2017 Consulting Services Expenditure City Divisions and Major Agencies and Corporations

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1 GM28.10 REPORT FOR ACTION Consulting Services Expenditure City Divisions and Major Agencies and Corporations Date: May 22, 2018 To: Government Management Committee From: Treasurer Wards: All 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,. Both a summary and details, by category and vendor, of the Operating and Capital consulting services expenditures for, with 2016 comparatives, have been provided in this report. Overall, the City and its Agencies and Corporations spent $21.4 million on consulting services in for operating and capital combined, a decrease of $11.5 million (or 34.9%) compared to 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 Interim Chief Financial Officer has reviewed this report and agrees with the financial impact information. Consulting Services Expenditure Report Page 1 of 13

2 DECISION HISTORY At its meeting of December 4-6, 2001, Toronto City Council (Council), approved the following, 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, and; Hiring of Professional and Consulting Services Review : a Purchasing Policy for the Selection and Hiring of Professional and Consulting Services; and 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: 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: 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: Consulting Services Expenditure Report Page 2 of 13

3 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, 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 and may become redundant as requirements change. 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 or opinion on a non-recurring (or non-annually) basis to support or assist management decisions 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, and 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 policy in nature); with research and development, 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 is a service undertaken for legal advice or opinion which requires expertise and time that is not available by City staff. Creative Communications: inclusive of advice and recommendations on strategies for advertising, promotions, public relations and design which requires expertise and time that is not available by City staff. For the reporting process, guidelines were developed and distributed to divisions to clarify the reporting criteria between 'consulting' and 'professional' services (see Appendix C). Consulting Services Expenditure Report Page 3 of 13

4 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 Definitions for each of these categories are provided above in the Issue Background section of this report. The City divisions and major agencies and corporations have confirmed their consulting services expenditures, by vendor, for each of the five categories funded from both the Operating and Capital Budgets. Accounting Services staff have verified and reconciled actual and budget amounts reported by divisions to the General Ledger. 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, with 2016 comparatives, 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, by category and vendor, for each division and major agency/corporation, are shown on Appendix A (Operating) and Appendix B (Capital), respectively. Consulting Services Expenditure Report Page 4 of 13

5 Table 1a OPERATING Consulting Services Expenditures Summary By Consulting for City Divisions and Major Agencies & Corporations (Details in Appendix A) City Divisions Contract / PO Balance Dec 31/17 (Note1) Budget Actual 2016 Actual Incr (Decr) Exp by ($ 000's) % 2016 Exp by Creative Communications Information Technology % 1.8% 1.3% Legal % 4.7% 20.4% Management / R & D , , , % 66.5% 61.1% Technical , % 27.1% 17.2% Divisions 1, , , , % 100.0% 100.0% Major A & Cs Creative Communications % 9.0% 2.2% Information Technology % 6.6% 0.2% Legal % 4.6% 4.4% Management / R & D 1, % 33.5% 34.6% Technical 2, , , , % 46.3% 58.6% A&C's 3, , , , % 100.0% 100.0% Grand 5, , , , % Note 1: The contract balance remaining as at December 31, is the amount expected to be spent in future year(s), and is not comparable to the current year expenditure amount. Consulting Services Expenditure Report Page 5 of 13

6 Table 1b OPERATING Consulting Services Expenditures Summary By Consulting for City Clusters and Major Agencies & Corporations (Details in Appendix A) Cluster Creative Comm Info Tech Legal Mgmt/ R&D Tech 2016 Incr (Decr) Serv & Rents Budget Exp % of Serv & Rents ($ 000's) % ($ 000's) % Citizen Centred Services "A" Citizen Centred Services "B" , % 740, % , , , % 422, % City Manager % 3, % Financial Services (Note1) Internal Services City Divisions % 300, % % 89, % , , , % 1,556, % Note 1: For reporting, Non-Program City-Wide accounts have been included in the Financial Services total. Consulting Services Expenditure Report Page 6 of 13

