservations, or other traveldecisions, it is expected that the Board of Directors will choose the most reasonable andeconomical rate.

AirplaneAir travel is permitted if it is the most practical and economical way to travel.Economy class is the standard option for ticket purchase.

TrainTravel by train is permitted when it is the most practical and economical way to travel.

A coach class economy fair is the standard.

VehicleWhen road transportation is the most practical, economical way to travel, it is preferred thatBoard members choose the most economical of rental vehicle or use of personal vehicle.When renting a vehicle, the most economical vehicle based on the driving conditions should beselected. Luxury and sports vehicles are prohibited. To avoid higher gasoline charges, refuelyour rental car before returning it.

If using a personal vehicle, the Corporation will reimburse based on the kilometers accumulatedfrom January 1 of each year (calendar year) and using the following rates:

Total kilometers drivenPer fiscal year

Southern Ontario($ per km)

Northern Ontario($ per km)

0-4000 km 0.40 0.41

4001-10,700 km 0.35 0.36

10,701-24,000 km 0.29 0.30

More than 24,000 km 0.24 0.25

ParkingReimbursement is provided for necessary and reasonable expenditures on parking. Valet parkingis not a reasonable expenditure. There is no reimbursement for traffic or parking violations.


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AccommodationHotel accommodation for participants traveling to Board meetings from outside of the GreaterToronto Area may be reimbursed for accommodation. Board members may choose their ownhotel accommodation. Accommodation reimbursement rates are capped at HSC’s corporate rateat its designated hotel, which will be set and communicated annually. Any hotel charge in excessof HSC’s corporate rate per night is the responsibility of the individual. Approval of anyaccommodation requests which are related to sector events, or which fall within the GreaterToronto Area commute, are at the discretion of the CEO.

Accommodation receipts must be included in the expense claim form in order to be reimbursed.

Business MealsExpenses for business meals, whether incurred locally or out-of-town, may be reimbursed onlywith a receipt showing detailed itemization. The names of the people attending the meeting andthe purpose of the meeting must be provided with the request for reimbursement and noted onthe receipt. Meals consumed whilst traveling may be reimbursed only up to the followingmaximum amounts. These rates include taxes and gratuities.

· $8.75/breakfast,· $11.25/lunch,· $20/dinner.

Alcohol cannot be claimed and will not be reimbursed as part of travel or meal expenses. Thereare no exceptions to this rule.

International TravelIn some cases, the requirement to travel internationally may be considered integral to business.Written approval by the CEO is required prior to any arrangements being made for internationaltravel.Requests for international travel must include:

· Written rationale demonstrating critical value to the Corporation of travel and details howthe travel will produce benefit to the Corporation.

· Documentation showing detailed itemization of anticipated expenses (note that the mosteconomical and practical method of travel must be used).

The Treasury Board of Canada Travel Directive shall be used for reimbursement rates for mealexpenses outside of Canada and the United States.

Approvals

· Expense Claim Forms will be reviewed by staff to ensure compliance with Policies.· All Board member expense claims must be approved by the CEO.· All Chair expenses will be approved by the Treasurer· CEO expenses related to Board activities must be approved by the Board Chair.


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EMPLOYEE BUSINESS EXPENSES POLICY

Scope:This policy applies to all HSC and subsidiary employees.

Purpose:The purpose of this policy is to identify expenses which can be reimbursed and outline anyrestrictions on reimbursement.

Policy:Employees can be reimbursed for legitimate business expenses incurred as a result of an HSCbusiness related function or responsibility that has not already been paid for directly by HSC.Employees are expected to check with their manager before incurring expenses to confirm theireligibility for reimbursement. Personal expenses are not reimbursed by HSC and all businessrelated expenses must be deemed reasonable.

Employees are required to make the best reasonable efforts to secure the lowest possible costoptions available when selecting accommodation, meals and transportation options.Expenses for a group of employees can only be claimed by the most senior employee present.

Transportation

· It is the expectation of HSC that staff and the Board of Directors will choose the mosteconomical means of travel and rate when making transportation reservations.

· A coach class economy fare is the standard for ticket purchase.

Car Expenses

· When road transportation is the most practical, economical way to travel, staff areexpected to choose between the most economical rental vehicle or use of personalvehicle.

· HSC will reimburse employees for the cost of transportation to and from the airport,either from the office or their home.

