400 Audit Summary 2
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City of Windsor
1.
Preamble to the Main Report The intent of this preamble is to clarify the final scope of the review and to summarize the history of updates of this report that have resulted from new information provided to the Auditor between January and December of 2008.
1.1 History of the 400 CHS Report: This document updates the audit work and analysis completed on the draft audit report prepared by the City Auditor in April of 2007 entitled, “The Post-Construction Audit of the 400 City Hall Square building” for our review of the substantial volume of new information provided by Administration to the Auditor throughout 2008. The 400 CHS audit review leading to the April 2007 audit draft report was subject to a significant scope limitation. A scope limitation is a restriction placed upon the internal Auditing department that precludes the department from accomplishing its objectives and plans. The scope limitation of the 400 CHS review of 2007 was defined by the Auditor as the restricted access to records, personnel, and physical properties relevant to the performance of the engagement objectives and the performance of necessary engagement procedures. The City Auditor completed a draft report in April 2007, noting the following scope limitations in the draft document: -
The Auditor did not have access to all in-camera Council documentation The project financial closeout was not completed, so the Auditor could not perform a financial analysis of total project expenditures The Auditor had limited access to the project records and project staff to provide clarification and answers to questions.
Throughout 2008, Audit had been provided with access to new information and persons to answer questions necessary to address the scope limitations of the April 2007 draft. Through an analysis of the new information, Audit has identified areas of the April 2007 draft that required updating. This issue was addressed through changes to the report objectives, a refinement of audit objectives and corrections or amendments to certain draft findings and recommendations. A significant volume of work was required to bring this report up to date with the new information. The report has been updated to reflect the new information provided by Administration and the information gathered throughout 2008 in the interviews held by Audit with the project Staff and Consultants who worked on the 400 CHS project.
1.1.1
New Information and Audit Report Revisions
Report History: 2006 – 2007 In 2006, the Office of the City Auditor undertook a post-construction audit of the processes approving the project and managing the construction of the building. The file was completed with the City Auditor as the lead with Audit staff assisting. Noted within the 400 CHS draft (April 2007) audit report, was that the report had been completed under a significant scope limitation, where the Auditor had limited access to documentation and project staff required to provide answers to the Auditor’s questions. “The post-construction audit of the 400 City Hall Square building involved discussions with various responsible City Staff and Management, interviewing consultants, the gathering and examination of City documents from Council reports to Committee meeting minutes to e-mails and memos regarding the project, as well as reviewing the City’s financial records. There are, however, areas of the audit where sufficient documentation could not be found to be able to answer questions regarding matters such as the alterations in the procurement process, the lack of implementation of a project management methodology or the apparent cost overrun for which a final financial analysis and closeout has not been performed.”
Main Report: History of the 400 CHS Report
Page 34
City of Windsor Also noted in the 400 CHS draft (April 2007) audit report, were three specific scope limitations that impacted the scope of the review. a. “We question the necessity and the degree to which Council meetings relevant to this project were held in-camera. The lack of public transparency on a taxpayer funded project created challenges throughout the audit review. An extensive level of fieldwork was performed to gain assurance that we acquired adequate documentation to support the findings in the review.” b. “We requested but did not receive the following project documentation that we anticipated would have been available for review as per best practices. We were advised by Management, that such documentation may be obtained by reviewing the minutes of the various committees of the project (supplied by Management), the project Council reports and from the project Consultant contracted by the City. We were unable to identify where a project charter identifying the project team, schedule and deliverables was created and approved. Due to this limitation, we relied on measurable deliverables of the project (found to exist at a very basic descriptive level) within the project Council reports, RFP(s) documents, project contracts/agreements and committee minutes.” c. “To date, the project financials have not been finalised and therefore, we are unable to perform a final analysis or issue a final report on total project expenditures. Any financial reported findings are based on project expenditures recorded in the PeopleSoft Financial System as of December 6, 2006.” The draft audit report entitled, Post Construction Audit Report, 400 City Hall Square East, Draft For Audit Committee Discussion (April 2007) was completed based on the review and analysis of the limited documentation and project staff that were available to the Auditor. In December of 2007, the Post Construction Audit Report, 400 City Hall Square East, Draft For Audit Committee Discussion (April 2007) was discussed at the Audit Committee with City Auditor and Administration in attendance. On December 31, 2007, the City Auditor retired. At the December meeting, the Audit Committee assigned Angela Berry, the Lead Auditor, to update and complete the 400 CHS file.
