Audit Work Plan - 2003 - FINAL Jan 6 03

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STAFF REPORT
January 6, 2003
To: Audit Committee
From: Auditor General
Subject: Audit Work Plan - 2003

Purpose:
To provide City Council with details of the Auditor General's work plan for the year ended
December 31 2003.
Financial Implications and Impact Statement:
There are no financial implications resulting from the receipt of this report.
Recommendation:
It is recommended that the 2003 work plan for the Auditor General’s Office, as set out in this
report, be received for information.
Background:
At its meeting of May 21, 22 and 23, 2002, City Council approved Clause No. (1) of Report No.
(7) of the Policy and Finance Committee establishing the Office of the Auditor General and
transferring the internal audit function of the City Auditor to the Chief Administrative Officer, as
recommended in the report of Mr. Denis Desautels, the former Auditor General of Canada. The
report also recommended that the Chief Administrative Officer, working with the Auditor
General, in consultation with the City Solicitor and the Commissioner of Corporate Services,
report back on specific implementation actions.
A report dated November 4, 2002, entitled “Implementation of the Auditor General and Internal
Audit Functions” was approved by City Council on November 26, 27 and 28, 2002. Included in
the recommendations approved by Council was a draft by-law setting out provisions for the
Auditor General’s responsibilities, term of office, selection, compensation, annual audit plan, and
other matters as required to implement the Auditor General function.- 2 -
The Auditor General reports directly to City Council through the Audit Committee and has the
mandate to conduct compliance, value for money, and financial (excluding attest) audits of all
programs, activities and functions of departments and agencies, boards and commissions. The
Auditor General is also responsible for the oversight of the work of the external attest auditors.
This report addresses the Auditor General's annual audit work plan for 2003.
Included in the by-law passed by City Council, establishing the office of the Auditor General are
the following provisions relating to the annual audit work plan.
The Auditor General shall:
- Have full carriage and control of and be fully responsible for the conduct of the Auditor
General's Office.
- Be responsible for carrying out financial (excluding attest), compliance and performance
audits of all programs, activities and functions of all City departments, agencies, boards,
and commissions, and the offices of the Mayor and members of Council.
- The Auditor General shall submit an annual audit plan to Council.
- No deletions or amendments to the annual audit plan shall be made except by the Auditor
General, however, Council may add to the annual audit plan by a two-third’s majority
vote.
In addition to the above the following specific responsibilities of the Auditor General were
approved by City Council:
The Auditor General shall:
- conduct or cause to be conducted, audits on behalf of City Council in the areas of
compliance, financial (excluding attest) program or value for money, information
technology infrastructure, environment and sustainability and other audits as appropriate;
- undertake forensic investigations including suspected fraudulent activities;
- oversee the work of external auditors performing financial statement/attest audits;
- examine problems and carry out assignments identified by the Auditor General, or
approved by two-third’s majority resolution of Council;
- provide assurance that the information technology infrastructure contains adequate
controls and security by ensuring the existence of such controls in existing systems,
assessing overall computer security including business continuity (emergency) planning;- 3 -
- coordinate audit activities with internal auditors and any contracted work to ensure
efficient and effective use of audit resources; and
- manage the fraud hotline; refer issues to departmental management and the Internal Audit
Division as appropriate.
Comments:
The Work Plan of the Auditor General for 2003 consists of the following:
- Attest or Financial Audits
- Audit Projects Requested by City Council
- Audit Projects Identified by the Auditor General
- Annual Recurring Audits
- Follow-up Audits
- Fraud or Fraud Related Investigations
- Coordination and Oversight of the City’s External Attest Audit
Attest or Financial Audits
The year 2003 is a transitional year for the newly established Auditor General’s Office. Attest
audits for the year ended December 31, 2002, for Community Centres, Arenas and Business
Improvement Areas are being conducted during 2003, and will likely continue until the end of
the year. This has previously been reported to the Audit Committee and City Council. Details of
these financial audits are included in Appendices 1, 2 and 3.
The Auditor General’s Office (previously the City Auditors office) has been conducting attest
audits of Community Centres, Arenas and Business Improvement Areas since amalgamation. In
addition the Auditor General’s Office has also been conducting attest audits on a wide range of
provincial subsidy claims relating to various programmes such as Homes for the Aged and
Public Health.
Attest audits, for these entities for years subsequent to 2002 fiscal year ends, will be the
responsibility of external public accounting firms as was previously approved by City Council.
The reason for this is two fold:
a) The new Municipal Act in subsection 296 (4) in relation to attest audits, provides that for
years ending subsequent to December 31 2002:
“ the auditor of a municipality shall not be an employee of the municipality or of a local
board of the municipality.” Consequently, this subsection clearly precludes the Auditor
General, an employee of the City, from performing attest audits in the future.
b) In creating the Auditor General function in the City, and in accordance with the
recommendations of Mr. Denis Desautels, Council specifically excluded attest audits
from the Auditor General’s responsibilities.- 4 -
As a result of the foregoing, the Auditor General’s Office, for fiscal year ends subsequent to
December 31 2002, will no longer conduct any attest audits for the City or any of its Agencies,
Boards, Commissions or Special Purpose Bodies. The transition of these audits from an
“internal” to “external” is currently in process.
In accordance with the contractual arrangement with the external auditors, the Auditor General
will provide 1,000 hours of audit assistance to the external auditor in connection with the City’s
2002 financial audit. This is consistent with prior years. This assistance will not be provided for
fiscal years subsequent to December 31, 2002.
Audit Projects Requested by Council
Included in the Auditor General’s 2003 work plan are projects previously requested by City
Council and which remain outstanding. The majority of these projects are either currently in
progress or are in the preliminary planning stage. These projects are as follows:
a) Review of the Investigation of Sexual Assaults – Toronto Police Service
One of the recommendations contained in the City Auditors report relating to the “Jane Doe”
audit was a requirement that “the City Auditor be requested to conduct a follow-up audit in
regard to the status of the recommendations contained in the report, the timing of such audit to be
consistent with the time frame outlined in the report of the Chief of Police. The City Auditor be
required to report directly to the Toronto Police Services Board in regard to the results of the
follow-up audit”.
This audit is in progress and is scheduled for completion in mid 2003.
b) Performance Audit – The Public Complaints Process, Toronto Police Services
The Auditor General conducted a Performance Audit on the Toronto Public Complaints process
and issued a report to the Police Services Board dated August 2002. The Police Services Board
requested that the Auditor General conduct an annual audit on the complaints process and report
directly to the Board. While the 2002 audit was a detailed performance audit, future annual
audits will be compliance in nature only.
c) Access and Equity Audit
In December 1999, City Council adopted the recommendations of the Final Report of the Task
Force on Community Access and Equity which required that, “once in each term of Council, the
City Auditor oversee an internal audit of the performance by the Corporation as a whole in
achieving its access, equity and human rights goals”.
A detailed Terms of Reference have been developed and the Auditor General has participated in
a number of Community Meetings in regard to this project. It is anticipated that this project will
be submitted to Audit Committee at either its July or September 2003 meeting.- 5 -
d) Review of Race Relations Practices of the Toronto Police Services
City Council directed the “City Auditor, within his mandate to the Toronto Police Services
Board, to undertake an updated audit of Police policies, procedures, programs and practices that
impact on racial minorities similar to that undertaken by the former Metro Auditor, Allan
Andrews, in 1992, including an audit of the implementation of recommendations made at that
time, and report back to Council of the City of Tor