September 7/05 Report
1:35 pm - 2:50 pm (Committee went in camera at this point.)

Attendance:

Members:

• Braden
• McHattie (chairing)
• Mitchell
• Bruckler
• Whitehead

Non-member:

• Ferguson attended and he left at 2:44 when Whitehead and the press left.

Staff:

• Rinaldo
• Tollis
• 3 or 4 other finance staff
• Ann Pekaruk
• Peace
• Stewart
• Kay
• Priel (and three others)
• Graham
• Anna Bradford
• Coveyduck

Press:

• Ken Mann (CHML)
• Bill Dunphy (Spectator)

Agenda:
http://www.city.hamilton.on.ca/clerk/agendas-minutes-reports/
Strategic-Planning-Budgets/2005/Sep07/Sep07-Agenda.pdf
(Note * 5 outstanding items of business for the committee, initiating dates from 11/04 to 01/05. Three are waiting for staff action and the other 2 are the committee's to address)

No tape is available of this meeting.

Discussion Items:

8.1 Follow-up of Audit Report 2003-02 - Contracted Shelter Programs
http://www.city.hamilton.on.ca/clerk/agendas-minutes-reports/
Strategic-Planning-Budgets/2005/Sep07/Sep07-CM05021.pdf

A quick overview by Ann Pekaruk, Internal Auditor, was given.

Braden asks whether the city is in better shape since the audit was done? Pekaruk explained the areas of concern and said that controls have improved.

8.2 Follow-up of Audit Report 2003-07 - Construction Contract Management and Administration
http://www.city.hamilton.on.ca/clerk/agendas-minutes-reports/
Strategic-Planning-Budgets/2005/Sep07/Sep07-CM05022.pdf
A quick overview by Pekaruk was given.

Bruckler asks how the city can ensure that the consultants are accountable. Scott Stewart (public works) assures that the necessary language regarding accountability is in the contracts and that the city can take action based on this if necessary.

Whitehead asks re the construction issues at Wentworth Lodge where apparently the city is having problems getting reasonable bids on an RFP (perhaps due to the risks of working in a building that is concurrently occupied). Stewart says this type of project is new for the city. Staffer Michael Hill from Legal (Risk Management) is handling this issue to make sure the city is covered. Rinaldo says something about a "letter of credit" which would create "more flexibility and a higher level of protection" and is in the best interest of the city, but that the "industry doesn't like it". Whitehead says he's heard that the professional association is telling their members not to bid on the RFP and Stewart answers that they'll be meeting with the engineering and architectural associations to discuss "why they're taking that hard line approach".

8.3 Audit Report 2005-05 - Grants to Outside Bodies:
http://www.city.hamilton.on.ca/clerk/agendas-minutes-reports/
Strategic-Planning-Budgets/2005/Sep07/Sep07-CM05023.pdf

A quick overview was given by Pekaruk explaining that her audit report covers two areas, the Community Partnership Program ($2.8 million - Arts and Culture programs) and the National Child Benefit Program ($3.1 million - this is Hamilton's 20% of the Provincial clawback of Federal child benefit monies from parents receiving public support incomes). She tells the committee her recommendations for the former (better follow-up once the grant is given - in particular require a financial report, and more objective scoring of applicants) but not the latter.

Ferguson says he's "upset" at the story about in the Spectator regarding the CPP, saying staff is doing their "honest double best" but getting their "kicked in the teeth" by the paper. He asks "was anyone paid that shouldn't have been?" and is told no. He extols the virtues of the staffers and names them. He reads aloud a complaint letter he has received from Patti Cannon. City Manager Glen Peace says that the intent of this audit is to improve the processes and not to malign staff.

Whitehead asks how many groups that received grants through the CPP program turned in audited statements. Pekaruk explains that it is their procedure to select a sample not to look at all the grants, but that of the sample they survey not one had submitted financial statements.

Whitehead wonders if in the scoring used to assess new applicants there is a section that asks about this. Pekaruk explains some of what is included in the scoring that relates, such as the organization must have a "stable financial environment", but that there is nothing about financial statements per se involved in assessing applications for these grants. Tony Tollis (finance) clarifies that although that is true, most groups reapply (he says later 95%) for funding and at that point the group must submit a financial statement (not audited - for most groups this is too expensive) regarding how previous grants were used. He says that it would be "repetitive and cumbersome" to require this at the scoring stage, and says something about the timing of the new applications being appropriate in terms of receiving the financial reporting at that time.

