Letter of Direction Final Report

Transcription

1 Letter of Direction Final Report September 30, 2016

2 Table of Contents Executive Summary Introduction Letter of Direction (LOD) Beyond the Final Report Communications Protocols Purpose Internal Communications External Communications Promotional and Strategic Partnership Policy Metrolinx Corporate and Administrative Costs Cost Allocations Efficiencies and Value-for-Money Corporate (Key) Performance Indicators Conclusion Appendices Definitions Ongoing Reporting Requirements Segmented Financial Report (Mock-up with false data) Value-for-money Framework KPI Suite Metrolinx Key Performance Indicator (KPI) Reporting Guidelines... 34

3 Executive Summary Metrolinx is an agency of the Government of Ontario that was created in 2006 to play a critical role in planning and delivering an integrated transportation network for the Greater Toronto and Hamilton Area (GTHA). Metrolinx is playing an important role in the design and delivery of key transportation infrastructure projects over the current and coming years that will help transform transportation across the region. At the same time, Metrolinx is making real service improvements for GTHA commuters. As the government makes unprecedented investments in transit, Metrolinx is focused on planning, building, operating, and supporting an integrated transit network. This includes delivering on priority projects such as the Eglinton Crosstown, Finch Light Rail Transit, and key Moving Ontario Forward commitments, including a capital construction investment of $13.5B ($2014) for Regional Express Rail (RER) and $2.4B ($2015) for the Hurontario and Hamilton LRT projects. To ensure the optimization of resources, value for-money, and strong collaboration and communication between Metrolinx and the Ministry of Transportation (MTO), the Minister of Transportation provided a Letter of Direction (LOD) to the Chair of Metrolinx s Board of Directors. The letter requested that Metrolinx and MTO s Chief Administrative Officer continue to work collaboratively to identify opportunities for enhanced agency oversight and accountability though the review of several key areas. As a result of this request, Metrolinx and MTO finalized an interim report for June 30th, 2016 and now a final report for September 30th, A summary of scope, outcomes, and next steps follows: Communications Protocols Internal Communications: Metrolinx and MTO are collaborating with Treasury Board Secretariat (TBS) to develop a Relationship Management Framework (RMF) Proof of Concept. The RMF will enhance internal communications between Metrolinx and MTO. The development of the RMF model is underway and will be ready for summer The expected outcome is a framework that will build upon the existing strong relationships and guide ministry-agency interactions to a much more robust longerterm sustainable relationship. External Communications: Metrolinx and MTO worked together to update the external communications protocol. The updated protocol clearly outlines the working relationship of Metrolinx and MTO regarding any external communications activities. Promotional and Strategic Partnership Policy An updated Promotional and Strategic Partnership Policy has been developed in collaboration with MTO. As part of this initiative, a new framework has been established to include a risk-based ministry approval to provide greater awareness on promotional sponsorships. The updated policy was presented to the Metrolinx Board of Directors on September 9th, 2016 and is now in effect.

4 Corporate and Administrative Costs To further enhance MTO s understanding and oversight of Metrolinx s corporate and administrative costs, Metrolinx has provided additional insight into their financial, labour, realty, freedom of information, support fleet, information technology, and capital projects details. As a result of this, an ongoing Metrolinx Reporting Framework has been developed that builds upon existing reporting requirements and stipulates report details and timelines for sharing information with MTO. Cost Allocations Metrolinx had previously developed a corporate cost allocation methodology. To ensure the methodology is consistent with similar capital intensive crown corporations and Public Sector Accounting Board accounting practices, Metrolinx engaged a third party to conduct an analysis of the allocation model. The report concluded that a key requirement to the cost allocation methodology is evidence-based cost drivers. Metrolinx is currently working with all corporate departments to strengthen the cost driver data used to allocate costs to capital and operating programs. Implementation of the first component of the cost allocation model (allocation of centrally managed program costs and direct functions) is expected in fall 2016 for the budget submission. The allocation of oversight costs will follow once the impact to systems and the integration with actuals reporting is finalized. Efficiencies and Value-for-Money To confirm that Metrolinx is achieving value-for-money while delivering on its mandate, a Value-for-Money Assessment Framework has been developed and agreed to by Metrolinx and MTO. Metrolinx and MTO have determined that value-formoney assessments would originate from the annual internal audit work plan and a certain number of assessments will be performed each year. Metrolinx and MTO will continue to work together on establishing a governance structure that will develop a systematic way to prioritize areas of assessment, determine the key items to be included as part of the assessments, and review the results of those assessments. Key (Corporate) Performance Indicators Metrolinx and MTO have developed a suite of 52 Key Performance Indicators (KPI) that will measure Metrolinx s performance from a corporate oversight perspective. Metrolinx and MTO have developed KPI Reporting Guidelines to guide the implementation of this new reporting requirement. KPI reporting will begin in fall 2016 with Q2 results provided to MTO in November KPI and corporate reporting will provide a complete picture of Metrolinx s performance.

