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BUILDING INVESTMENT, FINANCE AND AUDIT COMMITTEE MEETING AGENDA

PUBLIC SESSION

Date: November 17, 2016 Time: 8:45 to 9:15 a.m.

Location: Ground floor boardroom, 931 Yonge Street

Agenda

Item Description Action Pre-read Presenter

1) Chair’s Remarks Information Verbal Report Chair

2) Consent agenda

2 a) Approval of Public Meeting Agenda

Approval Agenda Chair

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

Declaration Agenda and Conflict of Interest Policy

Chair

2 c) Confirmation of the Public Meeting Minutes of October 19, 2016

Approval

Minutes Chair

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

Information Action Item List Chair

PUBLIC AGENDA BUILDING INVESTMENT, FINANCE AND AUDI T COMMITTEE November 17, 2016 of 2


2 e) Stand-alone Properties – Sales and Relocation Update

Information BIFAC:2016-152

4) Internal Audit Reports

Chief Internal Auditor

4 a) 2017 Internal Audit Budget

Approval BIFAC:2016-151

4 b) Status Update on Audit Recommendations from Internal Audit Reports


Termination

TORONTO COMMUNITY HOUSING CORPORATION

BUILDING INVESTMENT, FINANCE AND AUDIT COMMITTEE

AGENDA

PUBLIC SESSION

8:45 a.m. – 9:15 a.m.

Date: November 17, 2016 Time: 8:30 a.m. – 11:30 a.m. Location: Ground Floor Boardroom 931 Yonge Street, Toronto


1. Chair’s Remarks Information Verbal Report Chair

2. Consent agenda Chair

a)

Approval of Public Meeting Agenda

Approval Agenda

b) Chair’s Poll re: Conflict of Interest

Declaration Agenda and Conflict of Interest Policy

c) Confirmation of the Public Meeting Minutes of October 19, 2016

Approval Minutes

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

Information Action Item List

e) Stand Alone Properties Update Information BIFAC:2016-152

President and Chief Executive Officer

(Interim)

3. Internal Audit Reports Chief Internal Auditor

a) 2017 Internal Audit Budget Approval BIFAC:2016-151

10 minutes

b) Status Update on Audit Recommendations from Internal Audit Reports


10 minutes

TERMINATION

Public Meeting Minutes October 19, 2016

Building Investment, Finance and Audit Committee

Page 1 of 5

The Building Investment, Finance and Audit Committee (“BIFAC” or “Committee”) of Toronto Community Housing Corporation (“TCHC”) held a public meeting on October 19th, 2016 in the Main Floor Conference Room, 931 Yonge Street, Toronto, commencing at 8:47 a.m.

Committee Directors Present: Colin Lynch, Chair Vincent Gasparro Kevin Marshman

Director Absent Councillor Ana Bailão, Vice Chair

Ex-officio Director in Attendance Norman “Bud” Purves

Other Director in Attendance: Catherine Wilkinson

Management Present:

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

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

Building Investment, Finance and Audit Committee Public Meeting Minutes October 19, 2016

Page 2 of 5 DEPUTATIONS Verbal deputations were received at the meeting with respect to the following items

• Robert Fredrickson (Item 3B)

ITEM 1 CHAIR’S REMARKS No remarks were made by Chair at this time.

ITEM 2 CONSENT AGENDA

Motion carried ON MOTION DULY MADE by Mr. Marshman, seconded by Mr. Gasparro and carried, the BIFAC unanimously approved Consent Agenda Items 2A, 2C and 2D as presented.

ITEM 2B DECLARATION OF CONFLICT OF INTEREST The Chair requested members of the BIFAC to indicate any agenda item in which they had a conflict of interest, together with the nature of the conflict. None were declared .

ITEM 2E ACCESS TO TCHC PARKI NG FACILITIES –

SUPPLEMENTAL REPORT BIFAC:2016-136

The BIFAC had before it the above-captioned report (BIFAC:2016-136) Valesa Faria, Senior Manager, Commercial & Business Development, presented the report. The Committee asked for clarification regarding “tenants currently paying below these levels continue to be subject to annual increases of $5 to their monthly charge.” Management advised that tenants paying below the approved rate have their monthly parking rate increased by $5 each year until their charges meet the approved rate ($75/month in central Toronto and $50/month in other regions of the city). The Committee noted that many tenants have difficulty with the current barcode stickers attached to the windshield of their cars. Management noted they are looking at phasing out barcode stickers and replacing them with tags that hang from the rear view mirror. The Committee also discussed the importance of re-evaluating


