Jan 5/05 Report
1:30 pm - 3:35 pm

http://www.city.hamilton.on.ca/clerk/agendas-minutes-reports/
Strategic-Planning-Budgets/2005/Jan05/Agenda.pdf
(changes: 15.1 removed, corrected appendix C for report in item 9.2)

Members Attending: DiIanni - Chair (In 1:32), Braden (In 1:25), Bruckler (In 1:34, Out 1X 4 min), McHattie (In 1:34, Out 1X 2min), Whitehead (In 1:35, Out 1X 30min). Absent: Mitchell

Other Councillors Attending: McCarthy (1hr.10min), Pearson (1hr.40min), Ferguson (31min), Collins (1 hr.31min), Bratina (33min)

Staff: Department Managers (except Graham, Rinaldo), Glen Peace (City Manager), Guy Paparella (Strategic Planning), Rick Male, Tony Tollis and 5 or 6 other finance staff, Ann Pekaruk (Internal Auditor), Don Hull (Manager of HSR).

Media: McGuinness (Spec), Mann (CHML), CATCH

Others: Duncan Gillespie (Acting CEO, HECFI)

Appointment of Vice-Chair: Councillor Whitehead nominated Ward One Councillor Brian McHattie to be the Vice-Chair of Strategic Planning and Budgets for this year, and the Motion CARRIED.

9.1 Hamilton Entertainment Convention and Facilities Inc. (HECFI) Governance Review
http://www.city.hamilton.on.ca/clerk/agendas-minutes-reports/
Strategic-Planning-Budgets/2005/Jan05/HECFI.pdf

From the staff report: " The number of HECFI Board Members has been reduced to nine with three Council Members including the Mayor and six citizen members appointed to one, two or three-year terms. In addition, a number of operational modifications more consistent with City of Hamilton policies and procedures have been made to help improve accountability and service delivery." Included in the mandate of HECFI is to engage in business activities to "seek to reach financial self-sustainability".

Discussion:

McCarthy notes that on page 6 of the report it states "HECFI will reimburse Directors for all reasonable expenses", asks for details, and expresses concern that expenses be "spelled out". The Mayor suggests that HECFI has a policy similar to the City on this, and Rick DeFillipo from Finance confirms this.

Whitehead has questions about the Board nominating process for the first five years or so when each Board member is entitled to sit for two consecutive terms. Guy Paparella (Strategic Planning) agrees that "it is a bit awkward in the first cycle" and suggests that the "nominating committee initially - the ones that are appointed as of March of this year. - they only be given the single year so that we know that they can participate in the nomination committee for the following cycle", and that some nominees might only want a one year term for a variety of reasons. Whitehead states for clarification that "you may be in the dilemma where.citizen appointees - all qualify to be reappointed, so the determination would have to be made by the Implementation Committee that at least two of the members that they appoint would be not renewable - be one term - so that they could participate in the nomination committee for future nominations".

Whitehead's second point is about financials, asking for confirmation from Paparella regarding the issue of the City continuing to subsidize HECFI, noting that the current level of about $5.5M does not fully take into account other revenues generated by HECFI activities in the city (parking), and other subsidies that users of HECFI receive (Opera Hamilton and The Bulldogs are two examples he sites). ".Those numbers aren't flushed out here too. I don't accept the premise that the $5.5M is the subsidy to HECFI, and if we do accept that then it's accounting dollars off our books.. I don't want to.appear to put the whole load on operations there, when in fact they're alleviating pressures here at City Hall".

Whitehead also doesn't want to see the Chair of the Tourism Board (automatic member of the new HECFI board) be a voting member, citing "special interests" on the Tourism Board that might create a conflict of interest. He would like to see this member sit on the HECFI board as "ex-official". The Mayor sees that the "Chair has raised his hand, and I will get to him in a moment", but first wants to allow other Councillors to speak.

