2014 Consulting Services Expenditure City Divisions and Major Agencies and Corporations. Government Management Committee

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STAFF REPORT

ACTION REQUIRED

2014 Consulting Services Expenditure – City Divisions

and Major Agencies and Corporations

Date: May 29, 2015

To: Government Management Committee

From: Treasurer

Wards: All

Reference

Number: P:\2015\Internal Services\Acc\gm15009acc (AFS 20216)

SUMMARY

This report provides information on the consulting services expenditures of City Divisions and major Agencies and Corporations (ACs) for the year ended December 31, 2014. It contains a summary and details, by category and vendor, of the Operating and Capital consulting services expenditure for 2014, with 2013 comparative.

Overall, the City and its agencies and corporations, for operating and capital combined, spent $11.2 million on consulting services in 2014, a decrease of $6.4 million (or 36.5%) compared to 2013.

RECOMMENDATIONS

The Treasurer recommends that:

1. Government Management Committee receive this report for information.

Financial Impact

There are no financial implications arising from this report.

The Deputy City Manager & Chief Financial Officer has reviewed this report and agrees with the financial impact information.

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DECISION HISTORY

Council at its meeting of December 4-6, 2001, in adopting Audit Committee Report No. 10, Clause 10 titled “Policy for the Selection and Hiring of Professional and Consulting Services; Use of Consultants and Expenditure Reduction Strategies; Hiring of Professional and Consulting Services Review”, approved the following:

a) a Purchasing Policy for the Selection and Hiring of Professional and Consulting Services;

b) a requirement that “All future reporting of consulting expenditures be based on actual expenditures incurred and not on the value of contracts awarded unless specifically requested by Council. In order to ensure that such reporting is accurate, all consulting costs reported to Council be reconciled to the City’s financial information system by each Department.”

The following is the link to the Council decision and staff report:

http://www.toronto.ca/legdocs/2001/agendas/council/cc011204/au10rpt/cl010.pdf Subsequently, Council at its meeting held on June 18 – 20, 2002, adopted the following recommendation contained in a report dated May 31, 2002 from the Chief Administrative Officer, entitled “Corporate Accountability Framework – Implementation Plan and Status Update on the Use of Consultants” (re: Audit Committee Report No. 6, Clause 1):

“The CAO and CFO, in consultation with the City Auditor, provide an annual report commencing with the period ending December 31, 2002, on consulting expenditures that will include actual consulting expenses for the previous year and the year prior (i.e., 2002 and 2001 actuals) organized by: department or local board, by the specific consulting categories, and by vendor.”

The following is the link to the Council decision and staff report:

http://www.toronto.ca/legdocs/2002/agendas/council/cc020618/au6rpt/cl001.pdf At its meeting held on May 23-25, 2007 Council approved an amended policy for the Selection and Hiring of Professional and Consulting Services to reflect changes made to the City's administrative structure and amendments made to the City's Purchasing and Financial Control By-laws (re: GM4.8) . Following is the link to the Council decision and staff report:

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ISSUE BACKGROUND

Similar to any public or private entity, the City retains consultants for specific projects or assignments requiring certain technical capabilities, or unique and specialized advice or services, not available in-house or as required by legislation. It is often more cost effective to retain these specialized services on an as required basis, as compared to employing and training staff for specialized skills that are used infrequently.

Consulting services are acquired in accordance with the Council approved policy on the Selection and Hiring of Professional and Consulting Services, as well as the City's Purchasing By-law, policies and procedures.

As outlined in the Council approved policy for the Selection and Hiring of Consulting Services, the term "Consulting Services" is defined as any firm or individual providing expert advice / opinion on a non-recurring basis to support / assist management decision in the following areas:

Technical: undertake activities on a defined assignment to assist managers in

analyzing technical problems and recommending solutions (including the selection of engineering/architectural designs, research, appraisals, planning).

Management/Research and Development:undertake planning, organizing and

directing activities to assist managers in analyzing management problems and

recommending solutions for a defined assignment (can be operational, administrative, organizational or policy in nature); with research and development being investigative study to provide the City with increased knowledge or information.