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ITEM 3A INTERNAL AUDIT REPOR T: COMPLAINTS

RECEIVED JANUARY 1, 2016 TO JUNE 30, 2016 BIFAC:2016-123

The BIFAC had before it the above-captioned report (BIFAC:2016-123) The Committee discussed the purpose of the “Do What’s Right” Hotline and enquired as to the focus of the hotline. Management noted that the focus is to report fraud, although many other complaints come through the hotline. The Committee and Management noted the importance of the deterrent effect of the hotline. The importance of having a fraud hotline as a mechanism tenants can use for reporting illicit activities was also discussed. Management noted that fraud hotlines have become an internal control best practice across many sectors. The Committee discussed trending the information drawn from the Fraud Hotline since 2012, and indicated its support for quarterly reporting on complaints from Internal Audit.

Motion Carried

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

ITEM 3B INTERNAL AUDIT REPOR T: TCHC EMPLOYEES

WHO ARE ALSO TCHC TENANTS BIFAC:2016-124

The BIFAC had before it the above-captioned report (BIFAC:2016-

subsidized parking given the trend in city planning to discourage the use of cars and promote the use of public transit. ACTION ITEM Management to undertake a review the Parking Policy and the parking rates and report back to the Committee in 2017. The report is to include the number of vacant parking spots.

Motion Carried

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


Page 4 of 5

124) The following person deputed this item:

• Robert Fredrickson Management noted that to obtain the sample of 15 employees, they selected employees that had a higher probability of misreporting their income. The Committee asked if there has been action taken to recuperate the lost revenue from the tenants from the sample that were found to have misreported their income. Management noted the processes in place to retroactively charge tenants in these circumstances to recover lost revenue. Management will update the Committee by e-mail on the outcome of how the tenants in the sample who misreported their income are dealt with. The Committee discussed not conflating an employee fraud issue with a tenant fraud issue, and noted that both tracks should be pursued independently. Management noted that due to privacy issues, a policy and protocol is recommended for TCHC to use and share personal information in its capacity as both an employer and a landlord in order to address this issue in a transparent manner.

Motion Carried

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

ITEM 3C INTERNAL AUDIT REPOR T: RENT GEARED TO

INCOME CALCULATION REVIEW 2015 SUPPLEMENTARY REPORT

BIFAC:2016-125

The BIFAC had before it the above-captioned report (BIFAC:2016-125) The Committee and Management briefly discussed the report. Regarding the source of the sample, Management advised that they audit the sample that PwC provides to them to audit.

Motion Carried

ON MOTION DULY MADE by Mr. Purves, seconded by Mr. Gasparro


Page 5 of 5

and carried, the BIFAC unanimously received the report for information.

ITEM 3D INTERNAL AUDIT REPOR T: CONTRACT

MANAGED PROPERTIES BIFAC:2016-137

The BIFAC had before it the above-captioned report (BIFAC:2016-137) The Committee noted that Management should consider modernizing the KPIs. The Committee noted that it appears that the vendors seem to be managing the metrics rather than focusing on meeting the obligations under the contract. Management noted that there is work under way to modernize the KPIs, which will be discussed further in the closed session. The Committee noted that regular auditing of the performance of the vendors needs to be clearly established in any future contracts.

Motion Carried

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

TERMINATION The BIFAC resolved to terminate the public meeting at 9:37 a.m.

__________________ Secretary Chair, Building Investment, Finance and Audit Committee

1

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

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

November 16, 2015 Accessibility in the Built Environment Policy The BIFAC requested Management to report back to the Committee with respect to: • Modifying existing units for compliance with

the Standards. • Timelines to achieve full implementation of

the Standards by 2025 (as part of the 10 Year Financial Plan).

Response: Funding for AODA modifications for 2017 are addressed in the 2017 Capital Budget. Future implementation details can be found in the most recent version of the 10 Year Capital Plan. Implementation of the standards by the 2025 deadline depends on a fully funded capital plan. Facilities Management continues to liaise with RPATH representatives regarding meeting the AODA standards.