McHattie is interested in HECFI's goal of self-sustainability, noting that staff costs (WSIB payments mentioned specifically in the report) are extra to the $5.5M City subsidy. He welcomes the plan to better track these costs in future, but wonders whether there's an "upset limit" for HECFI costs. He asks for more details to be brought forward at some point on the both income and costs. Paparella says these are "all good questions, and are things that the committee discussed in detail". He assures that in the upcoming months the finance department will be putting together detailed financial information for the information of Council, saying the "it's important to note that the policies.are to be more consistent with City of Hamilton policies.to bring both organizations in line (with each other).." Self-sustainability is a goal, but "it's a difficult one, under the circumstances because we have been subsidizing those facilities for quite some time. In the future obviously, with better accounting, better ways of generating revenue, we hope, with a new committee and a new direction we hope to obviously offset those". He uses income from parking revenues as an example an item that will be included in the "real activity-based kind of accounting method that we're going to try to impose here".

Bruckler says he is interested particularly in the program content within HECFI. "The more we deal with community based programs and the more concessions that we give to the tenants within HECFI, obviously we start to lose on that sustainability side". He says that Council needs to be clear to the Board as to what the expectations around these issues are.

Ferguson , who was on this reorganizing committee, thanks the staff involved. "The key is we have to make HECFI a SPU - a specific business unit. I don't know how we can expect anybody to manage a facility if they don't know what they're paying for the hydro. There's no incentive to turn the lights out when you leave the room. Therefore we have to charge them for all the services they receive.(legal, hydro, human resources etc.). The flip side is if the people around this table (council) want to give the 'world bocce tournament' (as an example) a great deal on Copps Coliseum, HECFI should invoice the City, because it was the people around this table that made that decision not the HECFI Board. .We have to give the tools to the HECFI Board to make them financially responsible.."

On HECFI Board make up, Ferguson wants to see the Chair of the Tourism Board be a voting member, as "tourism is such an integral part of HECFI's success." and makes recommendations regarding terms of office to ensure corporate continuity. In response to Councillor McHattie's question about an upset limit he says that he "would be fairly comfortable with an upset limit of $6M, all in, including all services, but we have to have .accountability".

Bruckler asks which committee the Board will report to. The Mayor says any of three are possible "this one, or corporate admin, or the recreation and parks facilities one" (community services), although it hasn't been decided yet. He thinks that because of the financials involved it might be best to come to one of the first two. Whitehead thinks that whatever committee the Tourism board reports to would be best (Planning and Economic Development, of which he is the Chair, for this year).

Whitehead reiterates his concern about the Tourism board chair being a voting member. ".Look at the makeup of the Tourism board, they are stakeholders.I really believe fundamentally that there is a potential - a strong potential - for conflict when you're dealing with the hospitality industry.. They have banquet rooms they rent out. They do their own shows. They are in competition with the HECFI events. . For the purposes of keeping things clear and open and transparent, and no perception of abuse, it would be probably better to have that member as an ex-official".

Motion (Whitehead/McHattie): Moved that the Tourism Board member be an ex-official of the HECFI Board.

Discussion on the Motion :

Ferguson: "If you vote to remove the Chair of Tourism Hamilton, you're also telling the other.committee members that they're wrong too, and Councillor Whitehead is part of that committee and he wasn't present at that meeting, so if you want to have input like that have it at the committee level not . here". DiIanni: "Well, the point though, is that we can bring that up here, and we can bring it up when we deal with it at Council as well. So that's just the way things work".

The Mayor notes that he was at that meeting and would like to make some comments. He understands the potential for conflict of interest, noting that the current chair of the Tourism board is "John, from the airport" and that if an event in conflict with the airport came to HECFI he would "have to step aside from the vote.(but) there's a mechanism for doing that". "Part of the process is that whenever we deal with those things, is that people are transparent and obvious in declaring potential conflicts...leaving it up to the person's discretion.and I really didn't see a harm in that, personally, provided that there's that provision in there that people have to be upfront and fair in their decision making.." In response Whitehead says he is concerned not only about the Chair, but also the makeup of the whole Tourism board ("stakeholders"). ".You know that at one point or another someone who's on the Tourism board who ends up sitting as a voting member. could put undue pressure to it - never mind that they declare a conflict - ..If there's a slim chance of abuse I'd rather just avoid it if possible by leaving the member as an ex-official".