Information Technology: undertake activities on a defined assignment to assist

managers in needs assessment and system selection including information processing, telecommunications and office automation (can be analytical, testing or of a business process nature).

External Lawyers and Planners (Legal):as determined in consultation with City

legal staff; and

Creative Communications: inclusive of advertising, promotions, public relations

and design advice.

COMMENTS

The consulting services expenditures reported in this report follow the five (5) categories (i.e. Technical; Management/Research and Development; Information Technology; Legal; and Creative Communications) outlined in the Selection and Hiring of Consulting Services policy that was approved by Council in May 2007. Definitions for each of these categories are provided above in the Issue Background section of this report.

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The City divisions and major agencies/corporations have confirmed their 2014 consulting services expenditure, by vendor, for each of the five (5) categories for both the Operating and Capital Budgets. Accounting Services staff have verified and reconciled, to the General Ledger, the actual and budget amounts reported by the divisions. The amounts reported for the agencies/corporations were confirmed by the specific agency/corporation.

The consulting services expenditures for the Accountability Officers are not included in this report as their expenditures are subject to a review by an external consultant and are to be reported in a separate report.

A summary of the consulting services expenditures for 2014, with 2013 comparative, for Operating and Capital, of divisions and major agencies / corporations, is presented below in Tables 1 and 2 respectively:

• Tables 1a (Operating) and 2a (Capital) provide a summary by category; • Tables 1b (Operating) and 2b (Capital) provide a summary by division and by

agency/corporation.

The details of the consulting services expenditures for 2014, by category and vendor, for each division and major agency/corporation, are shown on Appendix A (Operating) and Appendix B (Capital), respectively.

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Operating Consulting Expenditures

Table 1a

Contract Balance

Remaining 2014 2014 2013 % 2014 2013 Category Dec 31/2014 Budget Actual Actual Change Expenditure Expenditure

$ 000's $ 000's $ 000's $ 000's Increase/ % % (Note) (Decrease) by category by category

City Divisions

Technical 611.5 738.3 788.3 1,940.6 (59.4)% 39.7% 67.8%

Information Technology 0.0 0.0 9.1 0.0 Undefined 0.4% 0.0%

Management/ R & D 470.6 1,664.2 1,094.6 801.9 36.5% 55.1% 28.0% Legal 579.8 286.9 94.9 119.2 (20.4)% 4.8% 4.2% Creative Communications 0.0 0.0 0.0 0.0 0.0% 0.0% 0.0% Total Divisions 1,661.9 2,689.4 1,986.9 2,861.7 (30.6)% 100.0% 100.0% Major A & Cs Technical 0.0 154.2 92.4 378.5 (75.6)% 5.6% 26.9%

Information Technology 0.0 16.1 13.1 0.0 Undefined 0.8% 0.0%

Management/ R & D 18.2 1,164.8 477.4 833.3 (42.7)% 28.9% 59.3% Legal 0.0 1,164.2 1,068.1 161.7 560.5% 64.7% 11.5% Creative Communications 0.0 0.0 0.0 32.0 (100.0)% 0.0% 2.3% Total A & Cs 18.2 2,499.3 1,651.0 1,405.5 17.5% 100.0% 100.0% GRAND TOTAL 1,680.1 5,188.7 3,637.9 4,267.2 (14.7)% OPERATING

Consulting Services Expenditure Summary By Consulting Category for City Divisions and Major ACs

(Details in Appendix A)

Note: The contract balance remaining as at December 31, 2014 is the amount expected to be spent in future year(s), and is not comparable to the current year expenditure amount.

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Table 1b

2014 Exp. As % of 2014 vs Services Information Mgmt Creative 2014 2014 2013 2013 Actuals & Rents City Divisions Technical Technology /R&D Legal Commun. Actual Budget Actual % Change Budget

$ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's Incr./ (Decr.)