· Necessary and reasonable expenditures on parking and highway tolls incurred as a resultof business travel will be reimbursed. Valet parking is not a reasonable expenditure.There is no reimbursement for parking violations.

· Rentals are reimbursed only if the cost of the rental does not exceed the cost of taxi faresfor the same purpose.

· If an employee uses their own car for travel, they will be reimbursed based on thekilometers accumulated from January 1 of each calendar year and using the rates below.

· Distance is calculated from the HSC office to the off-site location, not from theemployee’s home to the location.

· If an employee will be driving their own car for more than 200 km in a day, they shouldconsider using a car rental if it will be more economical.


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· If an employee will be driving their own car for more than five days within a singlecalendar month, even if they are not exceeding 200 km in a single day, they shouldconsider lower cost options, such as a car rental or audio/video conferencing whenpossible.

Total Kilometers Drivenper Fiscal Year

Southern Ontario ($ per km) Northern Ontario ($ perkm)

0-4,000 km 0.40 0.414,001 – 10,700 km 0.35 0.3610,701 – 24,000 km 0.29 0.30More than 24,000 km 0.24 0.25

Car Rental Guidelines

· Before reserving a car, employees should check with their Manager to find out whetherHSC has a current discount rate agreement with a particular car rental company.

· Use a compact model or its equivalent. Exceptions must be guided by the principle thatthe rental vehicle is the most economical and practical size taking into account thebusiness purpose, number of occupants and safety (including weather) considerations andmust be documented and approved prior to the rental if possible. Luxury and sportsvehicles are prohibited.

· Employees should expect to pay for all car rental costs directly including contentinsurance, Collision Damage Waiver (CDW) and Loss Damage Waiver (LDW) and thenapply for reimbursement when submitting their expense report. NOTE: Some credit cardsalready have insurance built in – before reserving the car, look into what the card covers.

· Employees are expected to return the rental car with a full tank of gas and cars should bereturned to the rental agency as soon as they’re no longer needed.

· Rental cars are used for business purposes only and intended for local transportation.Cars should be rented only when more economical transportation (taxi, limousine, publictransportation, etc.) is not available or practical.

· Only the individual who signs the rental agreement should operate the vehicle, unlessother arrangements are made with the leasing agency.

· Anyone who violates the laws or ordinances of the area in which they are operating avehicle on HSC business assumes the financial responsibility for their actions.

Travel

· Travel within the province for staff requires written approval by the CEO or CAO.

· Travel that is out of province for staff requires written approval by the CEO.

· Travel that is out of province for the CEO requires written approval by the Chair of theBoard.


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· In some cases, the requirement to travel internationally may be considered integral tobusiness. Written approval by the CEO is required prior to any arrangements being madefor international travel.

· The Treasury Board of Canada Travel Directive shall be used for reimbursement rates formeal expenses outside of Canada and the United States.

Accommodation

· If hotel accommodations are required for business outside of the GTA, HSC willreimburse for the cost of the standard room. If HSC has corporate rates outside of theGTA, employees should utilize these rates.

· Accommodation reimbursement rates are capped within the GTA at HSC’s corporate rateat its designated hotel, which will be set and communicated annually.

· Approval of any accommodation requests related to sector events, or those that fall withinthe GTA, are at the discretion of the CEO.

· There will be no reimbursement for hotel suites, executive floors or concierge levelswhen traveling.

· Reimbursement will be made for single accommodation in a standard room.

· Accommodation receipts must be included in the Expense Claim form.

Business Meals

· Expenses for business meals, whether incurred locally or out-of-town, may be reimbursedonly with a receipt showing detailed itemization. The names of the people attending themeeting and the purpose of the meeting must be provided with the request forreimbursement and noted on the receipt.

· Meals may be claimed with a receipt to a maximum of $8.75/breakfast, $11.25/lunch and$20.00/dinner per person, including taxes and tip.

· Tipping is allowed for meal service. However, in no event should the tip exceed fifteen(15%) percent of the cost of meals. Tips in excess of fifteen percent will be reimbursed atthe fifteen percent amount.

· Alcohol cannot be claimed and will not be reimbursed as part of travel or meal expenses.There are no exceptions to this rule.

· For meals outside of Canada, refer to the Treasury Board of Canada Travel Directive,April 1, 2008, or its successor directive, Appendix C for USA and Appendix D forinternational.

· Breakfast will be reimbursed when the travel is out of town the night before or when theincurred travel begins earlier than a normal breakfast and no meal was provided by thetransportation company or hotel.