The vote on the amendment is called and the chair (the Mayor) asks for clarification of who is on the committee (first time sitting with new members). The vote looks to be 3-2 in favour (Bruckler and DiIanni opposed), but Ferguson puts his hand up, and the Mayor says he can't vote. Ferguson wonders if, in the absence of the chair of Public Works (chairs of all committees make up the SP&B committee) Councillor Mitchell, could vice-chair Councillor McCarthy vote? The clerk vetoes this. The Mayor states he sees "that this will have be decided at the Council level", but that the amendment is CARRIED at the committee level, as is the rest of the recommendation (below):

(a) That the Shareholder Direction relating to the City of Hamilton Entertainment and Convention Facilities Inc. be approved;

(b) That the City Manager be authorized and directed to advertise for citizen members on the HECFI Board of Directors, with the intent of creating a HECFI Board by March, 2005;

(c) That the HECFI Implementation Sub-Committee be appointed as the Nominating Committee for the selection of the initial Board of Directors and that the appointments be forwarded to Council for approval.

(d) That the HECFI Implementation Sub-Committee be appointed as the Nominating Committee for the selection of the initial Board of Directors and that the appointments be forwarded to Council for approval.

(e) That the City Solicitor be directed to prepare any legal documents required to enact all the changes in Report CM05002;

(f) That the Mayor and City Clerk be authorized to execute all necessary legal documents, as required.

9.2 Hamilton Community Energy Services and Charges http://www.city.hamilton.on.ca/clerk/agendas-minutes-reports/
Strategic-Planning-Budgets/2005/Jan05/
CM04031%20HCE%20Energy%20Services%20%20Charges.pdf

The City is purchasing energy locally and believes it is being penalized by provincial rules. (Committee discussion to posted)

Staff recommendation:

1. That the following report be received by Council, in response to a request for information, regarding the projected savings arising from the agreements between the City of Hamilton (City) and Hamilton Community Energy (HCE).
2. That Council submit a request to the Minister of Energy to amend the regulations under Bill 210 to allow municipalities, which purchase electricity from alternative energy sources, to be entitled to the "capped" commodity charge retroactive to May 1, 2002.
3. That all copies of requests made by HCE, on behalf of the City, for financial reimbursement for the excessive costs incurred by the City, as a consequence of the City's ineligibility of a capped commodity charge for electricity purchased from an alternative energy source, be forwarded to the Minister of Energy with a request for reimbursement.
4. That staff be directed to negotiate with HCE the savings guarantees, inflationary caps, energy management initiatives and various operational strategies to provide additional savings and future cost avoidances to the City in preparation for the 5-year contract review in 2006 and report back to Council.
5. That staff be directed to develop the business plan in conjunction with HCE in order to assess the viability of transferring the CUP asset, including all of the associated management and operating costs and pending future capital replacements, to HCE and report back to Council. CARRIED (Bruckler/Braden)

9.3 Audit Report 2004-05 - Business Travel, Training and Related Expenses
http://www.city.hamilton.on.ca/clerk/agendas-minutes-reports/
Strategic-Planning-Budgets/2005/Jan05/
CM04033%20-%20Business%20Travel%20-%202004-05.pdf

"The main issues noted for action in the report include: inappropriate account distribution (reported in the prior two reviews also); issuance of new advances with final accounting of current advance overdue (reported in the prior year also); incomplete supporting documentation for travel claims; and incorrect reimbursement for mileage due to 5,000 kilometre threshold. . Four instances of staff and elected officials with greater than one advance outstanding (one with five advances, all significantly overdue) were noted. Of these 11 advances outstanding among the four individuals, five originally dated back to 2002." (Committee discussion to be posted)

Staff Recommendation: That the report be received. CARRIED

9.4 2005 Internal Audit Work Plan
http://www.city.hamilton.on.ca/clerk/agendas-minutes-reports/
Strategic-Planning-Budgets/2005/Jan05/
CM04036%20-%202005%20IA%20Work%20Plan.pdf

Proposed projects for 2005:

Carry Forward of 2004 Work Plan Projects (payable; social housing funding streams; and Hansen Conversation technology ), Follow Up Reviews of Audits Previous Conducted, Annual Recurring Audits / Reviews / Assignments (procurement card usage; business travel, training and other related expenses; police revenues and cash accounts; fair wage policy compliance for contractors; and the Red Hill Creek Expressway claim), Work Order Processing (Public Works), Reserve and Reserve Funds, CLASS System (tracking for culture and recreation), Downtown Renewal Loans Programs, Grants to Outside Bodies, Accounts Receivable, and Cash Handling .