Completed Vice President, Facilities Management; Acting Vice President, Development

2 BIFAC:2016 -108 JULY 21ST, 2016

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

Response: TCHC Internal Audit Department (IAD) and TCHC’s external auditor (PwC) met on October 3 2016 to discuss preliminary findings on the first sample of 60 rent geared to income (RGI) reviews with an effective date between January 1 2016 and July 31 2016. Both the internal and external auditors re-performed the sample independently and reached the same conclusion in terms the number, dollar amount and rate associated with the calculation

Completed Chief Financial Officer/Chief Internal Auditor

2

# Report No. Description Status Target Date Assigned to errors. IAD will prepare a report to BIFAC after their audit of the full sample of 100 RGI calculations, in the spring of 2017.

3 BIFAC:2016 -112 JULY 21ST, 2016

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

• The length of time the properties have been vacant.

• The lost revenue from the vacant units.

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

Nov 17, 2016

Manager, Business Development

4 BIFAC:2016 -130 SEPTEMBER 28, 2016

Follow up Report on Access to TCHC Parking Facilities by Third-Party Service Providers Management provide the Committee with a report with information on the following:

• The strategy for parking rates for RGI tenants.

• The parking sticker program and potential improvements.

Report provided at the October 19th meeting.

Completed.


5 OCTOBER 19, 2016 Management to review the parking policy and parking rates, and report back to the Committee. Report to include information on vacant parking spots.

TBD 2017


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Stand-alone Properties – Sales and Relocation Updat e Item 2E November 17, 2016 Building Investment, Finance and Audit Committee Report: BIFAC:2016-152

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

From: President and Chief Executive Officer (Interim)

Date: November 2, 2016

PURPOSE: The purpose of this report is to provide the BIFAC with an update on the sales and relocation activities related to stand-alone properties approved for sale. RECOMMENDATIONS: It is recommended that the Committee receive this report for information purposes and approve receiving quarterly updates moving forward due to reduced activity in this area.

REASONS FOR RECOMMENDATIONS:

BIFAC Request

At the July 21, 2016 meeting, Management advised the BIFAC that 3 houses conditionally approved for sale, but which were on hold due to regulatory issues, had been recently repaired and were available for rent. In addition to the regular sales and relocation update scheduled for the November meeting, the BIFAC requested information regarding the length of time the 3 properties had been vacant and the estimated revenue loss during that period.

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Background and Current Sales Status

Between 2010 and 2012, a total of 158 stand-alone houses were approved for sale by City Council. These included those properties with an estimated market value above $600,000, and any property that was vacant or in poor condition that required costly repairs.

As of today, a total of 140 properties have been sold and/or committed under contract generating roughly $78 million in state of good repair funds. The $78 million in proceeds generated from the sale of stand-alone houses exceeds the $65 million target set out in the 10-year Capital Plan and reflects a strong housing market and diligent sales efforts.

Remaining Houses to be Sold and Relocation of Resid ents

Of the remaining 18 houses approved for sale, it is anticipated that only 1 more will be sold prior to the end of the year. The remaining 17 houses slated for future sale include 13 that are impacted by regulatory issues plus 4 that are occupied by rent-geared-to-income (‘RGI’) households that do not wish to relocate and cannot be evicted to facilitate sale of the properties. It should also be noted that these 17 properties contain a total of 28 units, 16 of which are currently occupied. Status of Houses Impacted by Regulatory Issues

Between late 2013 and early 2014, as required to advance the sale of 7 multi-unit properties contained in two groups, TCHC applied to amend the Official Plan and for Rental Housing Demolishing and Conversion. However, the applications were not approved at Community Council as TCHC was not in a position to replace the units and the current/previous rents were below the mid-market range. Recognizing that similar applications for another two groups of properties containing 6 multi-unit houses would also not advance at Community Council, TCHC withheld submitting applications until it was in a position to fulfil all required conditions for all groups of houses.

In early 2015 and upon securing budget for capital repairs, TCHC began the process to repair the vacant units at these 13 properties as a short-term measure to prevent further deterioration of the assets, improve community safety and create a revenue stream for the organization. Renting at full market rates would also ensure that the rents were above the mid-market range, a condition required to advance the planning applications.

As of today, repairs to 3 of the 13 properties have been completed and the units have been rented at full market rates. There are another 7 multi-unit properties that require repairs and work is well underway for completion by end of December. The remaining 3 properties are fully occupied and will be maintained as required.