Citizen Centred Services "A" 174.4 9.1 184.4 - - 367.9 621.7 454.5 (19.1)% 0.1% Citizen Centred Services "B" 558.6 - 80.6 - - 639.2 461.0 1,808.6 (64.7)% 0.2% Internal Services 7.4 - 287.4 2.0 - 296.8 200.0 - Undefined 0.3% City Manager - - 271.9 5.1 - 277.0 368.0 3.7 7386.5% 8.2% Other City Programs - - 64.1 - - 64.1 - 19.0 237.4% 0.5% Corporate Accounts - Non Program 47.9 - 206.2 87.8 - 341.9 1,038.7 575.9 (40.6)% 0.1% Total 788.3 9.1 1,094.6 94.9 0.0 1,986.9 2,689.4 2,861.7 (30.6)% 0.1% % 39.7% 0.4% 55.1% 4.8% 0.0% 100.0%

2014 Exp. As % of 2014 vs Services Information Mgmt Creative 2014 2014 2013 2013 Actuals & Rents Agencies\Corporations Technical Technology /R&D Legal Commun. Actual Budget Actual % Change Budget

$ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's Incr./ (Decr.) Exhibition Place - - - -Heritage Toronto - - - -Sony Centre for Perf. Arts 1.5 - 0.4 6.6 - 8.5 8.0 68.8 (87.6)% 0.2% St. Lawrence Centre for the Arts - - - -Toronto Atmospheric Fund - - - -Toronto Centre for the Arts - - - 85.6 (100.0)% -Toronto Parking Authority - - - -Toronto Police Service 4.1 - 215.8 796.1 - 1,016.0 1,541.1 523.3 94.2% 2.7% Toronto Police Services Board - - 190.0 265.4 - 455.4 664.1 117.0 289.2% 52.2% Toronto Public Library Board - - - 30.0 - - -Toronto Transit Commission 86.8 13.1 - - - 99.9 166.1 424.3 (76.5)% 0.1% Toronto Zoo - - 71.2 - - 71.2 90.0 186.5 (61.8)% 0.6% Total 92.4 13.1 477.4 1,068.1 0.0 1,651.0 2,499.3 1,405.5 17.5% 0.7% % 5.6% 0.8% 28.9% 64.7% 0.0% 100.0%

GRAND TOTAL (Divisions & ACs) 880.7 22.2 1,572.0 1,163.0 0.0 3,637.9 5,188.7 4,267.2 (14.7)% 0.2%

% 24.2% 0.6% 43.2% 32.0% 0.0% 100.0%

OPERATING

Consulting Services Expenditure Summary By City Divisions and Major ACs

(Details in Appendix A)

As shown on Tables 1a and 1b, the 2014 actual operating consulting services expenditures overall decreased by $0.6 million (14.7%) as compared to 2013:

a) City divisions decreased by $0.9 million (30.6%) as compared to 2013, due primarily to reduced spending for planning studies, mainly related to the Porter Airline and the Billy Bishop Toronto City Airport.

b) Agencies and corporations increased by $0.3 million (17.5%), compared to 2013, due primarily to:

• increased spending by the Toronto Police Service and the Police Services Board ($0.9M), mainly as a result of additional expenditure for legal

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consulting pertaining to the policies for use of lethal force to persons emotionally or mentally disturbed;

offset by,

• decreased spending by the Toronto Transit Commission ($0.3M) primarily due to the completion of the TTC commuter parking strategy, and,

• decreased spending by the Toronto Zoo ($0.1M), the Sony Centre ($0.1M), and the Toronto Centre for the Arts ($0.1M).

For City divisions, agencies and corporations, consulting expenditures were within the approved budget. An explanation of the significant budget variances, by

division/agency/corporation, is included in the detailed listing in Appendix A.

The total 2014 operating consulting services expenditures are approximately 0.1% and 0.7%, respectively, of the gross 2014 Purchase of Services and Rents budgets of City divisions and major agencies/corporations:

Chart A - Operating

City Divisions A & Cs TOTAL

2014 Operating Consulting

Expenditure $1,986,891 $1,651,002 $3,637,893

2014 Approved "Services & Rent"

Operating Budget (Gross) $1,404,569,009 $230,476,604 $1,635,045,613

Consulting Expenditure as a % of

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Capital Consulting Expenditures

Table 2.a

Contract Balance

Remaining 2014 2013 % 2014 2013 Category Dec 31/2014 Actual Actual Change Expenditure Expenditure