5 1 Introduction 1.1 Letter of Direction (LOD) On March 9, 2016, the Minister of Transportation provided a Letter of Direction (LOD) to the Chair of Metrolinx s Board of Directors. The letter requested that Metrolinx and Ministry of Transportation s (MTO) Chief Administrative Officer continue to work collaboratively to identify opportunities for enhanced agency oversight and accountability. Key areas within Metrolinx were to be reviewed to ensure the optimization of resources, value for money, and strong collaboration and communication with the ministry in delivering Metrolinx s important mandate of designing and delivering key transportation projects in the Greater Toronto and Hamilton Area (GTHA). The letter focuses on the following key areas: Communications Protocol: A review of agency-ministry communication protocols to ensure they are meeting their intended purposes for both parties, and that the right level of information is requested and provided in an efficient and timely manner. Sponsorship: A process to ensure the ministry approves any contributions to external parties related to promotional and marketing sponsorships and studies. Corporate costs and administrative costs: Detailed information on the composition of Metrolinx s corporate and administrative costs. Ensure Value-for-Money in corporate and administration processes: Possible ways to increase efficiencies and enhance value-for-money in corporate and administrative functions and processes. Improved reporting on corporate performance indicators, and the allocations of costs between business units. Metrolinx and MTO worked together to establish four working groups and a steering committee that consisted of both Metrolinx and MTO staff. These groups met regularly to discuss progress on each key area. The steering committee met to review, discuss, and approve all documents related to the letter. The letter stipulated that an interim report be completed by June 30th, 2016, and a final report by September 30th, Interim Report The Interim Report was presented to the Minister by the Chair of Metrolinx on June 30th, The Interim Report provided the proposal of scope, action plan, progressto-date, and next steps for each of the key areas identified in the LOD Final Report The Final Report provides a summary of progress, results, and conclusions and next steps for each key area. 1.2 Beyond the Final Report To ensure the spirit of the letter is completely met, work will continue on several key areas. These are identified as part of the discussion of affected key areas.

6 2 Communications Protocols 2.1 Purpose To review agency-ministry communication protocols, ensuring they are meeting their intended purposes for both parties, and that the right level of information is requested and provided in an efficient and timely manner. 2.2 Internal Communications Actions Taken Metrolinx and MTO are leveraging work being carried out in partnership with Treasury Board Secretariat (TBS) to improve and enhance ministry-agency internal communications using Relationship Management Frameworks (RMFs). TBS is working with select ministries and agencies, including Metrolinx and MTO, to develop and operationalize an RMF between each ministry/agency team as a proof of concept. Work is being led by a TBS service provider with experience in RMFs. The purpose of the RMF exercise is for Metrolinx and MTO to collaboratively develop a framework that will guide ministry-agency interactions. The goal is to achieve consistent communication at all levels and a fostering of stronger long-term sustainable relationships. This will build upon joint understandings of expectations and support a more effective and transparent relationship. The RMF will enhance ministry and agency collaboration, agility, and responsiveness to shared priorities and challenges, and ensure the relationship has continuity beyond personal relationships. Metrolinx and ministry staff with regular ministry-agency contact were introduced to the RMF concept at an orientation session in June The orientation sessions provided an overview of the RMF s purpose and aims, and familiarized participants with how the framework will be developed, rolled out, monitored, and performance measured. Interviews with key ministry and agency contacts are underway to provide the consultant with a better understanding of the current Metrolinx-MTO relationship, including areas of strength and focus areas for enhancement. Interviews are being delivered in two phases. Phase one interviews began in August 2016 and are being held with executive-level participants who have frequent ministry-agency contact. The interviews focus on the relationship s current state, goal setting, and identify focus areas to be included in the framework. Phase one responses will inform the phase two interview guide, resulting in more targeted questions that will be answered by management and staff with regular ministry-agency contact Results Input from the interview sessions will help develop an RMF straw model that will be further shaped through targeted discussions and workshops. Under the current timeline, the RMF model will be ready in early Conclusions and Next Steps

7 Metrolinx and MTO will continue to develop the RMF together. Next steps include development of the straw model based on interview responses, refinements of the model based on convergence workshops, and the development and launch of the model. Following RMF implementation, four RMF performance reviews will be conducted. The consultant will produce a final report with proof of concept findings for and the select ministries and agencies, including Metrolinx and MTO. The report will also make recommendations to TBS for potential broader adoption. Work on the RMF will be completed late spring Based on the success of the proof of concepts, TBS may encourage all ministries and agencies to adopt RMFs. Final recommendations on the RMF Proof of Concept is expected by summer External Communications Actions Taken Metrolinx and MTO worked together to update the Communications Protocol that covers roles and responsibilities for external communications, including issues management, media relations, events and announcements Results The protocol ensures the credibility and reputation of both Metrolinx and MTO is protected while respecting public communications. It includes principles and working assumptions, and details how different communications products will be approached. The protocol also stipulates that Metrolinx will submit to MTO annual communications and advertising and marketing strategies for planning purposes Conclusions and Next Steps The updated Communications Protocol is fully approved and is now in effect.