In terms of next steps, with respect to the two groups containing 6 multi-unit houses, staff have been diligently completing pre-application planning work and will be submitting applications for Official Plan Amendment and Rental Housing Demolishing

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and Conversion before the end of the month. The other two groups containing 7 multi-unit houses require a community meeting with support from the local Councillor in order to advance the applications, and will not proceed at this time. Furthermore, it should be noted that some residents at these properties have legacy eviction exemptions due to sale so even if consent is eventually obtained, the properties cannot be immediately disposed of.

Estimated Vacancy Loss

As mentioned above, repairs to 3 of the 13 properties were recently completed and the units have been rented at full market rates. Prior to being repaired, these houses sat vacant due to major repair issues that prevented them from being rented. Hence, they were approved for sale by City Council in October 2012 as they met the criteria that had been established. Upon securing approval for sale in late 2012, TCHC did not attempt to repair these properties as it was assumed that they would be sold in early 2014 once the required regulatory consents had been obtained. As the applications were later not approved and TCHC was not in a financial position to replace units, sale of these properties was delayed and an interim plan to repair and rent the units was developed.

In terms of the hypothetical estimated rental loss during the vacancy period (assuming all needed repairs were completed) plus the new rents secured, below is a breakdown:

Property Address

Became

Vacant

On

New Lease

Start

# of

months

vacant

Previous

Rent/

Month

*Estimated

Vacancy Loss

(after

operating

expenses)

New Rent

Amount/

Month

4 Sylvan Ave. 1-Apr-08 01-Aug-16 100 $955 $57,300 $2,000

6 Sylvan Ave. 2-Sep-09 01-Aug-16 83 $906 $45,119 $1,500

112 Havelock St. 1-Sep-05 01-Nov-16 134 $1,402 $112,721 $2,995

$3,263 $215,140 $6,495

Notes: 1) *Estimated vacancy loss is calculated based on 60% of gross rent to account for landlord's

operating expenses including overhead to maintain the properties.

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IMPLICATIONS AND RISKS:

As of November 2016, most of the stand-alone houses approved for sale by City Council have been sold. The remaining 17 properties will likely not be sold in the near future although the organization will continue to take steps to resolve all regulatory matters in preparation for future disposition. RGI households will also continue to be provided with relocation options as they arise. In addition, once all renovations are completed by the end of December, the remaining 12 units contained in 7 houses will be rented at full market rates and will provide a consistent revenue stream for TCHC plus add much-needed rental inventory to the City’s limited stock.

SIGNATURE:

“Greg Spearn”

Greg Spearn President and Chief Executive Officer (Interim)

STAFF CONTACT: Valesa Faria, Senior Manager, Commercial & Business Development 416-981-4317 [email protected]

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Internal Audit: 2017 Budget Item 3A November 17, 2016 Building Investment, Finance and Audit Committee Report: BIFAC:2016-151


From: Chief Internal Auditor

Date: October 26, 2016

PURPOSE:

To provide the Building Investment, Finance and Audit Committee (“the Committee”) with the 2017 Internal Audit Department budget (“the 2017 Budget”).

RECOMMENDATIONS:

It is recommended that the Committee approve the 2017 Budget.

REASONS FOR RECOMMENDATIONS:

Internal Audit Department

The Internal Audit Department consists of three distinct functions – (i) Internal Audit; (ii) Investigations; and (iii) Employee Expense Control Clerk.

Internal Audit

The Internal Audit function (“Internal Audit”) is an independent, objective assurance and consulting activity designed to add value and improve the organization’s operations. It helps TCHC to accomplish its objectives by bringing a systemic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

Internal Audit promotes continuous improvement by evaluating the adequacy and effectiveness of internal controls, identifying significant risk exposures, and monitoring and evaluating the effectiveness of TCHC’s risk management systems in TCHC related to:

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• Adequacy, reliability, and integrity of financial and operational information;

• Compliance with contracts, policies, plans, procedures, laws and regulations;

• Achievement of established objectives and goals;

• Economical and efficient management of resources; and

• Safeguarding of assets.

In addition, Internal Audit provides consultation services to management on a regular basis.

Investigations

In general, Investigations is responsible for:

• Conducting investigations about tenants, employees and contractors;

• Overseeing the operation of TCHC Do What’s Right fraud hotlines;

• Educating staff on matters related to ethical conduct;

• Providing subject matter expertise in policy and procedures development; and

• Developing a network of contacts with law enforcement, other government agencies and organizations, and other regulatory bodies.

Employee Expense Control Clerk

This position is responsible for reviewing all TCHC employee expense claims for accuracy and compliance with TCHC expense policies prior them being sent to Accounts Payable for processing. The position also frequently educates staff on the nuances of the various employee expense policies.