Discussion:

McHattie ask regarding 'process' - e.g. how he could have made suggestions for this work plan. Apparently he was away (on his honeymoon) during the period when councillor input was sought by the Internal Auditor, and so missed this opportunity. The Mayor assures everyone that this meeting presents another opportunity to make suggestions for additional areas to audit. McHattie, "not to rock the boat", is interested in looking at the Business Tax Reduction (BTR) program, saying this could come under the 'value-for- money' category of projects.

Collins notes that he brought to the auditor a long list of projects he'd like to see included, and he notes that some have been included in the '05 work plan. But he feels it is important to include a few other areas: severances for non-union employees, reserve funds, use of capital accounts, and contracts/consultants, and he is concerned that these items been left off the work plan. Human resources staff indicates that a report is coming to council that will outline details of the severances issue.

Collins: "I have found in going through the WIP's (works in progress), that when certain projects are allocated and approved during the budget session, and there are monies left over, I've found instances where certain departments have, in fact, used the remaining dollars for other initiatives within their department. I'm not sure right now what the policy is on capital accounts and the use of those funds.. Can that be part of the internal audit? .There would be financial savings to the municipality should we place tighter controls on the use of capital accounts for other purposes.." Staff (Tony Tollis): ".There are a number of policies right now that we are following. Unfortunately we haven't had the opportunity to consolidate some of the city policies and some of the regional policies in the outlying municipalities. Part of our work plan for 2005.was to bring about a policy for the capital projects.. There are policies in place. They have not been approved by Council in their entirety. We're kind of following past practice in most cases. We'll be bringing forward that comprehensive policy probably in the second quarter of this year. My aim is to get it out before the end of June so that we can use them for this year. As well, on the reserves, we used to issue an annual book on reserves, which had a page for each reserve, which.told you (the details). That's going to be created at year end, so probably in March.and that's when I wanted to introduce the policies on the capital side as well". Collins: "Can we not do something immediately, in the interim.to send something out to staff to state that if funds were allocated for a project that they're only to be used for that project until a policy is presented and approved?" Tollis: ".We can put together the policy that we're currently using.." Collins: "On that.what are we following..?" Tollis: "A lot of them are more commonsensical than anything else. For example if a reserve was used to fund a capital account and there was a surplus.then that money would go back to the reserve. If there were funds left over for a particular capital project where there was an on-going type of associated project, then it would be passed on to that. So there are a number of those that we've been using. .It hasn't been, by any stretch, carte blanche. There are specific guidelines when we close out the accounts. And there was a report recently that showed what we've done with each closed account - it's surpluses. . " Collins: ".My only problem is, is that there are accounts from '97, '98 - we've been through some of those - where we've been drawing on them for purposes for which they were never originally intended - that's what I'm trying to get at, really". Peace: "Yes, we recognize - now you will recall that we've been fairly diligent on trying to close out those accounts. We've been at it for about 18 months now under Joe's (Rinaldo) direction, and we're continuing to do that. So, yes we're continuing to find some of those accounts and we'll certainly reinforce that again this year Councillor, and bring back what's available (surplus funds) to the '05 budget process".