· Lunch will be reimbursed provided that the trip begins before the lunch hour.


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· Dinner reimbursement will be made when the traveler is away from home for the eveningmeal or does not return home until after the normal dinner hour, and no meal wasprovided by the transportation company on route.

· When more than one meal is claimed for any day, combined maximum rates for mealsmay be allocated e.g., combined rate for breakfast and lunch is $20 – this now becomesthe maximum rate for the two meals regardless of what is spent on each meal. Note that itis not permitted to use a combined maximum rate and not claim for each of the mealse.g., combined breakfast and lunch for brunch or combined maximum 3-meal rate if only2 meals are eaten.

Hospitality

· It is recognized that in order for HSC to develop new business partnerships (particularlywithin the private sector), there is a need to incur expenses for food and beverage throughbusiness meals and meetings. Please refer to the Board and Staff Member HospitalityExpense Policy for details on the reimbursement of expenses related to hospitalityactivities.

Cellphone

· If an employee leaves the country on business it is expected that they will contact IT andarrange to have a “travel pack” placed on their account. Failure to do so will result in theemployee being responsible for the charges incurred while abroad.

· If an employee leaves the country for personal matters, all charges incurred abroad are tobe billed to the employee. An employee can contact IT and arrange to have a “travelpack” put on the account to reduce roaming fees.

Corporate Credit Card

· Only approved employees will be issued a corporate credit card.

· The issuance, usage and claiming of expenses on any HSC corporate credit card must beclaimed on the same expense claim form as all other expenses and include all applicablereceipts and documentation.

· The card holder is responsible for ensuring that the credit card invoice is paid through thetimely submission of approved expense reports to the Finance department. Card holdersmust ensure the corporate credit card do not carry a balance.

· Continued failure to complete corporate credit card expense reports in a timely mannerwill result in a revoking of card privileges.

Exchange Rates

· For non-Canadian currency expenses, the rate of exchange will be the rate supported byan exchange slip provided by the bank, an exchange bureau at the time the currency wasbought by the claimant or at the rate shown on the credit card statement (if purchased ona charge card).

· If the appropriate documents are unavailable, the claim will be converted at the rate setby Finance and Accounting on the day HSC processes the claim.


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Reporting

· HSC elects to report publicly a summary of remuneration, expenses and other paymentsmade to each of the Officers on a quarterly basis, as well as the expenses of the top fivestaff with the highest expenses.

Procedure:

Reimbursements1. All Claimants must complete the Expense Claim Form and all expenses must be adequatelydescribed; i.e. point of origin and destination, mode of travel, purpose of the trip and/or nature ofexpense etc.

· HST amounts should be clearly identified on the Claim Form.

· If claims are based on credit card statements, the transaction date of the claim should bestated so it coincides with the date on the receipt, not the posting date.

2. Attach all original receipts and if applicable, the approved Outreach Travel form, to theExpense Claim Form. Claims must be submitted within 30 days of incurring the expenses.

· Business meals - the names of the people who attended the meeting and the purpose ofthe meeting must be provided.

3. Submit the Expense Claim Form to your manager for approval. The Chief Executive Officer isrequired to provide the final approval before the claims are forwarded to the Finance department.

4. If expenses are not properly supported, HSC will deduct the amount of the expense in questionso the payment of the remaining expenses is not delayed. The claimant will be informed of thediscrepancy and the expense item can be re-submitted on another expense form when the matteris resolved.

5. The reimbursement amount will be provided to the employee via cheque.

Approvals

· Expense Claim Forms will be reviewed by staff to ensure compliance with Policies.

· All Board and staff member expense claims must be approved by the CEO.

· CEO expenses must be approved by the Board Chair.

Housing Services CorporationSubsidiary Structure

March 17, 2016

Appendix 4

Housing Services Corporation

Encasa Financial Inc.(40% shareholder)

2242392 Ontario Inc.(g3)

(100% shareholder)(dissolution pending)

GLOBE Inc.(100% shareholder)

(dissolutionpending)

HSC Insurance Inc.(formerly SoHoInsurance Inc.)

(100% shareholder)

1891387 OntarioInc. (CIH Canada)

(49.9% shareholder)


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PROCUREMENT AND CONTRACT MANAGEMENT PROTOCOLS POLICIES

Procurement Policy

Purpose

· To specify principles that, when applied, will ensure the integrity and transparency ofprocurement activity

· To specify mandatory requirements to ensure adherence to the principles

ScopeThis policy applies to all procurements by HSC relating to goods and services except for goodsand services purchased from governmental and non-profit organizations and utilities (eg. hydro)and other similar goods and services.