8 3 Promotional and Strategic Partnership Policy 3.1 Purpose To enhance the current process and ensure the ministry is aware and supportive of any contributions to external parties related to promotional and strategic partnerships. 3.2 Actions Taken Metrolinx, in collaboration with MTO, has completed a review and refresh of the Promotional and Strategic Partnership Policy, the first review since the policy was enacted in The policy covers those activities that are mutually beneficial to both Metrolinx and the external parties involved. Partnership activities may include blasts and special train services. The criteria that all proposals are evaluated against remain the same as the previous policy iteration and include: alignment with Metrolinx objectives; return on investment of at least 10%; and feasibility of implementation. Key changes in the updated policy include: defining the distinction between activities that are considered promotional partnerships and strategic partnerships ; updating the internal Metrolinx approvals process for both types of partnerships; MTO will approve promotional partnerships: o if the partnership registers as a high risk based on the Enterprise Risk Management standards or based on review and recommendation by MTO Communications Branch; o if the implementation costs, labour costs and cash contributions are equal to or greater than $25,000; or o if the agreement s term is greater than 3 years. annual review of the policy to ensure appropriate oversight; and financial results for strategic partnerships will be incorporated into the annual financial business plan for Metrolinx that will be submitted for approval to the Minister as part of the oversight process of the MTO. Any in-year changes will be reported as part of the quarterly financial reporting process. 3.3 Results The revised Promotional and Strategic Partnership Policy is now in effect. The contents and scope of the policy were agreed upon by Metrolinx and MTO. The policy was approved by the Minister and subsequently by the Metrolinx Board of Directors on September 9, Conclusions and Next Steps The revised Promotional and Strategic Partnerships Policy establishes a new framework that will ensure that each contribution provides value-for-money and advances the achievement of Metrolinx priorities. In addition, appropriate ministry approval levels were established to ensure awareness and MTO oversight over these arrangements.

9 Further examination and analysis of other funding arrangements will be explored including donations and other contributions. For instance, as part of the Metrolinx Act Review, MTO is examining and analyzing the related issue of grant-making, as currently set out in the enabling legislation. This process involves the exploration of legislative and non-legislative options, including the potential to clarify authority, which is consistent with a robust oversight and accountability framework, as established by the ministry.

10 4 Metrolinx Corporate and Administrative Costs Purpose To provide detailed information on the composition of Metrolinx s corporate and administrative costs. Actions Taken Currently, Metrolinx uses direct responsibility budget reporting. This is the practice of reporting all costs managed by a function under that function, whether those costs belong to that function or not. This practice affects not only financial planning and reporting, but the resulting Key Performance Indicators (KPIs) as well. Given the growing provincial investment in transit infrastructure made through Metrolinx, there has been a significant increase in financial reporting from Metrolinx to MTO over the past several years. To satisfy the requirements of the letter, Metrolinx worked in partnership with MTO to identify areas for additional financial and nonfinancial reporting. Metrolinx provided enhanced reporting in the following areas: financial, labour, realty, freedom of information, support fleet, information technology, and capital projects. In addition, Metrolinx has provided the ministry with an enhanced understanding of how it currently budgets its costs, including a crosswalk between internal financial records and financial information used for the Program Review, Renewal and Transformation (PRRT) process. Further background information was provided to provide additional details on the make-up of certain costs. This information has strengthened MTO s oversight through increased visibility and a better understanding of Metrolinx s corporate and administrative costs, performance, and structure. This exercise also provided a foundation for Metrolinx and MTO to collaboratively develop a framework for ongoing reporting requirements between the agency and ministry. Results Building upon the actions noted above, Metrolinx and MTO worked together to develop a framework for ongoing reporting requirements. Metrolinx and MTO identified key areas of reporting that would support the ministry in its oversight function of Metrolinx, including capital projects, financial performance, operational performance (e.g., ridership) and corporate information, such as real estate, staffing and compensation. The final framework incorporates existing and new reporting requirements for Metrolinx and outlines reporting frequency and approval requirements. Please see section 9.2 for the full framework. Conclusions and Next Steps Corporate information gathered through the LOD process will help inform the valuefor-money work being conducted. Ongoing reporting will continue to enhance transparency between the organizations and will guide future program review and budget allocation processes.

11 In addition, there are a number of Central Agency initiatives underway that will further increase the transparency of Metrolinx s operations. As committed in the 2016 Budget, Ministers will issue mandate letters to their board governed provincial agencies. This annual letter will outline high level expectations for Metrolinx priority actions and performance for the fiscal year. The letter will also inform Metrolinx s annual businesses planning cycles.

12 5 Cost Allocations Purpose To improve financial reporting on the allocation of costs between business units within Metrolinx. Actions Taken Report on Overhead Cost Allocation and Capitalization Evaluation Metrolinx had developed a preliminary corporate cost allocation model. Given the model had capitalization implications, prior to proceeding with this model Metrolinx decided to seek third party advice to evaluate the methodologies used in the model. Third party consultants were engaged in May 2016 to: evaluate two proposed methods for corporate oversight cost allocation and capitalization, and to provide an opinion on the appropriateness of these two methods; review the practices of similar capital intensive crown corporations as well as capital intensive organizations in the electric utility sector; and provide recommendations on the appropriateness of Metrolinx allocations based on its Public Sector Accounting Board framework. The consultant report was completed on July 15, 2016 and had the following observations: both proposed cost allocation methodologies would be acceptable by accounting standards; the defensibility of the model is dependent on sufficient appropriate audit evidence; and given the results of investigating similar capital intensive crown corporations, and the fact that Metrolinx capital expenditures are expected to grow significantly over the next 10 years, Metrolinx could consider expanding its overhead capitalization rate. In summary, Metrolinx will move forward with a hybrid version of the two proposed cost allocation and capitalization methods while ensuring that sufficient appropriate audit evidence is collected to support the method. Results With the consultant report in mind, Metrolinx has developed an internal survey to collect corporate service activities and associated cost driver information. This will help ensure sufficient evidence is gathered to support its cost allocation and capitalization methods and requirements. The collection of this data is currently underway. The survey information collected will be used to revise the cost allocation model which will populate:

13 the high-level mapping of corporate services costs to the respective operating divisions and capital programs (consuming groups) supported; the percentages of corporate oversight costs by consuming group; the oversight rates for each consuming group; and the resulting segmented internal financial income statement. The final result would be a fully allocated segmented income statement for internal management reporting purposes. An example of this is provided in section 9.3. Conclusions and Next Steps The cost allocation model will be updated based on the information gathered from the Corporate Service survey. It will also be revised for recommendations made in the Cost Allocation Evaluation Report. Upon completion of the cost allocation model, the summary tables and resulting segmented internal financial report will be populated with budget information and provided to MTO for review. A workplan will be developed for the implementation of the cost allocation model into the regular monthly reporting. This workplan will include: the application of the cost allocation model to actual/budget results and processes; the implementation of the cost allocation model into the Hyperion environment; and the implementation of the fully allocated cost data into the KPI model. Implementation of the first component of the cost allocation model (allocation of centrally managed program costs and direct functions) is expected in fall 2016 for the budget submission. The allocation of oversight costs will follow once the impact to systems and the integration with actuals reporting is finalized.

14 6 Efficiencies and Value-for-Money Purpose To explore possible ways to increase efficiencies and enhance value-for-money in corporate and administrative functions and processes. Actions Taken Given Metrolinx mandate and associated resource needs, it is vital that the agency continue to achieve value-for-money in its activities to ensure that public funds and assets are used responsibly and appropriately with due regard for economy and efficiency. Value-for-money means achieving the right balance between economy, efficiency and effectiveness. It is also important that ethics and environment/sustainability be fundamental to value-for-money assessments. In order to achieve this, a value-for-money framework has been developed and agreed to by both Metrolinx and MTO (see section 9.4). In addition, potential quick wins are being examined; for example, MTO has a centre of excellence to support fleet services within the Ontario Public Service. A review of Metrolinx s support fleet had been identified as an area for a value-for-money review. The intention is to explore the opportunity of leveraging MTO s fleet management services as a mechanism to manage Metrolinx support fleet. As a result, Metrolinx has completed a review of its current support fleet and preliminary recommendations have been developed for internal review. Results The value-for-money framework notes that value-for-money assessments will examine how Metrolinx resources support the achievement of their goals and objectives, and may include a review of the following: organizational strategies, plans, and inter-relationships; the cost of activities, programs and inputs; use of service providers and alternative delivery methods; documented processes and systems, with clear inputs, outputs, and outcomes; and performance measures, service standards, and outcomes compared to industry. Prioritization of areas for review will consider: transactional impacts areas with high transaction volume where small process redesigns can have efficiency impacts; financial materiality areas that high financial materiality; and risks areas where decisions have significant strategic impacts.

15 Opportunities may include alternative service delivery models such as shared services and consideration of other efficiencies that could benefit Metrolinx. The ministry will also look to incorporate any best practices at Metrolinx. Preliminary recommendations for the support fleet have been developed and the approval of these recommendations is expected in fall Analysis of information technology is underway and will continue as one of the priority areas for value-formoney opportunities. Conclusions and Next Steps A joint Metrolinx-MTO governance group has been established to oversee the valuefor-money work. This group has developed a Terms of Reference to identify value-formoney reviews and approve the scope of the reviews. An assessment will be completed to determine specific areas for a value-for-money review. It is expected that some value-for-money work will become part of the annual internal audit work plan with a certain number of reviews occurring each year. This would be in addition to the value-for-money reviews already included as part of the annual audit plan. Other value-for-money work will proceed independently, with support fleet and information technology as examples, where work is already underway. The value-for-money governance group will ensure consensus on prioritization of areas for review and the approach to be taken. The group will also be provided with findings and outcomes of analysis performed. The ministry will also be involved in key required decisions resulting from recommendations.