Report Updating History: 2007 - 2008 1.
April 2007 – City Auditor’s Office Completes Draft Audit Report In April of 2007, the City Auditor’s Office prepared its draft 400 CHS review report, but without a complete financial analysis of the 400 CHS project. The financial details were not yet available to audit, as the Project Management Team had not completed the final analysis or financial closeout of the 400 CHS project. Delays in the Corporate Projects financial closeout can be attributed to the gaps in project management staffing noted throughout this report. The preliminary financial findings of the April 2007 draft were based on project expenditures recorded in the PeopleSoft financial system as at December 6, 2006. Due to the scope limitations identified above, it was necessary to present the City Auditor’s Office financial findings in the report without clarification or comments from the City’s Corporate Projects Group. To complete audit reports in compliance with our Audit Charter (2004), the audit process requires that Management ensure that a written response to the recommendations in the Internal Audit report is submitted to the City Auditor, and that the Auditor include Management’s written response in the report. A disclosure of non-compliance is required in the instances where full compliance with this written response requirement could not be obtained.
Main Report: History of the 400 CHS Report
Page 35
City of Windsor 2.
July 2007 Financial Update: Because of the lapse in time since the April 2007 draft audit report was prepared, the City Auditor prepared a new financial update report reflecting project expenditures recorded in the PeopleSoft financial system as at June 29, 2007. Due to the scope limitations identified above, it was necessary to present the financial findings of the City Auditor in the report update with limited clarification / comments from Corporate Projects.
3.
November 2007 Audit Committee Meeting: As recorded in the official Audit Committee minutes of November 2007, the City Auditor tabled (in camera), the original audit report with the July financial update and received the following committee direction: “Moved by B. Carter, seconded by Councillor Halberstadt, That the confidential report relating to the Audit of 400 City Hall Square East BE DEFERRED to the special meeting of the Audit Committee to be held December 14, 2007.”
4.
December 2007 Financial Update: Due to the lapse in time it was again necessary for the City Auditor to complete a new financial update report reflecting project expenditures recorded in the PeopleSoft financial system as at November 21, 2007 with limited comments from Corporate Projects. The audit at this point has resulted in three separate reports consisting of the original draft document and two additional draft financial update reports.
5.
December 2007: Audit Committee Meeting and New Information: At the December 2007 Audit Committee meeting, the committee asked the City Auditor to consolidate the Post Construction Audit Report (including all financial updates of the City Auditor’s Office, and upon its completion, the Project Management Team report) into one final report. The Audit Committee also requested, pending the advice of City Legal, that either (i) a Public report be sent to Council or (ii) that an In Camera report be sent to Council accompanied by a summary report for the public session that includes the financial issues, project management issues and the request for proposals process. By taking this direction, the City Auditor’s Office would prepare the final report with the current financial project values in a format that would be clear to the reader. Also, at the December 2007 meeting of the Audit Committee, Administration requested permission to revise the management comments to the audit draft to reflect any changes made to the audit report. These efforts are intended to make certain the views of City Management & Administration are adequately and appropriately represented within the final audit report. In December of 2007, the Project Management Team informed the Auditor’s Office that it was nearing completion of the final analysis and financial closeout of the 400 CHS project. The importance of this communication was that the Project Team’s report would provide final financial figures as well as a detailed analysis of project variances. It was anticipated that the analysis part of that report would satisfy draft audit recommendation # 23 of the City Auditor’s Office 400 CHS Review (April 2007) which states, “that upon completion of the financial records of the project, that Administration present a full financial accounting of the project budget versus actual financial details to Council.”
Main Report: History of the 400 CHS Report
Page 36
City of Windsor 6.
April 2008: Revised Management Comments / New Information from Administration: Audit received revised management comments to the 400 CHS draft (April 2007) addressing the findings, comments and recommendations of the draft audit report. In addition, Administration provided 2 large binders documenting in-camera and opensession council reports and meeting minutes covering the entire timeline of the project. Administration identified and made accessible individuals not previously interviewed by Audit.