PrinciplesGoods and services shall be acquired competitively, through open and transparent procurementprocedures, to meet specific needs with the objective of obtaining the best value for the funds tobe expended. HSC is committed to ensuring all transactions involving acquiring goods andservices follow this procedure.Procurement procedures will ensure the following principles are upheld:

· competition from suppliers is encouraged;· the process of procurement is accountable; and· the evaluation of the procurement is equitable and fair to all proponents.

The outcome of all procurements will be to achieve and maximize the added value to HSC andits members. The following principles should form the basis for decisions made by HSC staff inthe planning, acquisition and management of goods and services procurements.

Competition and Fair and Equal Treatment of SuppliersSuppliers must be treated in a fair, equitable and responsible manner. Equal treatment is to beprovided to all suppliers through comparable transparent procurement procedures.

Competitive Acquisition ProceduresThe procedures to be followed for the acquisition and approval of goods and services shall bebased on the “Competitive Methods and Approval Table” as determined by the estimated valueof such goods and services.


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Competitive Methods and Approval TableThe following table shall be used in instances where new work is being considered or whereHSC is engaging a supplier for a new project:

Estimated Value Approval Level Method Signing Authority

Up to $10,000 Chief ExecutiveOfficer

Single Source Chief Executive Officer ORChief Financial Officer

$10,000 to $25,000 Chief ExecutiveOfficer

Short-form Request forProposals(Minimum 3 Quotes)

Chief Executive OfficerORChief Financial Officer

$25,001 to $99,999 Chief ExecutiveOfficer/Chair

Requests for Proposals(Open Process)

Chief Executive OfficerAND Chief FinancialOfficerORone of either the ChiefExecutive Officer or ChiefFinancial Officer and theChair, Vice-Chair orTreasurer

$100,000 or more Board Requests for Proposals(Open Process)

Chief Executive OfficerAND Chief FinancialOfficerORone of either the ChiefExecutive Officer or ChiefFinancial Officer and theChair, Vice-Chair orTreasurer

Where a signed contract is in place to deliver on-going and regular service (such as the purchaseof natural gas), the Chief Executive Officer (or his/her designate) may be the sole signatory forall transactions which form part of that contract.

Notification of Procurement Opportunities (RFPs, open process)Notification of open procurement opportunities shall be listed on HSC’s website and appropriateelectronic tendering websites.

Unsolicited BidsHSC will not accept or consider unsolicited bids with a procurement value over $10,000 orgreater.


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Conflicts of InterestHSC must ensure it effectively manages internal and external conflicts of interest. The evaluationteam for each procurement project must ensure there are no undeclared internal direct or indirectconflicts of interest. Proponents are also required to declare any conflicts in their proposalsubmission. All conflicts must be declared in writing to Procurement.

Procurement Record KeepingProper documentation must be maintained for all stages of the procurement project and be inaccordance with the Records Retention Policy.

ConfidentialityHSC must ensure proponent information submitted in confidence as part of a procurementproject is adequately protected.

Contract Management Protocols Policy

All contractual arrangements must be approved by the CEO and/or Board as applicable beforeany work can begin. The following are guidelines that need to be followed before any type ofcontract can be put into place.

The following table shall be used in instances where new work is being considered or whereHSC is engaging a supplier for a new project

Competitive Methods and Approval Table

Estimated Value ApprovalLevel

Method Signing Authority

Up to $10,000 ChiefExecutiveOfficer

Single Source Chief Executive OfficerORChief Financial Officer

$10,000 to$25,000

ChiefExecutiveOfficer

Short-form Request forProposals(Minimum 3 Quotes)

Chief Executive OfficerORChief Financial Officer

$25,001 to$99,999

$100,000 or more

ChiefExecutiveOfficer / Chair

Board

Requests for Proposals(Open Process)

Chief Executive Officer AND ChiefFinancial OfficerORone of either the Chief ExecutiveOfficer or Chief Financial Officerand the Chair, Vice-Chair orTreasurer of the Board


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Contract Process

· HSC’s standard form of contract must be used. Where exceptions have been given, theconsultant’s form of contract shall be reviewed by Procurement and legal counsel.

· Determine which method of procurement will be required based on the CompetitiveMethods and Approval Table above.