16 7 Corporate (Key) Performance Indicators Purpose To improve reporting on corporate performance indicators. Actions Taken Metrolinx and MTO have collaborated to develop a suite of Key Performance Indicators (KPIs) for regular agency reporting to the ministry. The KPIs build upon work undertaken through the MTO Integrated Reporting Study (IRS) and the Metrolinx Corporate Key Performance Indicator (KPI) Initiative: The MTO IRS was a study developed by a third party consultant for the purposes of reviewing and enhancing, where required, Metrolinx s current reporting requirements, and determine ways to more comprehesively demonstrate to the ministry that Metrolinx is meeting its reporting obligations under the Metrolinx Act, 2006, the Memorandum of Understanding between Metrolinx and MTO, and applicable provincial directives. The final report included a recommendation to implement strategic outcome measures, or KPIs, to enhance the agency s reporting to MTO. The Metrolinx Corporate KPI Initiative was an internal agency initiative undertaken to create a portfolio of Top of the House KPIs aligned to Metrolinx s strategic priorities, which would be used by executive management to demonstrate Metrolinx s performance to the public and monitor Metrolinx s progress relative to its mandate. Using a collaborative approach, Metrolinx and MTO completed a crosswalk of the suites of KPIs developed through the IRS and Corporate KPI Initiative to determine alignment. The results showed a high degree of alignment. The crosswalk results were then used to construct a new suite of KPIs designed to support the ministry s oversight of Metrolinx. As a complement to this exercise, Metrolinx and MTO worked together to develop an overarching framework to guide the implementation of KPI reporting. Together, the new KPI suite and supporting framework will be used for regular reporting by Metrolinx to MTO to support enhanced agency oversight. Results Metrolinx-MTO KPI Suite The suite consists of 52 KPIs selected to measure Metrolinx s performance in fulfilling its mandate and strategic priorities from a corporate oversight perspective. This includes new KPIs for capital reporting that will allow the ministry to have more insight into the performance of Metrolinx s capital delivery program. KPIs are categorized in five key focus areas: 1. High Level Strategic Indicators that demonstrate progress in meeting the strategic objective of providing an integrated and optimized transit system for the people of the GTHA that results in a growing economy, increased mobility (speed and reach of transit), and improved customer service, while minimizing environmental impact and maximizing value-for-money.

17 2. Plan Indicators that demonstrate achievement in planning an integrated and optimized transit system in the GTHA. 3. Build and Develop Indicators that demonstrate progress, effectiveness and efficiency in building and developing an integrated and optimized transit system, focusing on the delivery of capital projects. 4. Operate - Indicators that demonstrate performance in planned operational service levels (reliability, safety and customer service), optimized operational efficiency, and minimized environmental impact. 5. Corporate Health - Indicators that demonstrate organizational efficiency and effectiveness and that the organization is reputable, fiscally responsibly, transparent, accountable, trustworthy and well governed. The full suite of KPIs can be found in section 9.5. KPI Reporting Guidelines (Framework) This document sets out the overarching framework for the implementation and ongoing reporting of the KPI Suite. It includes such information as report format, frequency of reporting, setting of KPI targets, phasing of reporting, approvals and key contacts at the ministry and agency. Please see section 9.6 to view the full guidelines. Conclusions and Next Steps KPI reporting will launch in fall 2016, with the first KPI report delivered to MTO in November 2016 ( Q2 results). MTO will report the results internally to ministry senior management on a quarterly basis.

18 8 Conclusion Driven by the efforts of the working groups and Steering Committee, there has been an overall increase to the oversight and awareness by MTO of the operations of Metrolinx. Some actions are longer term, and will continue past the September 30th date noted in the LOD. It is expected that ongoing improvements will also be an outcome of the LOD work. The following items are part of the ongoing work that will continue past the final report date: Metrolinx and MTO will continue to work with TBS on the RMF model. The model is expected to be ready summer Under the Metrolinx Act review, MTO will assess Metrolinx s authority for issuing grants and may consider an additional policy related to donations and contributions. Metrolinx continues to make progress on the cost allocation model. The model will be partially implemented for the budget submission. The development of a Value-for-Money Assessment Framework will assist Metrolinx and MTO in establishing a governance structure for future value-formoney assessments. Metrolinx and MTO will continue to work collaboratively on formalizing the prioritization and evaluation process for value-for-money assessments. Work will also continue for existing assessment initiatives such as the support fleet and I&IT reviews. Metrolinx and MTO expect to provide updates and items for discussion and approval to the Steering Committee even after the finalization of the Minister s Letter of Direction Final Report. As a result of the LOD, communication, collaboration, and oversight between Metrolinx and MTO has strengthened. Going forward, Metrolinx anticipates that its relationship with MTO will continue to strengthen given the outcomes of the Letter of Direction.

19 9 Appendices 9.1 Definitions Program Review, Renewal, Transformation (PRRT) A new approach to planning and budgeting introduced by Treasury Board Secretariat for the Provincial budget cycle. PRRT is designed to assist with the government s ongoing fiscal planning and expenditure management and to continuously review publicly funded programs. Oversight (As part of the Corporate and Administrative costs) General & Administrative activities performed by the corporate departments to support, direct, coordinate, and plan the achievement of Metrolinx s mandate. These costs are referred to as indirect costs as they are not directly attributable to operating divisions or programs. Activities in this category include labour and non-labour related to policy and processes for executive management, financial accounting, financial planning, procurement, information technology, realty management, economic analysis, planning, design, human resources management, audit, communications, and legal services Centrally Managed Activities performed and coordinated by the corporate departments for purposes of realizing economies associated with centralization; but, caused and consumed by the direct activities of Metrolinx operating and divisions, and programs. These costs are referred to as direct costs as they are directly attributable to operating divisions or programs even though they are managed in corporate departments. Examples include, insurance premiums and broker costs; rents and occupancy contracts for utilities; property tax payments; and, pension adjustments and administration Directly Assigned Costs Labour and non-labour expenses, incurred in the corporate departments, but that can be directly attributed to the provision of services by operating divisions and programs. Examples include Revenue Accounting; embedded communications groups; and, service planning departments Cost Allocations The distribution of corporate department expenses to the operating division activities that cause those expenses to be incurred. Allocations can be done by direct assignment or by means of an informed ratio (or by a hybrid of direct assignment and ratio).