7.
April 2008: In-Camera – Update Audit Committee on Exit Conference & Impact of New Information Provided by Administration: On April 23, 2008, the Lead Auditor updated the Audit Committee on the progress of the 400 CHS review. The Lead Auditor reported that to comply with Audit Standards, the 400 CHS draft report was required to be sent back to the fieldwork stage. The Audit team needed to conduct the necessary work to determine the impact of the new information on the draft audit findings through the completion of interviews and through seeking further new and relevant information from interview sources.
8.
The Audit Committee, at its meeting held April 23, 2008, adopted the following resolution: Moved by B. Carter, seconded by Councillor Marra, “That the Lead Internal Auditor BE REQUESTED to consider the comments and information received from Administration to determine the effects that the findings and recommendations will have on the 400 City Hall Square review and further, that the review BE DEFERRED until the Lead Internal Auditor is satisfied that the findings and recommendations are supported by proper evidence.”
9.
14 May 2008: In-Camera – Lead Auditor Update to the Audit Committee on Assessment of New Information Provided by Administration “We are conducting the work to determine the extent to which two (2) binders of information provided by Administration to Internal Audit on April 18, 2008 can be considered as new evidence.”
10.
16 Jun. 2008: New Information – Council Report, 400 CHS Project Completion -
On June 16, 2008, Administration submitted a report to council entitled, 400 CHS Project Completion Report.
-
One of the major scope limitations identified in the April 2007 400 CHS audit draft was that as of the conclusion date of audit fieldwork, Corporate Projects had not yet completed the closeout of the project financials. Therefore, the final financial details required to perform an analysis were not available for review.
-
The project completion report of the 400 City Hall Square (CHS) Project was a new source of information. This document is a source of clarification to many of the outstanding questions raised by the former City Auditor within the 400 CHS draft (April 2007) audit report.
Main Report: History of the 400 CHS Report
Page 37
City of Windsor 11.
12.
12 Sept 2008: New Information – Update Audit Committee: 11 Boxes of Project Information Received From Corporate Projects -
On August 21, 2008, while interviewing project staff, Audit was informed of the existence and location of a large number of 400 CHS project files.
-
Audit requested Administration to grant it access to these files. Administration was helpful in locating the files, retrieving them from storage and granting access to the files, thereby ensuring timely availability to Audit.
-
On September 9, 2008 Audit obtained 11 boxes of project paper files and a computer disc containing 74 electronic files.
Interviews – Project Staff, Administration and Consultants -
New information gained through conducting interviews in 2008.
Main Report: History of the 400 CHS Report
Page 38
City of Windsor
1.1.2
Impact of New Information on the Final 400 CHS Review 2008 (Part I and II)
The goal for the completion of the 400 CHS draft (April 2007) report was to strengthen the audit findings by gathering sufficient and appropriate audit support, with the ultimate goal of updating the draft report with the new and current information. The impact of the new information received from Administration has been significant. Addressing the new information that materially or moderately impacted the 400 CHS draft (April 2007) report required significant audit work and revisions, to bring the report to completion. To avoid further delay in completing our reporting, it was decided to separate the report into two parts, to be released on different dates.
Part I:
Part II:
The first Part will cover: -
Our analysis of the legal agreement with the Contractor (as amended) and whether the City received what it bargained for;
-
Whether the project was delivered on schedule (as amended), and within budget (as amended); and
-
Whether an appropriate project management methodology was established and followed throughout the design-build approval and construction process for the project (including whether change orders were appropriately approved and monitored and whether the project costs were effectively monitored and reported during the process).
The second Part will cover: -
A review of how the project approval process was conducted in compliance with the City’s Purchasing By-Law, the Municipal Act, 2001 and the Common Law governing procurement by public authorities, with respect to the award of the contracts for the building construction and for the building fit-ups:
-
This will include a review of the selection of proponent and the information reported to Council for decision-making purposes (including a determination as to whether the costs, benefits and risks of the project were appropriately and clearly presented).