7 Table 1b (continued) Major Agencies & Corporations Creative Comm Info Tech Legal Mgmt/ R&D Tech 2016 Incr (Decr) Serv & Rents Budget Exp % of Serv & Rents ($ 000's) % ($ 000's) % Exhibition Place Sony Centre for the Performing Arts Toronto Parking Authority Toronto Police Service Toronto Police Services Board Toronto Public Library Board Toronto Transit Commission % 13, % % 7, % % 29, % % 43, % % % % 19, % - 1, , , % 188, % Toronto Zoo % 12, % A&C's , , , % 316, % Grand , , , , , , % 1,873, % Consulting Services Expenditure Report Page 7 of 13

8 As shown on Tables 1a and 1b, the overall actual operating consulting services expenditures increased by $0.571 million (or 10.0%) as compared to 2016 primarily due to a new initiative at the Toronto Police Service: a) City divisions had a net decrease of $0.04 million (or -1.2%) compared to There was a $1.20 million increase due to the following initiatives: Studies of Accessibility for Ontarians with Disabilities Act (AODA) and Compliance Audits on Tenants Program Development ($0.7 M) in Shelter, Support & Housing Administration division (see Appendix A, page 2). Advice on Organizational Review and Continuous Improvement within Transportation division ($0.5 M) (see Appendix A, page 5). There was a $1.24 million decrease due to the completion of the following initiatives: City - Wide Real Estate Review (CWRER) Phase 2 within the Real Estate division ($0.6 M) (see Appendix A, page 7). Review of the City of Toronto's electoral ward boundaries within the City Manager Office ($0.3 M) (see Appendix A, page 5). Improving the procurement process - implementing category management and strategic sourcing within the Purchasing & Materials Management division ($0.3 million) (see Appendix A, page 6). b) Agencies and Corporations expenditures increased by $0.612 million (or 28.2%) compared to 2016, due primarily to greater spending by: Toronto Police Service ($0.6 million) new initiatives are Human Resources Modernization and Public communication (see Appendix A, page 9). For agencies and corporations, consulting expenditures were under 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 operating consulting services expenditures are approximately 0.2% and 0.9%, respectively, of the gross Approved Services and Rents budgets of City divisions and major agencies/corporations. Chart A Operating City Divisions A&C's ($000's) Operating Consulting Expenditure 3, , ,273.0 Approved Services & Rents Operating Budget 1,556, , ,873,011.9 Consulting Expenditure as a % of Services & Rents Budget 0.2% 0.9% 0.3% Consulting Services Expenditure Report Page 8 of 13

9 Table 2a CAPITAL Consulting Services Expenditures Summary By Consulting for City Divisions and Major Agencies & Corporations (Details in Appendix B) City Divisions Contract/ PO Balance Dec 31/17 (Note1) Actual 2016 Actual Incr (Decr) Exp by ($ 000's) % 2016 Exp by Creative Comm % 0.9% 1.7% Information Technology , % 3.1% 19.6% Legal % 2.2% 3.6% Mgmt / R&D 1, , % 19.5% 7.0% Technical 10, , , % 74.3% 68.1% Divisions 13, , , % 100.0% 100.0% Major A & Cs Creative Comm Information Technology 3, , % 15.3% 60.8% Legal % 0.6% 5.4% Mgmt / R&D % 3.3% 4.3% Technical 7, , , % 80.8% 29.5% ABC's 11, , , % 100.0% 100.0% Grand 24, , , % In reporting capital expenditures, the budget is excluded from the table since capital projects are budgeted at a total project level and consulting services budgets are not separately identified. Note 1: The contract balance remaining as at December 31, is the amount expected to be spent in future year(s) and is not comparable to the current year expenditure amount. Consulting Services Expenditure Report Page 9 of 13

10 Table 2b CAPITAL Consulting Services Expenditures Summary By Consulting for City Divisions and Major Agencies & Corporations (Details in Appendix B) Creative Comm Info Tech Legal Mgmt / R&D Tech 2016 Incr (Decr) Approved Budget (Gross) Exp % of Budget ($ 000's) % ($ 000's) % City Divisions Citizen Centred Services "A" Citizen Centred Services "B" % 364, % , , , % 655, % City Manager (Note1) , , Financial Services (Note2) 207.5% 214, % , % 26, % Internal Services % 433, % Divisions , , , , % 1,695, % Major A & Cs Exhibition Place % 7, % Sony Centre % 7, % Toronto Police Service % 67, % Toronto Public Library Board % 30, % Toronto Transit Commission , , , % 1,934, % Toronto Zoo % 6, % A&C's , , , % 2,052, % Grand , , , , , % 3,748, % Note 1: Consulting expenditures charged to Other City Programs are included in the City Manager total Note 2: Consulting expenditures charged to Non-Program City-wide accounts have been included in Financial Services Consulting Services Expenditure Report Page 10 of 13