20 Corporate Department Metrolinx Organizational Units that provide corporate support to operating and Capital divisions, and programs. All corporate and administrative costs are embedded in corporate departments. Corporate departments are what make up the Internal Program Costs for PRRT. These include: Financial Services Human Resources I&IT Legal Procurement Realty Strategic Communications Non-Fare Revenue Policy and Planning Strategic Business Planning Economic Analysis and Investment Strategy Risk and Insurance Internal Audit Executive Fully Allocated Costing Distribution of all corporate and administrative expenses to the operating divisions, and programs of the Agency. In fully-allocated costing all expenses are systematically attributed to the direct activity segments of the organization

21 9.2 Ongoing Reporting Requirements Periodic reporting to MTO ensures that open sharing of information and a common platform for informed discussions. Reporting has been segmented into monthly, quarterly and annual requirements. The following is a sample of items that will be reported: Frequency Bi-weekly / As Required Description Funding request - list of major payments and due dates, current cash balance, signed declaration that Metrolinx is meeting related MOU/AEAD requirements Monthly Ridership by business unit budget, actuals, forecast for volumes, related dollars, and variance explanations Monthly Project Controls Status Reports - for Capital Projects Group portfolio for current and planned projects. Other revenues - Budget, forecasts, actuals, related dollars Operating Expenses - Segregated by significant type and by business unit including variance explanations Capital Expenditures by programs identified in PRRT - Budget, actuals, forecast, variance explanations Cashflow forecast projected requirements Procurement tracking reports - for Capital Projects Group to identify current and planned procurements Partnership and Sponsorship Post Implementation Report - per policy, all post-implementation reports Revenues by category budget, actuals forecast, with variance analysis; signed off by CFO Operating expenses segregated by significant type, budget, actuals, forecasts, with variance explanations signed off by CFO

22 Frequency Description Capital expenditures by programs identified in PRRT, budget, actuals forecasts with variance explanations, signed off by CFO - # Active major projects (in progress/completed) - $ cost of active major projects (in progress/completed) - LRT vehicle delivery tracking PRESTO Monthly Report Major Project level expenditures above pre-determined threshold in each program - Budget, actuals, forecasts, variance explanations, out-year impacts Expenditures by business unit - Budget, actuals, forecasts, variance explanations Committed vs. Uncommitted funds by major project above threshold FTE data (with narrative) broken down by business area Detailed Project Schedules - for Capital Projects Group portfolio for current and planned projects Partnership and Sponsorship Activity Update Annually Certificate of Assurance Year-end actuals broken down by major category, including individual project actuals that were above identified threshold and/or politically important and related variance analyses PRRT Breakdown by Budget Department - 2 years historical actuals and budget - # of FTEs and Classification per Budget Department

23 Frequency Description - indicator of FTEs frontline vs back office, including breakout of back-office FTEs # FOI requests received (by nature of request, e.g. project specific, financial) over the past 2 years HR Classification structure/system as well as salaries/benefits associated with this system Strategic HR Plan and FTE forecast Comparators used in determining appropriate compensation plans (as well as any cost-of-living considerations)

24 9.3 Segmented Financial Report (Mock-up with false data) REVENUE GO Transit UP Express PRESTO CAPITAL PROGRAMS Auxiliary Programs CORPORATE Total Fare Revenue $523,622,876 $49,817,240 $573,440,116 Non Fare Revenue $24,273,270 $7,909,645 $37,371,344 $5,963,000 $75,517,259 Total Revenue $547,896,146 57,726,885 $37,371,344 $ $ $5,963,000 $648,957,375 OPERATING Operating Labour & Benefits $203,174,506 $7,692,251 $19,503,087 $1,076,813 $ $52,089,449 $283,536,106 Non-Labour Expenses $382,347,963 $57,391,585 $82,816,612 $980,000 $ $98,196,865 $621,733,025 Total Expenses $585,522,469 $65,083,836 $102,319,699 $2,056,813 $ $150,286,314 $905,269,131 Surplus / Shortfall - Area of Responsibility $(37,626,323) $(7,356,951) $(64,948,355) $ (2,056,813) $ $(144,323,314) $(256,311,756) EXPENSE ALLOCATIONS Direct Services $10,500,000 $3,000,000 $ $ $1,500,000 $(15,000,000) $ Centrally Managed Services $33,000,000 $2,750,000 $5,500,000 $11,000,000 $2,750,000 $(55,000,000) $ Total - Direct Allocations $33,000,000 $2,750,000 $5,500,000 $11,000,000 $2,750,000 $(55,000,000) $ Surplus/Shortfall - Direct $ (70,626,323) $(10,106,951) $ (70,448,355) $(13,056,813) $(2,750,000) $(89,323,314) $(253,561,756) Total - Oversight Allocations $49,127,823 $4,466,166 $13,398,497 $17,864,663 $4,466,166 $(89,323,314) $ Surplus/Shortfall - Fully Allocated $(119,754,145) $ (14,573,117) $(83,846,852) $ (30,921,476) $ (7,216,166) $ $ (253,561,756)