Staff Complement

The staff complement of the Internal Audit Department consists of a Full Time Equivalent (FTE) of 10 staff. The Internal Audit organization chart is set out in Attachment 1 to this report.

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2017 Budget Request

The table below sets out the proposed 2017 Budget for the Internal Audit Department:

2016 Budget 2016 Forecast 2017 Budget

2017 % Increase

Salaries 837,517 834,922 858,956 2.6%

Benefits 226,967 236,525 223,557 (1.5)%

Other Expenses 60,843 56,694 60,843 0.0%

Total 1,125,327 1,128,141 1,143,356 1.6%

The 2017 Budget represents a 1.6% increase over the 2016 Budget.

Salaries

Though the 2017 salaries budget represents an increase of 2.6% over the 2016 Salaries Budget, it does not reflect any additional staff. The staffing complement remains at 10 FTEs.

The 2.6% increase is comprised solely of annual salary increases anticipated to be approved by the TCHC Board in 2017.

Benefits

The 2017 Benefits Budget has decreased by 1.5%.

As has been noted in previous budget reports to the Committee, the TCHC Finance Department requires all departments to calculate their Benefits costs as a % of budgeted salaries.

In 2016, that percentage was 27.1%. In 2017, we have been instructed to use 26.03%.

Other Expenses

Other Expenses include such items as:

• Staff training and tuition;

• Mileage charges and other staff travel;

• Professional development courses and conferences;

• Overhead items (office supplies etc.);

• Cell phones; and

• The annual fee to operate the TCHC Fraud Hotline.

These expenses are essentially non-discretionary. They are necessary to operate the department. It should be noted that Other Expenses represents only 5.3% of the total Internal Audit budget.

We have requested no increase in the 2017 Other Expenses budget from what was approved in 2016.

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Administrative Audit Assistants

At the Committee’s October 19, 2016 meeting it approved Asset Management’s request to

• Revise the internal process of reviewing RGI calculations to a sample based program;

• Transfer responsibility for the revised RGI calculation review program from the Program Services Department of Asset Management to Internal Audit; and

• Transfer three Administrative Audit Assistant1 positions from Program Services to Internal Audit in order to continue the revised RGI calculation review program.

The actually timing of the transfer of the three positions to Internal Audit has not yet been finalized. As such, and in consultation with the TCHC Chief Financial Officer (interim), those three positions have NOT been included in the 2017 budget request. They will remain in the Program Services 2017 budget until the transfer has been finalized. At that time, we will present a revised budget to the Committee reflecting the addition positions in Internal Audit.

We would like to emphasize that the transfer of these three positions from Program Services to Internal Audit represents no increase in TCHC’s FTEs. It is simply a transfer of budget money from one department to another.

Chief Financial Officer Support

The 2017 Budget has been reviewed by the TCHC Executive Leadership Team, which includes the TCHC Chief Financial Officer (interim). The Executive Leadership Team is supportive of the 2017 Internal Audit Budget being presented to the Committee.

IMPLICATIONS AND RISKS:

The 2017 Internal Audit Budget attempts to strike a balance between cost and benefit, taking into consideration the limited resources available to the organization.

SIGNATURE:

“Michael Vear”

Michael Vear, CPA, CA, CPA (Illinois) Chief Internal Auditor

1 The Administrative Audit Assistant position conducts the RGI calculation reviews.

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ATTACHMENT: 1. Internal Audit Department – Organization Chart – October 26, 2016

STAFF CONTACT: Michael Vear, Chief Internal Auditor 416-981-4065 [email protected]

Internal Audit DepartmentOrganization Chart - October 16, 2016

Chief Internal

Auditor

Michael Vear

Internal Audit

Manager Internal

Audit

Genevieve Segu

Internal Audit

Analyst

Amyn Bhayani

Internal Audit

Analyst

Jane Schope

Business Analyst

Barb Kapeluch

Employee Expense

Control Clerk

Leela Diptee

Investigations

Manager

Investigations

Siu-On Wong

Investigator

Tuan-Kiet (TK) Doan

Investigator

Randy Roth

Investigations

Specialist

Christine Peck

Item 3A - Internal Audit: 2017 Budget November 17, 2016 BIFAC Public Meeting Report: BIFAC:2016-151