Whitehead comments that based on his experience of other levels of government, who all require proper financial reporting, that this should be a condition to receiving a city grant. He asks what will change as a result of the auditors recommendations. Tollis refers to the management response in the report saying that staff is looking into how best to deal with this. McHattie asks for further clarification that financial reporting will be required of groups getting city grants and Tollis reiterates that staff is discussing it. He comments that many organizations "don't have the time or the capacity", but that "some reporting will occur".

Bruckler says he understands the limits of some of these volunteer run organizations. He suggests that the city make it a requirement of the "final decision" on a new grant that a financial report be received. Tollis says that the city already requires this.

Bruckler brings up the issue of "preferential treatment" at city facilities - 'services in kind' (http://www.hamilton.ca/Finance/Grants/applications/pdf/
2005-grant-se-services-in-kind.pdf) - saying these should also be reflected in financial statements. Tollis says that staff is currently reviewing the issue of services in kind and he names the staff involved.

Mitchell suggests that larger grants be looked at more critically - perhaps those over 10 or 20 thousand dollars. He also brings up the example of the Winona Peach Festival outlining their history of grant amounts from the city, the capital improvements the festival makes to the community due to the festival, the services in kind that the city has periodically allocated to the festival, etc. Tollis says he personally reviews all the financial statements of organizations receiving more than $50K, and that they're "not a pretty sight" - they have small budgets and no reserves. He repeats that staff is looking at the services in kind issue.

Ferguson outlines some facts of the grant for the Peach Festival.

Mitchell says that the festival is very happy with the program and that they are a fine example of a group working with the community. He goes on to say that he wants to encourage them all to be more self sustaining. He says that this year groups (or just the Peach Fest?) were asked if they could move towards more self sufficiency or other sources of funding and free up 10% of their grant so that perhaps a new program/festival could be established. He says that "they" said that would be OK, but only if the money went to help a new organization, "not just getting lost" in general city coffers.

McHattie points out that Pekaruk's report actually states that although there is a statement of policy regarding encouraging groups to become more self sustaining, there is no evidence that the city is taking concrete steps to provide incentives for this. Pekaruk confirms that the policy says that the city "looks more favourably upon" those organizations that are trying to move to this, there is no formal incentive. She also mentions something about $5K 'seed money' for new organizations. Ferguson says that the city could address this in the evaluation of new applications.

Braden has questions and comments about the other program in the grant audit - the National Child Benefit program. He asked "how is it we are not spending money we have access to?" He says he knows that there are community groups that are concerned that the clawed back monies are returned more directly to those that were due it in the first place (parents receiving Ontario Works or Ontario Disability Support payments). Pekaruk explains that much of the surplus had accumulated prior to amalgamation in 2001 "when there were no staff devoted to this". And that the yearly amount that doesn't get spent is now in the area of 3%, which is well below the province's acceptable level of 10%. Braden asks for clarification of the amount of accumulated surplus and Joe-Ann Priel (Manager, Public Health and Community Services) tells him that it's in the $500-600 thousand range. She says her department in at least one previous year (last year?) "took it.to the food bank.council gave authority to decide.we gave.to help out. Council didn't like this.re not transparent.." She mentioned they try to "target ODSP.food shelters.." etc. The staffer responsible to form proposals on how to spend the money is Gillian Hendry. Priel tells the committee that it's "not good we're not spending as we should be, because there's lots of need". Braden says "spend it where it should be (spent)".

McHattie now moves back to the Community Partnership Program and the scoring system, mentioning that he hears from the BIA's that their experience of the scoring system (changes) is good. He says wonders if it would be possible to remove more groups from this category of funding - the ones that are coming back year after year - and move them to 'Boards and Agencies' for example. Tollis explains that a category called 'Multi-year funding' was created last year for 4 major arts organizations, and this will last for the term of council. The amounts that these groups will remain stable (subject to budget discussions) and they won't have to reapply. McHattie suggests that an additional recommendation be added to the audit report that reflects his idea.