25 9.4 Value-for-money Framework

26 9.5 KPI Suite * Phased = data will become available within the next 2 years Category KPI Data Availability Frequency of Reporting Available Segments Estimated Time Definition Strategic High Level HL1 HL2 Transit trips per capita in the GTHA (Change vs. 2006) % of the GTHA working w/i 1kms of rapid transit (Change vs. 2006) 5 year N/A 5 year N/A HL3 Accessible stations AODA (#, or % increase) Annually GO/UP Express HL4 HL5 Commute time (avg peak period travel time in minutes, across the GTHA across all travel modes) % of GTHA trips taken using transit, walking and cycling during AM peak period ( vs. 2006) Phased Annually N/A 1-2 years Under development 5 year N/A HL6 Passenger Trips to Seat Trips vs Plan - GO Bus /GO Rail/ UP GO/UP Express The % of passengers to seats available across all scheduled trips 26

27 Plan P1 Total Mx Network Kms excluding Train-Bus Routes (%) Annually GO/UP Express MX network Kms counted only once.ie no double counting for multiple tracks on corridors; with exception of UP Service P2 Transit cross-boundary trips as a % of total cross-boundary trips in the AM peak ( vs ) Annually N/A Build and Develop BD1 % of total costs, for > $50M completed projects, that were both On-Time and On-Budget (CPG & PRESTO)/ Phased Annually CPG/Prest o 1-2 years Weighted based upon project spend and using latest project forecast. On-time is defined as within 10% of delivery schedule On-budget is defined as within 10% of budget BD2 % of total costs, for > $50M inflight projects, that were On- Budget (latest forecast w/i 10% of budget) (CPG & PRESTO) Phased Annually CPG/Prest o 1-2 years Weighted based upon project spend and using latest project forecast. On-time is defined as within 10% of delivery schedule On-budget is defined as within 10% of budget 27

28 BD3 % of total costs, for > $50M inflight projects, that were On- Time (latest forecast w/i 10% of plan schedule) (CPG & PRESTO) Phased CPG/Prest o 1-2 years Weighted based upon project spend and using latest project forecast. On-time is defined as within 10% of delivery schedule On-budget is defined as within 10% of budget BD4 BD5 BD6 BD7 New MX Rapid Transit - Built and In Service (kms of new corridor) New MX Rapid Transit - Under Construction (kms of new corridor) Kms of new GO Transit Track completed YTD vs Plan Kms of new GO Transit Track under construction YTD vs Plan Metrolinx Built in year Annually Metrolinx Point in time GO GO BD8 Change in # of Municipalities involved in Transit Procurement Initiative (TPI) (#) Annually TPI Includes municipalities involved since the start of the program from 2006 (cumulative) Operate O1 Ridership YTD vs Plan Annually GO/UP express 28

29 O2 % of Mx Trips arriving at destination on time Annually GO/UP express Total on time MX trips is a weighted average of all on time trips divided by all scheduled trips for all operating divisions. On time reliability is available by segment for GO Bus, Rail and UP and is a segmented average of on time trips over scheduled trips. O3 Increase in total vehicle trips excluding Train-Bus trips YTD vs Plan YTD GO/UP Express Total Vehicle trips= GO bus trips +GO Rail trips + UP express trips - Train-Bus trips O4 New GO Bus Route Kms YTD vs Plan YTD GO Bus Does not include seasonal changes or train-bus routes O5 Overall Customer Satisfaction Score Annually GO/UP express/pr esto Divisions include: GO/UP/ Presto O6 Customer Satisfaction - GO Rail YTD vs Plan YTD GO Rail O7 Customer Satisfaction - GO Bus YTD vs Plan YTD Bi-Annual GO Bus O8 Customer Satisfaction - GO Rail Stations YTD vs Plan Bi-Annual GO Rail O9 Customer Satisfaction - GO Bus Terminals YTD vs Plan Bi-Annual GO Bus 29

30 O10 Customer Loyalty - GO YTD vs Plan Bi-Annual GO Loyalty measured as rating of 7 or more in all of the following 3 categories:1) overall satisfaction, 2) continue to use, 3) will recommend O11 Customer Loyalty - UP YTD vs Plan Bi-Annual UP Loyalty measured as rating of 7 or more in all of the following 3 categories:1) overall satisfaction, 2) continue to use, 3) will recommend O12 Trips eligible for service guarantee (#) GO Trip must not be delayed more than 15 minutes, doesn t apply to delays caused by reasons outside of our control, including extreme weather, emergency investigations, pedestrian incidents, track obstructions, and on-board emergencies O13 Reported Injury Claims YTD vs Plan YTD GO/UP Express/Pr operties Injury claims from:go Bus, GO Rail, UP express, & Properties O14 Fare Revenue YTD vs Plan YTD (Grouped by revenue type, can be combined) GO/UP Express O15 Cost efficiency - % Change in total Mx Opex per seat-km YTD vs Prior YTD & vs Plan YTD GO/UP express/pr esto Seat-km= (Weighted Average Seats per consist/vehicle) *(# of Revenue generating kms ) 30

