Currently, some internal audit professionals across the City meet through external forums to share their experiences and learn about internal audit leading practices. We believe that an internal working group focused on internal audit may be of additional value to the City, as it would provide the City and its agencies an opportunity for all internal audit leads to share lessons learned and leading practices, collaborate, and optimize their use of resources. Moreover, such a forum could lead to strengthened working relationships across the City and a cross-pollination of skills and knowledge. The working group structure and frequency of interactions should be determined by the internal audit professionals in the City and agencies.
Findings and Opportunities
1.3.5 Legal
Services
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Current State
The City’s Legal Services Division is tasked with supporting all divisions and some agencies with the provision of legal advice, support, and guidance. Comprised of 287 staff and similar to a full-service law firm, the division handles multiple areas of law, including: municipal, real estate, planning and development, and employment. Other functions include litigation, prosecution, council liaison, Transit Plan, and library services. Consistent with industry practices, the legal division often charges its internal clients on an hourly basis for legal advice.
A number of agencies in the scope of this review utilize the services of the Legal Services Division for various needs. TPH relies on the City’s Legal division for all of its legal services and needs.
TPA occasionally contracts the City for legal advice related to real estate transactions. However the majority of legal services are provided to the TPA by specialized external law firms.
TPL uses the City legal services for real estate and municipal law. Employment services, including labour relations are handled using external legal resources, as appropriate.
EP relies on the City to provide the majority of its legal services, with employment services being the exception. EP uses external law firm for employment and labour relations support.
For TPS, the City provides legal services for contracts, claims, employment law and real estate law. TPS performs the remaining services in house, including supporting the Board, the Chief, Command, and members of the force with provision of legal advice. The TPS Legal Department is comprised of 10 people, including one Lead Council, one Legal Council, coordinators, clerks and assistants.
TTC uses the Legal Services Division of the City for real estate services. The rest of legal support is provided through an internal Legal group at TTC. The group is comprised of 34 individuals, including 18 lawyers, 12 legal assistants, one prosecutor, one articling student, and two court advocates. The group’s primary area of focus is representing the commission in legal claims brought forward against the organization. These include personal injury and property cases.
Findings and Opportunities
Observations and Issues
KPMG observed that issues of capacity and specialization often hinder collaboration and sharing of resources. The City’s legal team reportedly experiences high workloads and their capacity to take on additional services without additional staff may be limited. The agencies, on the other hand, often cite the need for specialized expertise, which may not be readily available in the City’s legal division, prompting them to select an external law firm. With the TTC Legal group’s focus on injury and property claims against the Commission, there is little overlap or duplication of activities between it and the City. Moreover, since TPS is governed by its own provincial act, having an in-house legal group appears to be reasonable. As a consequence, KPMG did not identify any specific shared services models within this function. However, as is the case with most of the other functions, we recommend that the heads of Legal groups in each organization meet regularly to discuss the needs of each organization, emerging issues effecting the City as a whole, and share ideas on optimal service delivery of legal services across the City.
It is worth noting that given that this was not an in-depth legal services sourcing study, KPMG did not examine the benefits of procuring external legal resources as opposed to keeping legal staff in-house. Internal studies conducted by the City suggest the latter to be more cost effective.
1.3.6 Purchasing
and Materials
Management
Current State
The current state of purchasing for the City is organized in a hybrid centre-led model. The City’s Purchasing and Materials Management Division (PMMD) employs 79 FTEs and has an estimated gross budget of $7.1m. The PMMD leads policy compliance, business process management and oversight of operational procedures for all City divisions. In addition, key service delivery activities for the PMMD include administering the RFP process and managing the purchase order (PO) and blanket contract process for higher value purchases. Service level agreements between PMMD and most of the customer divisions are currently in place, augmented with agreed upon delivery mechanisms. Lower value purchases (typically under $50K) are managed directly by the divisions. An estimated $1.1b of external procurement spend (consolidated across City divisions) is managed by the PMMD.
The PMMD also has a formal agreement to provide operational procurement services and support to Toronto Public Health, who have approximately 4.4 FTEs performing purchasing activities and whose main tasks are managing lower value purchases and partnering with the City for higher value purchases. The total annual procurement spend for TPH is estimated at $27m. While much of TPH’s procured goods and services are common among other City divisions and agencies, they also procure medical and dental equipment and supplies unique to TPH. Furthermore, the PMMD provides similar services to EP through a contract. EP has 3 in house FTEs and annual procurement spend estimated at $21m. The other in-scope agencies, namely TTC, TPS, TPL and TPA, have their own independent purchasing organizations, policy and systems.
TPS has five dedicated staff in Purchasing Support Services - specifications and bid documents are prepared by the business units, with Purchasing Support Services guiding the process to verify compliance with policies and procedures. The total annual procurement spend is estimated at $100m. Of this amount, annual operational spend is estimated at $60m and annual capital spend is estimated at $40m. An estimated 60% - 70% of the annual spend is police-specific. TTC has 59 staff involved in the delivery of procurement services at the TTC. These people are directly involved in the buying of goods and services (i.e., the full pre-award cycle from specification preparation through tendering process and award) plus post-award contract administration. These resources are also involved in ensuring commercial compliance, contract management, coordination and payment processing (to some extent). The TTC has its own policies, procedures and systems for procurement. The total annual procurement spend is estimated at $260 m – of this amount, annual operational spend is estimated at $98m and annual capital spend is estimated at $162m.