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Typewritten Text

Attachment 1

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Typewritten Text

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Status Update on Audit Recommendations from Internal Audit Reports November 17, 2016 Building Investment, Finance and Audit Committee Item 3B Report: BIFAC:2016-153


From: Chief Internal Auditor

Date: October 31, 2016

Strategic Plan Priority:

Service Excellence:

Demonstrate Value for Money and Public Accountability PURPOSE: To provide the Building Investment, Finance, and Audit Committee (the Committee) with a report on Internal Audit’s follow-up on recommendations set out in Internal Audit reports submitted to the Committee prior to November 30, 2015. RECOMMENDATIONS: It is recommended that the Committee receive this report for information. REASONS FOR RECOMMENDATIONS:

Background

The Internal Audit Department annually reports to the Committee on our follow-up of all Internal Audit reports issued to ensure management has taken appropriate action to implement recommendations included in those reports.

Since recommendations included in audit reports may take in excess of six months to implement, our annual follow-up is conducted only on reports that (i) contained outstanding recommendations and (ii) were addressed at a Committee meeting prior to November 30, 2015.

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When conducting our follow-up procedures, we reviewed information and documents and performed tests necessary to establish that the recommendation had been implemented.

Reports Issued

This report reviews the recommendations made in the following Internal Audit reports:

Report Name Covering Report Date

Date of Committee Meeting

Cell Phone Usage Compliance Audit1 February 27, 2014 March 6, 2014

Review of TCHC Payroll Processing2 June 18, 2014 June 27, 2014

Review of TCHC Public Sector Salary Disclosure

September 11, 2014 September 23, 2014

Petty Cash Compliance Audit January 27, 2015 February 5, 2015

Tenant and Employee Cash Advances Compliance Audit

January 27, 2015

February 5, 2015

Procurement Compliance Review March 18, 2015 April 27, 2015

Rent Geared to Income Calculation Review 2015

November 10, 2015 November 16, 2015

1 The follow up on the Cell Phone Usage Compliance Audit Report was initially set out in our November 8, 2015 follow up report to the Committee. At that time, there were two Recommendations that remained in progress. 2 The follow up on the Review of TCHC Payroll Processing Report was initially set out in our November 8, 2015 follow up report to the Committee. At that time, there were two parts of one Recommendation that remained in progress.

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Summary of Findings

Overall, of the 21 recommendations that were made:

10/21 (48%) have been implemented; 10/21 (48%) are in progress; and 1/21 (4%) is no longer applicable

The detail of the implementation status of the reports being reviewed is summarized in the following table:

Report Name

Total No. of

Recs

ImplementedIn

Progress No Longer Applicable

Cell Phone Usage Compliance Audit 2 2 Review of TCHC Payroll Processing 1 1 Review of TCHC Public Sector Salary Disclosure

1 1

Petty Cash Compliance Audit 7 7 Tenant and Employee Cash Advances Compliance Audit 2 2

Procurement Compliance Review 4 1 3 Rent Geared to Income Calculation Review 2015

4 4

Total 21 10 10 1

Attachment 1 to this report sets out the recommendations that have been implemented.

Attachment 2 to this report sets out the recommendations that are in progress.

Attachment 3 to this report sets out the recommendation that is no longer applicable.

General Overview of Improvements

Cell Phone Usage Compliance Audit

Management strengthened controls over employee’s personal cell phone usage by implementing the remaining two Internal Audit recommendations. Management established both monitoring and reimbursement standards for the personal use of TCHC cell phones.

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Review of TCHC Payroll Processing

In this report it was noted there were two terminated employees who received overpayments of vacation payout upon leaving TCHC’s employment. As such, Recommendation 6(a) in the report stated:

The amounts outstanding with respect to the overpayment of vacation pay to terminated employees be recovered immediately by TCHC;

Management was unsuccessful in recouping the overpayments voluntarily from the individuals. Because the statute of limitations has passed, no further legal action can be taken.

Arising from the above noted finding, Recommendation 6(b) in the report stated:

Due to the fact that such a substantial amount of our sample selection determined that there were errors made in the calculation of vacation pay owing to terminated employees (both over and under payments), management should review all vacation payouts to all TCHC employees whose employment with TCHC terminated in 2013.

This action was not taken by management. Accordingly, any vacation over payments that may have arisen from such a review are now statute barred from being collected.

Recommendations 6(a) and 6(b) from this report are now no longer applicable.