31 O16 Cost recovery - Total Revenue as a % of Total Opex Annually GO/UP express/pr esto/corpo rate Includes Fare and non-fare revenue O17 Fuel Consumption (litres) per seat-km YTD vs Plan YTD GO/UP Express Seat-km= (Weighted Average Seats per consist/vehicle) *(# of Revenue generating km ) O18 Energy Efficiency GO Facilities YTD vs Plan GO Rail/GO Bus Measured in BTUs per seat-km O19 PRESTO system availability % vs Actual and vs Plan Phased Annually Presto 3-6 months O20 PRESTO Operating Expenses per tap YTD vs Plan YTD PRESTO Taps include all trip taps and load taps O21 % of total trips paid for by PRESTO Card in GTHA TTC/GO/ & Other TSPs/Otta wa/ontario total Corporate Health CH1 Corporate Service Opex as % of total Mx Opex Annually Corporate 6-12 months CH2 I&IT Operating Expenses per computing and communication device YTD vs Plan Phased I&IT 3-6 months 31

32 CH3 Finance Operating Expenses as a % of Metrolinx Operating Expenses YTD vs Plan Finance CH4 HR Operating Expenses per FTE YTD vs Plan Phased Human Resources 1-2 years CH5 P&P Operating Expenses YTD vs Plan Policy and Planning P &P =Policy and Planning CH6 StratComm Operating Expenses YTD vs Plan Strategic Communic ations StratComm: Strategic Communication CH7 Legal Operating Expenses YTD vs Plan Legal CH8 In-Year capital spend forecast YTD vs Plan YTD Metrolinx 1-2 years CH9 In-Year operating expenses forecast YTD vs Plan YTD GO/ UP Express/ PRESTO/ Corporate/ Metrolinx CH10 # of days from receipt of spec to contract execution Actual YTD and vs Plan YTD Metrolinx 32

33 CH11 Employee growth rate (#, %) Phased GO/ UP Express/ PRESTO/ Corporate/ Metrolinx/ Capital 1-2 years KPI dependent on HRIS system changes not available for 1-2 years CH12 Change in public perception of Mx methodology Phased Metrolinx 6-12 months CH13 Change in Trust in Mx as a source of information about new transportation Plans YTD Phased Metrolinx 6-12 months CH14 Travellers perception of regional transit integration Annually N/A 6-12 months CH15 Change in Muncipal and Transit Service Provider support of the Regional Transporation Plan vs Prior year Phased Annually N/A 1-2 years 33

34 9.6 Metrolinx Key Performance Indicator (KPI) Reporting Guidelines KPI Suite The suite of KPIs to be used for reporting by Metrolinx to MTO have been developed collaboratively by Metrolinx and the ministry. The suite consists of 52 KPIs selected to measure Metrolinx s performance in fulfilling its mandate and strategic priorities from a corporate oversight perspective. The MTO-Metrolinx KPIs are categorized into five key focus areas: Focus Area Description # of KPIs High Level Strategic Plan Build and Develop Operate Corporate Health Indicators demonstrate progress in meeting the strategic objective of providing an integrated and optimized transit system for the people of the GTHA that results in a growing economy, increased mobility (speed and reach of transit), and improved customer service, while minimizing environmental impact and maximizing value-for-money. The other four focus areas are derived from this high level strategic objective. Indicators demonstrate achievement in planning an integrated and optimized transit system in the GTHA. Indicators demonstrate progress, effectiveness and efficiency in building and developing an integrated and optimized transit system, focusing on the delivery of capital projects Indicators demonstrate achievement in planned operational service levels (reliability, safety and customer service), optimized operational efficiency, and minimized environmental impact. Indicators demonstrate organizational efficiency and effectiveness and that the organization is reputable, fiscally responsibly, transparent, accountable, trustworthy and well governed

35 Data & Format Aggregated KPI data will be reported to MTO electronically using Microsoft excel. Reports will deliver year-to-date results, as well as the monthly breakdown. MTO will use the aggregated data to populate a dashboard for internal reporting to ministry senior management. MTO will engage with Metrolinx on the format and content of the dashboard to ensure that data is being presented in an appropriate manner. Frequency Frequency of reporting is either quarterly or annually depending on the specific nature of each KPI reports will be delivered approximately six weeks after the quarter closes, reflecting the time required by Metrolinx to collect and aggregate the KPI data internally. Targets Targets for KPIs will be set annually each fiscal year in alignment with Metrolinx s and MTO s business planning cycle. Targets for the fiscal year will be based on historical information and guided by strategic priorities and business plans. Targets for future years will be determined collaboratively by Metrolinx and MTO based on past performance. Phasing KPI reporting will launch in fall 2016, with the first KPI report delivered to MTO in November 2016 (Q2 results). At launch, 35 KPIs will be available for immediate reporting. The remaining 17 KPIs will be phased into the regular reporting framework as data becomes available. Approvals KPI data reports will be approved by the Metrolinx Chief Financial Officer (CFO) prior to submission to MTO. 35