11 As shown on Tables 2a and 2b above, the overall capital consulting services expenditure decreased by $12.1 million (or 44.4%) compared to The changes were primarily due to the completion of the consulting phase of the following major capital projects: a) City Divisions decreased by $1.3 million (or 11.0%) primarily due to the completion of Time, Attendance and Scheduling System / Cross-Application Timesheet (CATS) in Pension, Payroll & Employee Benefits division (see Appendix B, page 9). b) Agencies and Corporations decreased by $10.8 million (or 68.4%) compared to 2016, primarily due to consulting phase project completions including the following: Toronto Transit Commission (TTC) had a $10.0 million decrease was primarily due to the following: The SAP technical implementation for Finance, HR and Payroll at the TTC included consulting services reported in the prior year ($4.5 M in 2016). Services provided within this contract in did not include consulting services (see Appendix B, page 15, IBM Canada Ltd). Program management, change management, communications and training related to SAP implementation at the TTC ($3.8 M). Services provided within this contract in did not include consulting services (see Appendix B, page 14, Comtech Group Inc). Strategic, advisory and legal advisory for automated vehicle location (AVL) technological changes ($0.8 M) project completion (see Appendix B, page 14, Osler, Hoskin & Harcourt Inc). Technical consulting for safety and reliability operational assessment of Scarborough Rapid Transit (SRT) vehicles ($1.3 M) project completion. (see Appendix B, page 13, WSP Canada Inc). Toronto Police Service decreased by $0.5 million as a result of the following project completions (see Appendix B, page 12): Research & Development on the City of Toronto policing model for enhanced innovation, sustainability, and affordability ($0.4 M). IT consulting for the Integrated Records & Information System (IRIS) project ($0.1 M). Consulting Services Expenditure Report Page 11 of 13

12 In total, capital consulting expenditures were 0.4% of the Capital Budget. The expenses were 0.6% and 0.2%, respectively, for City divisions and the major Agencies & Corporations. Chart B - Capital City Divisions A&C's ($000's) Capital Consulting Expenditure 10, , ,148.3 Approved Capital Budget 1,695, ,052, ,748,736.0 Consulting Expenditure as a % of Capital Budget 0.6% 0.2% 0.4% Five Year Summary A comparison of the total consulting services expenditure for years 2013 to is presented in Table 3 below: Table 3 Year Comparison of Annual Consulting Expenses (2013 -) City Operating A&Cs Operating City ($ 000's) Capital A&Cs Capital TOTAL 3, , , , , , , (Note1) 3, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,587.2 Note 1: 2016 Consulting Expenses have been adjusted from the prior year report due to identified omissions. The $1.03 million increase includes Transportation ($0.60 million), City Planning ($0.26 million, TTC ($0.09 million), Toronto Water ($0.03 million) and Sony Centre ($0.05 million) in the Technical and IT consulting categories. Consulting Services Expenditure Report Page 12 of 13

13 combined Operating and Capital consulting services expenditures of $21.4 million were $11.5 million (or 34.9%) less than the prior year. City divisions spent $1.3 million (or 8.4%) less, while Agencies and Corporations spent $10.2 million (or 56.9%) less than Overall, consulting expenses were 7.1 % higher than the historical 5 year average of $20.0 million. While spending on consulting services is subject to operational requirements and varies 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, collectively 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: This database maintains a rolling five years of expenditure history, and will be updated with the consulting services expenditures after this report is received by Committee. CONTACT Sandra Califaretti, Director, Accounting Services, , sandra.califaretti@toronto.ca SIGNATURE Mike St. Amant Treasurer ATTACHMENTS Appendix A: Consulting Services Expenditure - Operating Appendix B: Consulting Services Expenditure - Capital Appendix C: Consulting Services Reporting Guidelines Consulting Services Expenditure Report Page 13 of 13