Collins: ".My last one is - and I stole this one from the City of Toronto's audit, the plan that they had for '04 and '05 - and that is the selection and hiring of professional and consulting services. And that could even include contractual. We've had some debate recently about how we go about hiring people - whether or not they're needed or not - very high profile cases, and in fact.I had my meeting several months ago, and it just co-incidentally happened that - for instance the Silverberg situation is a very appropriate one that would fall into this category. And from an audit standpoint, the City of Toronto noted - and I looked at their minutes - that their professional consulting and contractual fees were rising exponentially in comparison to other budget years, and they were looking for ways and means that they could control those costs and possibly undertake some of those services internally. I'm not sure what category that (audit project) would fall in terms of the appendices that are before us.. Is there a way to review that rather than doing an operational review?" Peace: ".You could add that.. It's a capacity issue, so if that's a priority of committee or of Council then we could direct the internal auditor to do that". DiIanni: "Well, we've talked about this in the past. In fact we've committed to reviewing the use of consultants and so on. I'm not convinced at this stage that it's an audit function though. .I think it is a policy function, and a budget function, and we need to understand where and why we hire consultants. To me an audit takes us into the realm of 'once the decision's been made are you using the money appropriately?' So, if we investigated the Silverberg issue from an audit perspective, as we did and we found that most of the money was used appropriately - was spent according to what the contract was, with the exception of some that we're trying to recover, but it wouldn't have got at 'did we need that consultant to do that work?'. And I think that's what you're trying to get at, isn't it?" Collins: "Well, in part. Part of it is selection and hiring, and so what is our process.? And I know that in the past - I just had this complaint on the weekend, where a private organization or a company complained that, you know, the practice is in the City that under $5000 people are issuing purchase orders to certain groups and just breaking up the contracts over the course of the year - and I think our internal auditor's dealt with that in the past, in terms of trying to skirt the purchasing policy with lower dollar amounts. But I think it has to do too with the continuing reliance on certain services, when in fact they can be, or could be provided internally. So, landscape architects for instance. We review site plans, we have all sorts of projects internally - I'm sure that the expressway would be one of them - where we rely on landscape architects, and to the best of my knowledge I think we're contracting a lot of that out. Where formerly, we had provided those services internally. And I want to know whether we'd get more bang for our dollar if we were to hire people, and get more work done that way than contractually selecting people from the private.." DiIanni: "And how do we get at that, because I think I agree with you. That's the question to be asked.." Peace: ".I think I concur with your position Mr. Chair, that it's not the audit. That's a policy review, and if that's the direction, clearly we'll review that policy and come back. In fact it's my understanding we're in that process. But I think we'll get to where you want to be, and we agree we need to get there". Collins: "But if I could start - and I'm not on the committee, but I could do this at Council or have somebody do it here - to add professional services and contractual to the review that Glen (Peace) mentioned earlier, that we've already approved - expanding the scope of that audit?" DiIanni: "Let's do that, and the Clerk has captured that. OK?" He wants to vote on the recommendation, but Collins interrupts. Collins: "I didn't know if we had consensus on, for instance, the severances and those issues. Does it require a motion? DiIanni: "I think we have a report coming.and it's been captured in the (clerk's) report too. All in favour of the recommendation, as amended, that's CARRIED ".

Staff recommendation:

1. That the report be approved.
2. That the Director of Audit Services report back to the SP&B committee regarding additional resources.
3. That the reporting process for Internal Audit reports be approved.

9.5 Follow Up of Audit Report 2002-07 - Transit Fares and Revenue and Ticket Agent Revenues
http://www.city.hamilton.on.ca/clerk/agendas-minutes-reports/
Strategic-Planning-Budgets/2005/Jan05/
CM04034%20-%20Follow%20Up%202003-07%20-
%20Transit%20Fares%20&%20Ticket%20Agent%20Revenues.pdf

From the staff report: " Audit report 2002-07, Transit Fares and Revenues, was originally issued in November, 2002 and management action plans with implementation dates were included in the report. The report Ticket Agent Revenues was issued in February 2003 after agent cash counts were carried out. In October 2004, Internal Audit followed up the two reports to determine that appropriate actions had been taken. Of the 14 individual recommendations made in the original reports, four (4) have been completed, one (1) has been partially acted upon and nine (9) have not been implemented. . Even though several of the non-actioned recommendations are reliant on a Business Process Review (not to be completed until mid 2005) or participation in the GTA Fare Card project (ongoing), some of the recommendations, especially those dealing with ticket agents' balancing of funds and ticket pass stock should have been actioned by the time of the follow up."

Don Hull (Manager of HSR) makes a power point presentation. He indicates that fare box replacement is outstanding, but that this delay has availed the City of extra funding in the form of upper level government grants ("many millions of dollars in provincial subsidies") for the GTA Smart Card program, in which Hamilton is "obliged to participate" to receive gas tax monies.

Discussion:

Whitehead wonders if any of the original budgeted monies for this project ($4.5M) will now be available as a result of these grants. Hull indicates that on the contrary, more funds will be needed because of additional aspects associated with the GTA fare card project, but that there will be no budget impact as it is expected that provincial gas tax revenues will be allocated to this project.

Staff recommendation: That the report be received. CARRIED (McHattie/Whitehead)

Meeting adjourned 3:35 p.m.