For Single Sourced Contracts:Where contract terms are not finalized:

Complete a Non-disclosure agreement (NDA/confidential information letter agreement - legallybinding). This is required if either party is sharing information while both parties are stillpursuing/discussing a possible relationship. Staff must ensure that the standard format is used.Where the standard format is used, no further review by Procurement is required. Provide signedelectronic and hard copies to Procurement.AND/OR

Complete the Information Required for MOUs (Memorandum of Understanding, non-binding).This is needed to outline the high-level of terms being negotiated before a contract can be put inplace. Staff must ensure that the standard format is used. Provide signed electronic and hardcopies to Procurement.

Where contract terms are finalized:Complete the Information Required for Contracts form. This form contains all the informationrequired for a contract. This form requires the HSC project lead, Director and CEO’s signatures.Provide signed electronic and hard copies to the Procurement Manager.

For Request for Proposals (RFP):Complete applicable information form depending on the estimated budget of the project. Theseforms contain all the information required for an RFP to be issued and requires the project lead,Director and CEO’s signatures. Provide signed electronic and hard copies to Procurement.

Once the required information as noted above is received by Procurement, the applicabledocument will be drawn up:

Contracts - Procurement will obtain the CEO’s signature after which it will be sent to theconsultant for their signature.

RFPs – Procurement will write the RFP for the project lead and CEO’s review and approvalbefore issuance of the document.

Contract ManagementProject leads are responsible for managing the consultant’s services to ensure that thedeliverables are met by the timelines indicated in the contract.


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Executed Contracts• Electronic copies of executed contracts will be available in a central file repository• Hard copies will be maintained by Procurement• Contracts will be kept according to HSC’s Records Retention Policy

Invoices

• Ensure invoices specify a description of the services performed and if applicable, thenumber of hours/days worked related to each service

• Consultant invoices require three signatures in the following order:1. Project lead to confirm the invoiced amount against the services delivered;2. Procurement to confirm amount invoiced against contract terms; and3. CEO or his/her designate.

Ensure the approval stamp is used for approval of invoices to easily and clearly indicate that allrequired sign-offs have been obtained.

After the CEO’s signature, the invoice will be processed further by Accounting for issuance of acheque.

The signing of the cheque will follow the Approvals Table above.Note that an invoice will not be processed without a fully executed contract in place.

Revisions to ContractAdvise Procurement of any changes required to an executed contract e.g. extension of contractterm, additional services, additional fees, so that a Letter Agreement reflecting any changes canbe prepared and executed. This includes any work that is deemed to be required during thecontract term but is not currently reflected in the executed contract.

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HSC Action Plan to Implement Weiler Report Recommendations

CIH Canada Inc.

Weiler Recommendation:

HSC should assign oversight responsibility with respect to any future funding of CIH to an existing committee of HSC’s Board of Directors; perhaps the Executive Committee. The Committee should be provided with at least quarterly updates on CIH’s performance relative to targets and budgets. The Committee’s approval should be required before HSC advances any future funding to CIH.

Action Plan:

• Overall responsibility of CIH Canada is assigned to the Service Design andGrowth Committee; a Committee of the HSC Board of Directors. This Committeeoversees all programs and services offered either by HSC or through apartnership

• Quarterly reports of CIH Canada will be a standing item on the agenda of theService Design and Growth Committee.

• CIH Canada Quarterly Reports to the Committee must include;o quarterly performance against budgeto performance to date against Key Performance Indicatorso status update of work against approved annual business plan.

• All CIH Canada items tabled at Committee will flow to the next HSC Board ofDirectors meeting.

• Annually, the Board of Directors will receive the Audited Financial Statements ofCIH Canada and the updated Strategic and Business Plan.

• Any requests for additional funding from CIH Canada, or requests to defer re-payment of initial start-up funding will be tabled for discussion by the ServiceDesign and Growth Committee with a decision being tabled with the full Board ofDirectors for consideration and approval.

It should be noted that this quarterly reporting has already begun. CIH Canada presented their board approved Q4 2014 findings to the Service Design and Growth Committee on June 12, 2015 with this information flowing through to the June 29, 2015 Board meeting. This practice will now continue quarterly with the next report scheduled for the September 11, 2015 Service Design and Growth Committee.

