The unbelievably boring facts about the bus rapid transit audit
Internal audits are important. But they are also a bit boring. So it’s no surprise that apparently the only way CTV London can cover the important work of the city’s audit committee was to sensationalize what is actually a routine, prudent and smart recommendation from our internal auditors, supported by city staff, the audit committee and council.
To recap: two days ago, CTV London ran a sensational story about an audit of bus rapid transit. It featured comments from audit committee chair Paul Hubert, who explained why the internal audit plan had changed and comments from Councillor Phil Squire, whose comments were edited by CTV London to suggest the audit was being delayed for political reasons (update on 6 Jul at 12:17pm: this section has been updated based on this clarifying tweet from Phil Squire). There was a second story featuring comments from mayoral candidates, one of whom, Paul Paolatto, said “that was without a doubt the most nonsensical comment I’ve ever heard from Councillor Hubert.”
Kudos to Deputy Mayor Paul Hubert, who has chaired the audit committee for the entire term of this council, for trying his best to actually let Londoners know what was happening.
But if all you knew about this issue was what you heard and saw in these CTV stories, I would understand if you were concerned about the audit.
The good news? There’s no reason to be concerned. The internal auditors for the city, Deloitte, are doing a good job. City finance staff are doing a good job. And the members of the audit committee — Paul Hubert, Michael van Holst, Anna Hopkins, Stephen Turner and Sumeet Khullar (a citizen appointee who is an accountant) — are doing a good job.
As someone who has attended 21 meetings of the audit committee this term of council, I’m going to give you the plain, boring facts about this issue.
External vs Internal Audit
The city has two independent auditors: KPMG, which handles the external audit of the city’s consolidated financial statements; and Deloitte, which handles the internal audit of a limited number of specific projects or areas.
The external audit is what most people think of when they think of an audit. To learn more about the most recent external audit by KPMG, read this audit findings report for the 2017 financial statements. It was presented and discussed at the 20 June 2018 audit committee meeting.
Importantly, the external audit of the consolidated financial statements includes all areas of the city, as well as agencies, boards and commissions. The first consultants engaged for the environmental assessment of rapid transit were hired in 2014, and all related spending in 2014, 2015, 2016 and 2017 would be included in the audited consolidated financial statements for those years. The operating and capital budgets, which include rapid transit, are also subject to mid-year and end-of-year reporting and scrutiny at corporate services committee. The most recent reports were discussed at committee on 17 April 2018.
The mandate of the internal audit function is set out in the internal audit charter:
The mandate of the City’s Internal Audit (“IA”) function is to assist the Audit Committee and Management in meeting its role under the Municipal Act by serving as an independent and objective assurance and consulting body established to carry out activities that add value and improve City’s operations and systems of internal controls. IA assists the City in accomplishing its objectives by bringing a systematic, collaborative and disciplined approach to evaluate and improve the effectiveness of the City’s governance, risk management, internal control processes as well as assessing value for money and identifying value for money opportunities.
So What Happened?
The internal auditors, Deloitte, developed a four-year risk-based audit plan and presented it to the audit committee for discussion and approval. The plan for 2017–2020 was discussed at the 10 May 2017 audit committee meeting. This four-year plan is updated annually as projects are completed or reprioritized. The 2017–2020 audit plan included the following (page 13):
Each year, beginning in 2018, Internal Audit will assess a facet of the Rapid Transit Project based on the milestones reached within the project. Possible assessment areas of focus include project management controls and effectiveness, an assessment of the tendering, awarding and procurement process, construction auditing, and contract compliance auditing and communications assessment.
At the 22 Nov 2017 audit committee meeting, Councillor van Holst asked about an internal audit of the construction procurement process. Staff and the internal auditors were asked by Deputy Mayor Hubert to report back at the next audit committee meeting.
At the 7 Feb 2018 audit committee meeting, the internal auditors reported back as requested. The report from Deloitte stated:
Per request made at the last Audit Committee meeting, a Construction Procurement Process assessment has been included in the 2017–2018 Internal Audit plan. The high level process description is as follows: Assess the processes and controls in place related to the construction procurement process. Areas to be reviewed are request for quote, tendering, change orders and contract compliance. Timing of the assessment is proposed for September to December 2018. This review will replace Rapid Transit within the audit plan.
Just to put the scale of the construction procurement process in perspective: in 2017, the city awarded 204 contracts valued at over $254 million. The construction procurement process is very important.
Changing the internal audit plan to include the construction procurement process in 2018 and to reschedule rapid transit to future years was a recommendation from Deloitte, the city’s professional, independent internal auditors. The audit committee received that report on 7 February 2018 and council voted unanimously to receive that report on 13 Feb 2018.
Rapid transit is still included in the 2017–2020 internal audit plan. It was rescheduled because a new project was added to the internal audit plan and there has not been as much activity — for example, no construction contracts have been awarded yet — as originally anticipated.
That’s it. That’s the whole story. No one trying to hide anything or shield rapid transit from criticism. Just a group of professional accountants, city staff and municipal politicians (and one citizen appointee) doing their jobs well. Pretty boring, eh?
Expect Better from your Mayoral Candidates
Every Mayoral candidate who was interviewed for this story, with the exception of Tanya Park, did nothing to clarify or to inform Londoners about this issue when asked about it by CTV London. Judging from their comments, that’s either because 1) they themselves don’t understand what happened; or 2) they do understand what happened but they think it’s an easy way to get media coverage and score political points.
One of these candidates, Paul Paolatto, said he would initiate an audit of rapid transit within 30 days, if he is elected Mayor. Sounds like a good idea! But he is telling voters he will do something that the current audit committee and city council have already done. We don’t need to initiate an audit of bus rapid transit because it is already scheduled as part of the city’s internal audit plan.