Whitehead comments that he thinks it's unrealistic to ask some of these smaller groups to reduce their dependence of city funding. He asks about the section of the report where Pekaruk highlights the remarks on the scoring sheets. Pekaruk explains that there are inconsistencies - some groups (with lower scores perhaps) were given higher marks but no details were given, whereas other group's score sheets were circled and had written comments in the margin that would give insight into the score that they received. Whitehead says that this creates a bad public perception issue and that the groups need to know why they scored the way they did. Standardizing this would "produce greater confidence in the community". Ferguson explains that the forms are evaluated by more than one person because these are representatives of "their peer group".

Whitehead is concerned that the city "ensure that we are dealing with viable organizations" because he is concerned about how the "taxpayers dollars" are spent. He suggests that all financial reports over a certain amount be audited "so we understand how the money is being spent". Tollis remarks that even audit statements are "not tight" enough to ensure that every dollar does to the project, and there is a cost/benefit analysis to be done regarding the city doing this. He mentions that city funding never makes up more than a certain percentage of each organizations budget ( sorry, I missed the exact percentage ) but receipts for "lawyers" and other such expenses are requested. "As long as the program is being delivered, we don't question it". McHattie suggests that there is a recommendation in the audit report that covers this issue. Whitehead explains his concern by using the example of French emersion funding at the school board, saying that he's concerned about "diversion" of monies.

Bruckler says that his biggest concern is for accountability and that the policies in place are followed, saying "some procedure needs to be put in place to ensure this". Rinaldo says that management will look at this.

Whitehead wraps up by saying that he thinks these audits are a good idea.

8.4 Audit Report 2005-06 - Accounts Payable
http://www.city.hamilton.on.ca/clerk/agendas-minutes-reports/
Strategic-Planning-Budgets/2005/Sep07/Sep07-CM05024.pdf
No discussion. Report received for information.

8.5 Audit Report 2005-03 - Police Service Accounts and Revenue Processes
http://www.city.hamilton.on.ca/clerk/agendas-minutes-reports/
Strategic-Planning-Budgets/2005/Sep07/Sep07-CM05028.pdf

Mitchell references the towing fees portion of the report and says he's been getting email from people complaining about bigger costs, "or something". Pekaruk explains that at an accident scene police ask citizens if they want them to call for a tow truck, and if they do, police services have a rotating roster of towing businesses they use, and these calls each generate $25 of revenue for the police. Mitchell wants to know where the revenue from the "reclaimed items" that are auctioned off is covered in the report. Pekaruk tells him that this is covered in the section called 'reserve account'.

Bruckler wonders if the audit recommendations are followed up on and the results brought to committee. Pekaruk tells him that it is standard practice to follow up within 12-24 months of the initial audit, and that 2 of the reports coming to committee that day are follow up reports.

8.6 Capital Budget Variance Report, as of June 30/05. http://www.city.hamilton.on.ca/clerk/agendas-minutes-reports/
Strategic-Planning-Budgets/2005/Sep07/Sep07-FCS05095.pdf

Joe Rinaldo (Manager, Finance and Corporate Services) gives an overview. The policy is that after 3 years if the account on the project is not spent it automatically comes back to council for their attention. He says in this report there are no special instances that he sees that he needs to highlight for the committee.

Mitchell asks for clarification on the policy wondering if the role of council at that point is generally to re-approve the project? Rinaldo says it's often a case that more time is needed to complete the project for one reason or another. He says the project automatically closes if there is no re-approval given. Mitchell is concerned that the department be contacted in that event (before cancellation), and Rinaldo assures him that they are informed.

Bruckler asks if annualized projects are listed in a separate account, thereby bypassing the re-approval process? Rinaldo gives 'roads' as a good example, saying that these type of projects are covered under a 'block funding' approach, which means they don't come back to council for these. Bruckler states that if there are surpluses from these annualized projects it would be useful to council to know (for the yearly budget process).

Meeting ended and they moved in camera at 2:50 to discuss 'Audit Report 2005-04 Municipal Service Centres - Cash Handling'