$ 000's $ 000's $ 000's Increase/ % % (Note 1) (Note 2) (Note 2) (Decrease) by category by category

City Divisions

Technical 1,658.1 2,685.2 2,155.7 24.6% 56.5% 20.3%

Information Technology 28.0 891.4 8,256.8 (89.2)% 18.8% 77.9%

Management/ R & D 1,474.1 858.5 105.7 712.2% 18.1% 1.0%

Legal 29.1 311.7 88.8 251.0% 6.5% 0.8%

Creative Communications 0.0 4.7 0.0 Undefined 0.1% 0.0%

Total Divisions 3,189.3 4,751.5 10,607.0 (55.2)% 100.0% 100.0% Major A & Cs Technical 500.0 1,817.2 972.8 86.8% 65.3% 35.9% Information Technology 5,042.5 964.6 1,736.9 (44.5)% 34.7% 64.0% Management/ R & D 0.0 0.0 0.0 0.0% 0.0% 0.0% Legal 0.0 0.0 3.3 (100.0)% 0.0% 0.1% Creative Communications 0.0 0.0 0.0 0.0% 0.0% 0.0% Total A & Cs 5,542.5 2,781.8 2,713.0 2.5% 100.0% 100.0% GRAND TOTAL 8,731.8 7,533.3 13,320.0 (43.4)%

By Consulting Category for City Divisions and Major ACs (Details in Appendix B)

CAPITAL

Consulting Services Expenditure Summary

Notes:

(1)The contract balance remaining as at December 31, 2014 is the amount expected to be spent in future year(s), and is not comparable to the current year expenditure amount.

(2)The Budget amount is excluded from the Table because capital projects are budgeted on a total project basis and consulting services are not separately identified in the capital budget.

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Table 2.b

2014 Exp. As % of

2014 vs Approved

Information Mgmt Creative 2014 2013 2013 Actuals 2014

City Divisions Technical Technology /R&D Legal Commun. Actual Actual % Change Capital Budget

$ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's Incr./

(Decr.)

Citizen Centred Services "A" 221.9 - 163.8 - - 385.7 116.2 231.9% 0.1%

Citizen Centred Services "B" 2,229.9 - 694.7 - 4.7 2,929.3 1,597.2 83.4% 0.2%

Internal Services 233.4 891.4 - 311.7 - 1,436.5 8,893.6 (83.8)% 0.3%

City Manager - - -

-Other City Programs - - -

-Total 2,685.2 891.4 858.5 311.7 4.7 4,751.5 10,607.0 (55.2)% 0.2%

% 56.5% 18.8% 18.1% 6.5% 0.1% 100.0%

2014 Exp. As % of

2014 vs Approved

Information Mgmt Creative 2014 2013 2013 Actuals 2014

Agencies\Corporations Technical Technology /R&D Legal Commun. Actual Actual % Change Capital Budget

$ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's Incr./

(Decr.)

Exhibition Place 16.7 - - - - 16.7 136.7 (87.8)% 0.1%

Heritage Toronto - - -

-Sony Centre for Perf. Arts 51.6 - - - - 51.6 34.1 51.3% 2.1%

St. Lawrence Centre for the Arts - - -

-Toronto Atmospheric Fund - - -

-Toronto Centre for the Arts - - -

-Toronto Parking Authority - - -

-Toronto Police Service - 617.4 - - - 617.4 1,110.7 (44.4)% 1.1%

Toronto Police Services Board - - -

-Toronto Public Library Board - - -

-Toronto Transit Commission 1,748.9 347.2 - - - 2,096.1 1,431.5 46.4% 0.1%

Toronto Zoo - - -

-Total 1,817.2 964.6 0.0 0.0 0.0 2,781.8 2,713.0 2.5% 0.1%

% 65.3% 34.7% 0.0% 0.0% 0.0% 100.0%

GRAND TOTAL (Divisions & ACs) 4,502.4 1,856.0 858.5 311.7 4.7 7,533.3 13,320.0 (43.4)% 0.2%

