400 Audit Summary 2

8/14/2019 400 Audit Summary 2

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City of Windsor

Main Report: History of the 400 CHS Report Page 34

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 byAdministration to the Auditor throughout 2008.

The 400 CHS audit review leading to the April 2007 audit draft report was subject to asignificant 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 restrictedaccess 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 limitationsin 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 requiredupdating. 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 newinformation. 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 completedwith 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 beencompleted under a significant scope limitation, where the Auditor had limited access to

documentation and project staff required to provide answers to the Auditors questions.

The post-construction audit of the 400 City Hall Square building involved discussionswith 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 theCitys 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 projectmanagement methodology or the apparent cost overrun for which a final financial

analysis and closeout has not been performed.


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Also noted in the 400 CHS draft (April 2007) audit report, were three specific scopelimitations 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 ataxpayer funded project created challenges throughout the audit review. An

extensive level of fieldwork was performed to gain assurance that we acquiredadequate 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. Wewere 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 charteridentifying 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 projectCouncil 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 projectexpenditures 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 andanalysis 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 withCity 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 Auditors Office Completes Draft Audit Report

In April of 2007, the City Auditors 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 inthe 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

Auditors Office financial findings in the report without clarification or comments

from the Citys Corporate Projects Group.

To complete audit reports in compliance with our Audit Charter (2004), the auditprocess 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 Managements written response in the report. A disclosure ofnon-compliance is required in the instances where full compliance with this written

response requirement could not be obtained.


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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 scopelimitations identified above, it was necessary to present the financial findings of the

City Auditor in the report update with limited clarification / comments fromCorporate 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 newfinancial 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 Auditors Office, and upon its completion, the Project

Management Team report) into one final report. The Audit Committee alsorequested, 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, projectmanagement issues and the request for proposals process. By taking this direction,

the City Auditors 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 reflectany changes made to the audit report. These efforts are intended to make certain the

views of City Management & Administration are adequately and appropriatelyrepresented within the final audit report.

In December of 2007, the Project Management Team informed the Auditors 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 Teamsreport 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 Auditors Office 400 CHS Review (April 2007)

which states, that upon completion of the financial records of the project, thatAdministration present a full financial accounting of the project budget versus actual

financial details to Council.


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6. April 2008: Revised Management Comments / New Information fromAdministration:

Audit received revised management comments to the 400 CHS draft (April 2007)

addressing the findings, comments and recommendations of the draft audit report. Inaddition, Administration provided 2 large binders documenting in-camera and open-

session council reports and meeting minutes covering the entire timeline of theproject. Administration identified and made accessible individuals not previouslyinterviewed 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 ofthe 400 CHS review.

The Lead Auditor reported that to comply with Audit Standards, the 400 CHS draftreport 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 furthernew 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 andinformation 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 onAssessment of New Information Provided by Administration

We are conducting the work to determine the extent to which two (2) binders ofinformation 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 auditdraft was that as of the conclusion date of audit fieldwork, Corporate Projects hadnot 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 anew 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.


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11. 12 Sept 2008: New Information Update Audit Committee: 11 Boxes of ProjectInformation 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. Administrationwas 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.

12. Interviews Project Staff, Administration and Consultants

- New information gained through conducting interviews in 2008.


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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 ofupdating the draft report with the new and current information. The impact of the new

information received from Administration has been significant. Addressing the newinformation 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: The first Part will cover:

- Our analysis of the legal agreement with the Contractor (as amended) andwhether the City received what it bargained for;

- Whether the project was delivered on schedule (as amended), and withinbudget (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 andreported during the process).

Part II: The second Part will cover:

- A review of how the project approval process was conducted in compliance

with the Citys Purchasing By-Law, the Municipal Act, 2001 and theCommon 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 informationreported to Council for decision-making purposes (including a determination

as to whether the costs, benefits and risks of the project were appropriatelyand clearly presented).

Documents

400 Audit Summary 2