Andrew

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Housing Services Corporation Report by Weiler & Company March 4, 2016 Appendix 6

Andrew

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Housing Services Corporation Report by Weiler & Company March 17, 2016 Appendix 6

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Encasa

Weiler Recommendation #1:

HSC should assign oversight responsibility with respect to any future funding of Encasa and any expansion of Encasa’s business to an existing committee of HSC’s Board of Directors, perhaps the Organizational Performance Committee. The Committee should be provided with at least quarterly updates on Encasa’s performance relative to targets and budgets and any changes to its business or expansion plans. The Committee’s approval should be required before HSC advances any future funding to Encasa to ensure HSC does not provide a disproportionate share of any funding. The committee should also provide guidance to HSC’s Board of Directors representative on Encasa’s Board to help ensure HSC’s best interests are maintained.

Action Plan:

• Overall responsibility for Encasa is assigned to the Organizational PerformanceCommittee; a Committee of the HSC Board of Directors. This Committeeaddresses corporate financial matters.

• Quarterly reports of Encasa will be a standing item on the agenda of theOrganizational Performance Committee.

• Encasa Quarterly Reports to the Committee must include;o quarterly financial resultso total assets under managemento Fund performanceo performance or new investor trends.

• All Encasa items tabled at Committee will flow to the next HSC Board ofDirectors meeting.

• HSC’s CEO is the designated representative for HSC on the Encasa board. Hewill provide updates along with the Encasa quarterly report to Committee and theBoard.

• Annually, the Board of Directors will receive a report to Shareholders which willinclude the Audited Financial Statements of Encasa.

It should be noted that this reporting has already begun. Encasa presented their board approved Q1 2015 findings to the Organizational Performance Committee on June 17, 2015 with this information flowing through to the June 29, 2015 Board meeting. This practice will now continue quarterly with the next report scheduled for the September 15, 2015 Organizational Performance Committee. In addition, an annual shareholder strategy meeting has been established with the first meeting to take place on December 10, 2015.

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Weiler Recommendation #2:

Although the shareholder’s agreement provides that unanimous approval is required for all significant decisions, including changes to the business plan, HSC should consider, in the future, the possibility of negotiating a revised Board of Director composition which would increase the total number of Directors to five and allow HSC to appoint two Directors. This would provide HSC with representation on the Board of Directors comparable with its ownership interest in Encasa.

Action Plan:

We appreciate the feedback received from Weiler & Company with regard to the HSC representation on the Encasa board and recognize that increasing the number of directors that HSC can appoint to the Board would provide the Corporation with greater control.

As the Report notes, an extensive process was used to investigate and eventually move to a shared ownership structure for Encasa. A chief element in the negotiations with potential partners was the need for equal partnership where no one party controlled the decision making, regardless of the equity % owned. The current structure of the Board reflects this concept of equal partnership. All major decisions require unanimous consent so no one party or faction can drive decisions. The Shareholder’s Agreement articulates this requirement and further provides a list of matters which require unanimous consent. This list includes all major decisions related to the governance and operations of Encasa; including but not limited to the approval of the Business Plan, issuance of shares, and borrowing. The current Board make-up is intended to encourage collaboration and find solutions that work for all partners.

The point is well taken that in the future there may be a business rationale for negotiating a revised Board of Directors composition. HSC will raise this issue with the other Encasa shareholders at the upcoming Shareholders’ Strategy meeting in December 2015.

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Procurement and Contract Management Policies

Weiler Recommendation:

HSC’s procurement and contract management protocols policies should be amended to specific that the policies apply to the subsidiaries of HSC, as well as to HSC, itself. Alternatively, it would be acceptable for a subsidiary to develop its own procurement and contract management protocols policies.

Response:

HSC shall review all of its procurement and contract management protocols policies and amend them all to include language that:

• requires that the policies apply equally to the wholly owned or controlledsubsidiaries of HSC; and

• suggest that the policies apply for those subsidiaries where HSC does not havea controlling equity interest (such as Encasa and CIH Canada).

The process to undertake this review will be completed by August 31, 2015 with a report to the HSC Board of Directors at their October 2015 meeting for review and approval. Communication will then be circulated to the Boards of each subsidiary to inform them of the policy and compliance requirement.

Additional Corporate Action:

The review conducted by Weiler & Company Chartered Accounts has enabled HSC to see the impact of the changes it has made while also providing valuable feedback on our operations.

The HSC Board of Directors will invite the independent reviewers back in 2016 to report on the implementation of their recommendations and to review any additional changes we have made to improve efficiency in our operations.

Approved by HSC Board of Directors on June 29, 2015.

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