However, as was noted in our November 8, 2015 report, Status Update on Audit Recommendations from Internal Audit Reports, all special payments made to employees that require payroll staff’s manual calculation and processing (e.g. vacation payouts) are now reviewed and approved by an authorized approver prior to the payment being processed.

Review of TCHC Public Salary Disclosure

Management strengthened controls over the review and submission of the TCHC Public Salary Disclosure to the City of Toronto, by implementing the one recommendation in the September 11, 2014 Internal Audit Report.

Petty Cash Compliance Audit

Management is in the process of improving the governance, accountability and compliance over petty cash with seven audit recommendations in progress, including the review and update of the TCHC Petty Cash Policy and procedures.

Tenant and Employee Cash Advances Compliance Audit

Management has strengthened the controls around the processing, documentation and follow-up of tenant cash advances by implementing the two Internal Audit recommendations from the January 27, 2015 Internal Audit Report.

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Procurement Compliance Review

Management is in the course of developing a protocol and processes relating to the change order process, including a change order analysis program as well as the use of electronic signatures in the procurement process.

Rent Geared to Income Calculation Audit

Management has strengthened controls around the monitoring and review of RGI calculations, by implementing all four recommendations in the November 10, 2015 Internal Audit Report.

IMPLICATIONS AND RISKS: Recommendations from Internal Audit reports are meant to improve the internal controls and processes of TCHC. Such recommendations hold little value if they are not fully and properly implemented by management. By conducting follow-up procedures, we are able to measure management’s implementation of previous Internal Audit recommendations.

SIGNATURE: “Michael Vear”

Michael Vear, CPA, CA, CPA (Illinois) Chief Internal Auditor

ATTACHMENT:

1. Toronto Community Housing Corporation Internal Audit Department, Internal Audit Recommendations – Fully Implemented as at October 31, 2016

2. Toronto Community Housing Corporation Internal Audit Department, Internal Audit Recommendations – In Progress as at October 31, 2016

3. Toronto Community Housing Corporation Internal Audit Department, Internal Audit Recommendations – No Longer Applicable as at October 31, 2016

STAFF CONTACT: Michael Vear, Chief Internal Auditor 416-981-4065 [email protected] Genevieve Segu, Manager, Internal Audit 416-981-4397 [email protected]

Attachment 1 Toronto Community Housing Corporation Internal Audit Department

Internal Audit Recommendations - Fully Implemented as at October 31, 2016 Report: Cell Phone Usage Compliance Audit Report Date: February 27, 2014 Recommendations: 5. Management should consider revising the Cell Phone/Mobile Communications

section of the TCHC Expense Reimbursement Policy Procedures, to include guidance on the course of action to be taken by employees in reimbursing TCHC for personal charges incurred on TCHC-issued Cell Phones.

6. The Cell Phone Policy be amended to reflect an employee's or the employee's manager’s responsibility to review employee Cell Phone invoices for excessive personal use during business hours. This amendment should include guidance with respect to:

(a) what is considered to be "excessive'; and (b) the development of a review process that (i) is cost effective and (ii) reduces the risk of excessive personal Cell Phone calls made during business hours.

Report: Review of TCHC Public Sector Salary Disclosure Report Date: September 11, 2014

Recommendation:

1. In future years, prior to submitting the “Record of Employees’ Salaries and Benefits Report” to the City of Toronto, the amounts included in that report be compared, and agreed, to the T4s that have been prepared for the employees included in that report.

Report: Tenant and Employee Cash Advances Compliance Audit Report Date: January 27, 2015 Recommendation: 1. In processing tenant cash advance applications, TCHC staff should be reminded

of the (i) proper completion of the requisite forms and (ii) need to evidence on the forms all of the necessary approvals.

2. TCHC staff ensure that TCHC Tenant Cash Advances are settled within the

timeline set out in the Tenant Cash Advance Policy.

Item 3B - Status Update on Audit Recommendations from Internal Audit Reports November 17, 2016 BIFAC Public Meeting

Report: BIFAC:2016-153

Status Update on Audit Recommendations from Internal Audit Reports Attachment 1

October 31, 2016 Page 2

Report: Procurement Compliance Review Report Date: March 18, 2015 Recommendation: 4. When a business case is required to commence a non-capital procurement

project, a copy of the business case should be sent to the Procurement Department and retained in the particular project’s procurement file, as supporting documentation for the procurement being made.