Main Report: History of the 400 CHS Report
Page 39
1.
Preamble to the Main Report The intent of this preamble is to clarify the final scope of the review and to summarize the history of updates of this report that have resulted from new information provided to the Auditor between January and December of 2008.
1.1 History of the 400 CHS Report: This document updates the audit work and analysis completed on the draft audit report prepared by the City Auditor in April of 2007 entitled, “The Post-Construction Audit of the 400 City Hall Square building” for our review of the substantial volume of new information provided by Administration to the Auditor throughout 2008. The 400 CHS audit review leading to the April 2007 audit draft report was subject to a significant scope limitation. A scope limitation is a restriction placed upon the internal Auditing department that precludes the department from accomplishing its objectives and plans. The scope limitation of the 400 CHS review of 2007 was defined by the Auditor as the restricted access to records, personnel, and physical properties relevant to the performance of the engagement objectives and the performance of necessary engagement procedures. The City Auditor completed a draft report in April 2007, noting the following scope limitations in the draft document: -
The Auditor did not have access to all in-camera Council documentation The project financial closeout was not completed, so the Auditor could not perform a financial analysis of total project expenditures The Auditor had limited access to the project records and project staff to provide clarification and answers to questions.
Throughout 2008, Audit had been provided with access to new information and persons to answer questions necessary to address the scope limitations of the April 2007 draft. Through an analysis of the new information, Audit has identified areas of the April 2007 draft that required updating. This issue was addressed through changes to the report objectives, a refinement of audit objectives and corrections or amendments to certain draft findings and recommendations. A significant volume of work was required to bring this report up to date with the new information. The report has been updated to reflect the new information provided by Administration and the information gathered throughout 2008 in the interviews held by Audit with the project Staff and Consultants who worked on the 400 CHS project.
1.1.1
New Information and Audit Report Revisions
Report History: 2006 – 2007 In 2006, the Office of the City Auditor undertook a post-construction audit of the processes approving the project and managing the construction of the building. The file was completed with the City Auditor as the lead with Audit staff assisting. Noted within the 400 CHS draft (April 2007) audit report, was that the report had been completed under a significant scope limitation, where the Auditor had limited access to documentation and project staff required to provide answers to the Auditor’s questions. “The post-construction audit of the 400 City Hall Square building involved discussions with various responsible City Staff and Management, interviewing consultants, the gathering and examination of City documents from Council reports to Committee meeting minutes to e-mails and memos regarding the project, as well as reviewing the City’s financial records. There are, however, areas of the audit where sufficient documentation could not be found to be able to answer questions regarding matters such as the alterations in the procurement process, the lack of implementation of a project management methodology or the apparent cost overrun for which a final financial analysis and closeout has not been performed.”
Main Report: History of the 400 CHS Report
Page 34
City of Windsor Also noted in the 400 CHS draft (April 2007) audit report, were three specific scope limitations that impacted the scope of the review. a. “We question the necessity and the degree to which Council meetings relevant to this project were held in-camera. The lack of public transparency on a taxpayer funded project created challenges throughout the audit review. An extensive level of fieldwork was performed to gain assurance that we acquired adequate documentation to support the findings in the review.” b. “We requested but did not receive the following project documentation that we anticipated would have been available for review as per best practices. We were advised by Management, that such documentation may be obtained by reviewing the minutes of the various committees of the project (supplied by Management), the project Council reports and from the project Consultant contracted by the City. We were unable to identify where a project charter identifying the project team, schedule and deliverables was created and approved. Due to this limitation, we relied on measurable deliverables of the project (found to exist at a very basic descriptive level) within the project Council reports, RFP(s) documents, project contracts/agreements and committee minutes.” c. “To date, the project financials have not been finalised and therefore, we are unable to perform a final analysis or issue a final report on total project expenditures. Any financial reported findings are based on project expenditures recorded in the PeopleSoft Financial System as of December 6, 2006.” The draft audit report entitled, Post Construction Audit Report, 400 City Hall Square East, Draft For Audit Committee Discussion (April 2007) was completed based on the review and analysis of the limited documentation and project staff that were available to the Auditor. In December of 2007, the Post Construction Audit Report, 400 City Hall Square East, Draft For Audit Committee Discussion (April 2007) was discussed at the Audit Committee with City Auditor and Administration in attendance. On December 31, 2007, the City Auditor retired. At the December meeting, the Audit Committee assigned Angela Berry, the Lead Auditor, to update and complete the 400 CHS file.