% 59.8% 24.6% 11.4% 4.1% 0.1% 100.0%

(Details in Appendix B) CAPITAL

Consulting Services Expenditure Summary By City Divisions and Major ACs

As shown on Tables 2a and 2b, the 2014 capital consulting services expenditure overall decreased by $5.8 million (43.4%) as compared to 2013:

a) City Divisions decreased by $5.9 million (55.2%), due primarily to:

• reduced spending for the Financial Planning Analysis Reporting System (FPARS) ($7.5M);

offset by,

• increased spending on planning studies ($0.6M) mainly related to the Transportation Master Plan, and,

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• increased spending on the Long Term Waste Management Strategy ($0.6M).

b) Agencies and corporations increased by $0.1 million (2.5%), compared to 2013, due primarily to:

• increased spending by the Toronto Transit Commission ($0.7M) as a result of $1.0M more expenditure on the Low Floor Light Rail Vehicle (LFLRV) project and $0.5M reduced expenditure on IT consulting due to completion of the Enterprise Resource Planning Strategy;

offset by,

• decreased spending by the Toronto Police Service ($0.5M) on computer information system consulting services.

The total 2014 Capital consulting expenditures are approximately 0.2% and 0.1%, respectively, of the 2014 Capital Budget of City divisions and major agencies/ corporations:

Chart B – Capital

City Divisions A & Cs TOTAL

2014 Capital Consulting Expenditure $4,751,504 $2,781,813 $7,533,317

2014 Approved Capital Budget $2,099,459,067 $2,158,753,258 $4,258,212,325

Consulting Expenditure as a % of

Capital Budget 0.2% 0.1% 0.2%

Five Year Summary

A comparison of the total consulting services expenditure for years 2010 to 2014 is presented in Table 3 below:

Table 3

Year

City ACs Total City ACs Total City & ACs 2014 1,986.9 1,651.0 3,637.9 4,751.5 2,781.8 7,533.3 11,171.2 2013 2,861.7 1,405.5 4,267.2 10,607.0 2,713.0 13,320.0 17,587.2 2012 2,497.3 1,465.4 3,962.7 12,443.0 1,899.1 14,342.1 18,304.8 2011 3,464.1 2,107.1 5,571.2 4,641.5 2,327.0 6,968.5 12,539.7 2010 1,585.2 5,241.5 6,826.7 3,963.9 4,024.7 7,988.6 14,815.3 OPERATING ($ 000's) CAPITAL ($ 000's) Total Consulting Expenditure - Operating & Capital

($ 000's) COMPARISON OF CONSULTING SERVICES EXPENDITURE BY YEAR: 2010 - 2014

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Total consulting services expenditure, Operating and Capital combined, for 2014 is $6.4 million lower than 2013. City divisions spent $6.7 million less than 2013. Agencies and corporations spent $0.3 million more than 2013.

While spending on consulting services are subject to operational requirements and vary from year to year, several measures implemented since 2002 have resulted in improved control. The initial zero-based justification during the budget process, stricter guidelines on the selection of consultants, compliance with purchasing policies, the requirement to report consulting expenditures as a separate item on the quarterly Operating Budget Variance report as well as this annual report have combined to ensure that divisions and agencies/corporations are maintaining control over their consulting expenditures.

Accounting Services has created a database of consulting services expenditures on the Accounting Services Intranet site and on the Open Data website which is available to the public. The following is the link to the Open Data website:

http://www1.toronto.ca/wps/portal/contentonly?vgnextoid=c629ea9ab8cbf210VgnVCM1 000003dd60f89RCRD&vgnextchannel=80b6e03bb8d1e310VgnVCM10000071d60f89R CRD

This database keeps a rolling five (5) years of expenditure history, and will be updated with the 2014 consulting services expenditure after this report is received by Committee.

CONTACT

Mike St. Amant, Director, Accounting Services Tel: 416-397-4438, Fax: 416-392-8003, Email: mstaman@toronto.ca SIGNATURE ___________________________ Giuliana Carbone Treasurer ATTACHMENTS

Appendix A: 2014 Consulting Services Expenditure - Operating Appendix B: 2014 Consulting Services Expenditure - Capital

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