Report: Rent Geared to Income Calculation Review 2015 Report Date: November 10, 2015 Recommendations: 1. The Director, Program Services direct the Asset Management Operational

Administrative Auditor to review, by October 30, 2015, the rent calculations of the current and two prior rent reviews of files having rent calculation errors and advise the appropriate Operating Unit manager of their resolution.

2. The Director, Program Services, direct staff to strengthen the RGI rent calculation

monitoring and review function within the Program Services department as follows:

(a) The Administrative Audit Assistants increase RGI calculation monitoring by using automated tools such as the one designed by Internal Audit, by January 31, 2016;

(b) The Administrative Audit Assistants continue reviewing periodic reports for outstanding rent reviews; and

(c) The Administrative Audit Assistants check all RGI rent calculations by December 31, 2016 prior to the Notices of Decision being mailed to tenants.

3. The Director, Program Services:

(a) Discuss with the Service Provider, the City of Toronto, the need to have a formal position on whether accepting alternative documents (e.g. bank statements from pensioners) to perform their rent calculation is an accepted business practice;

(b) Communicate the outcome of the above decision to TSCs and Contract Management partners; (c) Direct both groups to update their forms, procedures and training manual, as appropriate.

4. Asset Management Directors, before January 31, 2016:

(a) Explore the feasibility of an early transition towards electronic records retention system on a go forward basis (e.g. Using desk scanners and network access); and

(b) Should the resource constraints allow, start the implementation thereof by March 1, 2016.




Internal Audit Recommendations – In Progress as at October 31, 2016 Report: Petty Cash Compliance Audit Report Date: January 27, 2015 Recommendations: 1. Management review and update, if required, the current TCHC Petty Cash Policy

to ensure it is up to date with respect to current TCHC petty cash procedures and other TCHC policies

2. Petty Cash custodians and their managers should be reminded of the proper use,

completion, and approval of Petty Cash Vouchers.

3. Petty Cash custodians and their managers should be reminded of the proper use and completion the Petty Cash Reconciliation and Reimbursement Form.

4. (a) Management review the Petty Cash Policy to determine an appropriate minimum frequency for petty cash reconciliations to be completed. This frequency should take into consideration the date of the most recent replenishment of a petty cash fund.

(b) Management develop a cost effective program to ensure that there is compliance with the frequency of petty cash reconciliations determined from 4(a) above.

5. Petty cash reconciliations should be completed and submitted for those petty cash accounts that have not submitted a Petty Cash Reconciliation subsequent to May 1, 2014.

In addition, management should review those specific petty cash funds and determine whether they are still required. If they are no longer required, they should be closed and the funds returned to the Finance Department.

6. The Resident and Community Services token log should be:

a) reconciled and submitted for review once a year; and b) subject to an unannounced token count and reconciliation at least once per

year.

7. A standard token usage log should be developed and used by all petty cash custodians to track token usage.

The petty cash reconciliation process should include the reconciliation of tokens on hand with the Petty Cash Custodian.



Status Update on Audit Recommendations from Internal Audit Reports Attachment 2

October 31, 2016 Page 2

Report: Procurement Compliance Review Report Date: March 18, 2015

Recommendation:

1. A TCHC protocol on change orders be developed. Such protocol should address, but not be limited to, such items as:

a) The change order process(s);

b) Roles and responsibilities in the change order process;

c) Relevant forms that should be used and how they should be used;

d) Lump-sum vs. per unit pricing;

e) Thresholds for what change order process/document should be used; and

f) Authorization requirements for change orders.

Subsequent to its development, appropriate training documents be developed and presented to the appropriate staff.

2. Consideration be given to developing a program of change order analysis, with a view to (i) decreasing the number of change orders in future and (ii) identifying unusual patterns of change orders.

3. A protocol and/or policy with respect to the use of electronic signatures in the procurement process be developed, approved, and distributed to TCHC staff.

Consideration be given to reviewing the applicability and usefulness of electronic signatures in other TCHC operations.




Internal Audit Recommendation – No Longer Applicable as at October 31, 2016 Report: Review of TCHC Payroll Processing Report Date: June 18, 2014 Recommendation: 6(a) The amounts outstanding with respect to the overpayment of vacation pay to

terminated employees be recovered immediately by TCHC; 6(b) Due to the fact that such a substantial amount of our sample selection

determined that there were errors made in the calculation of vacation pay owing to terminated employees (both over and under payments), management should review all vacation payouts to all TCHC employees whose employment with TCHC terminated in 2013.



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