Report Updating History: 2007 - 2008 1.
April 2007 – City Auditor’s Office Completes Draft Audit Report In April of 2007, the City Auditor’s Office prepared its draft 400 CHS review report, but without a complete financial analysis of the 400 CHS project. The financial details were not yet available to audit, as the Project Management Team had not completed the final analysis or financial closeout of the 400 CHS project. Delays in the Corporate Projects financial closeout can be attributed to the gaps in project management staffing noted throughout this report. The preliminary financial findings of the April 2007 draft were based on project expenditures recorded in the PeopleSoft financial system as at December 6, 2006. Due to the scope limitations identified above, it was necessary to present the City Auditor’s Office financial findings in the report without clarification or comments from the City’s Corporate Projects Group. To complete audit reports in compliance with our Audit Charter (2004), the audit process requires that Management ensure that a written response to the recommendations in the Internal Audit report is submitted to the City Auditor, and that the Auditor include Management’s written response in the report. A disclosure of non-compliance is required in the instances where full compliance with this written response requirement could not be obtained.
Main Report: History of the 400 CHS Report
Page 35
City of Windsor 2.
July 2007 Financial Update: Because of the lapse in time since the April 2007 draft audit report was prepared, the City Auditor prepared a new financial update report reflecting project expenditures recorded in the PeopleSoft financial system as at June 29, 2007. Due to the scope limitations identified above, it was necessary to present the financial findings of the City Auditor in the report update with limited clarification / comments from Corporate Projects.
3.
November 2007 Audit Committee Meeting: As recorded in the official Audit Committee minutes of November 2007, the City Auditor tabled (in camera), the original audit report with the July financial update and received the following committee direction: “Moved by B. Carter, seconded by Councillor Halberstadt, That the confidential report relating to the Audit of 400 City Hall Square East BE DEFERRED to the special meeting of the Audit Committee to be held December 14, 2007.”
4.
December 2007 Financial Update: Due to the lapse in time it was again necessary for the City Auditor to complete a new financial update report reflecting project expenditures recorded in the PeopleSoft financial system as at November 21, 2007 with limited comments from Corporate Projects. The audit at this point has resulted in three separate reports consisting of the original draft document and two additional draft financial update reports.
5.
December 2007: Audit Committee Meeting and New Information: At the December 2007 Audit Committee meeting, the committee asked the City Auditor to consolidate the Post Construction Audit Report (including all financial updates of the City Auditor’s Office, and upon its completion, the Project Management Team report) into one final report. The Audit Committee also requested, pending the advice of City Legal, that either (i) a Public report be sent to Council or (ii) that an In Camera report be sent to Council accompanied by a summary report for the public session that includes the financial issues, project management issues and the request for proposals process. By taking this direction, the City Auditor’s Office would prepare the final report with the current financial project values in a format that would be clear to the reader. Also, at the December 2007 meeting of the Audit Committee, Administration requested permission to revise the management comments to the audit draft to reflect any changes made to the audit report. These efforts are intended to make certain the views of City Management & Administration are adequately and appropriately represented within the final audit report. In December of 2007, the Project Management Team informed the Auditor’s Office that it was nearing completion of the final analysis and financial closeout of the 400 CHS project. The importance of this communication was that the Project Team’s report would provide final financial figures as well as a detailed analysis of project variances. It was anticipated that the analysis part of that report would satisfy draft audit recommendation # 23 of the City Auditor’s Office 400 CHS Review (April 2007) which states, “that upon completion of the financial records of the project, that Administration present a full financial accounting of the project budget versus actual financial details to Council.”
Main Report: History of the 400 CHS Report
Page 36
City of Windsor 6.
April 2008: Revised Management Comments / New Information from Administration: Audit received revised management comments to the 400 CHS draft (April 2007) addressing the findings, comments and recommendations of the draft audit report. In addition, Administration provided 2 large binders documenting in-camera and opensession council reports and meeting minutes covering the entire timeline of the project. Administration identified and made accessible individuals not previously interviewed by Audit.
7.
April 2008: In-Camera – Update Audit Committee on Exit Conference & Impact of New Information Provided by Administration: On April 23, 2008, the Lead Auditor updated the Audit Committee on the progress of the 400 CHS review. The Lead Auditor reported that to comply with Audit Standards, the 400 CHS draft report was required to be sent back to the fieldwork stage. The Audit team needed to conduct the necessary work to determine the impact of the new information on the draft audit findings through the completion of interviews and through seeking further new and relevant information from interview sources.
8.
The Audit Committee, at its meeting held April 23, 2008, adopted the following resolution: Moved by B. Carter, seconded by Councillor Marra, “That the Lead Internal Auditor BE REQUESTED to consider the comments and information received from Administration to determine the effects that the findings and recommendations will have on the 400 City Hall Square review and further, that the review BE DEFERRED until the Lead Internal Auditor is satisfied that the findings and recommendations are supported by proper evidence.”
9.
14 May 2008: In-Camera – Lead Auditor Update to the Audit Committee on Assessment of New Information Provided by Administration “We are conducting the work to determine the extent to which two (2) binders of information provided by Administration to Internal Audit on April 18, 2008 can be considered as new evidence.”
10.
16 Jun. 2008: New Information – Council Report, 400 CHS Project Completion -
On June 16, 2008, Administration submitted a report to council entitled, 400 CHS Project Completion Report.
-
One of the major scope limitations identified in the April 2007 400 CHS audit draft was that as of the conclusion date of audit fieldwork, Corporate Projects had not yet completed the closeout of the project financials. Therefore, the final financial details required to perform an analysis were not available for review.
-
The project completion report of the 400 City Hall Square (CHS) Project was a new source of information. This document is a source of clarification to many of the outstanding questions raised by the former City Auditor within the 400 CHS draft (April 2007) audit report.
Main Report: History of the 400 CHS Report
Page 37
City of Windsor 11.
12.
12 Sept 2008: New Information – Update Audit Committee: 11 Boxes of Project Information Received From Corporate Projects -
On August 21, 2008, while interviewing project staff, Audit was informed of the existence and location of a large number of 400 CHS project files.
-
Audit requested Administration to grant it access to these files. Administration was helpful in locating the files, retrieving them from storage and granting access to the files, thereby ensuring timely availability to Audit.
-
On September 9, 2008 Audit obtained 11 boxes of project paper files and a computer disc containing 74 electronic files.
Interviews – Project Staff, Administration and Consultants -
New information gained through conducting interviews in 2008.
Main Report: History of the 400 CHS Report
Page 38
City of Windsor
1.1.2
Impact of New Information on the Final 400 CHS Review 2008 (Part I and II)
The goal for the completion of the 400 CHS draft (April 2007) report was to strengthen the audit findings by gathering sufficient and appropriate audit support, with the ultimate goal of updating the draft report with the new and current information. The impact of the new information received from Administration has been significant. Addressing the new information that materially or moderately impacted the 400 CHS draft (April 2007) report required significant audit work and revisions, to bring the report to completion. To avoid further delay in completing our reporting, it was decided to separate the report into two parts, to be released on different dates.
Part I:
Part II:
The first Part will cover: -
Our analysis of the legal agreement with the Contractor (as amended) and whether the City received what it bargained for;
-
Whether the project was delivered on schedule (as amended), and within budget (as amended); and
-
Whether an appropriate project management methodology was established and followed throughout the design-build approval and construction process for the project (including whether change orders were appropriately approved and monitored and whether the project costs were effectively monitored and reported during the process).
The second Part will cover: -
A review of how the project approval process was conducted in compliance with the City’s Purchasing By-Law, the Municipal Act, 2001 and the Common Law governing procurement by public authorities, with respect to the award of the contracts for the building construction and for the building fit-ups:
-
This will include a review of the selection of proponent and the information reported to Council for decision-making purposes (including a determination as to whether the costs, benefits and risks of the project were appropriately and clearly presented).
Main Report: History of the 400 CHS Report
Page 39
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