Letter of Direction Interim Report

Transcription

1 Letter of Direction Interim Report June 30, 2016

2 Table of Contents 1 Introduction Letter of Direction (LOD) Letter of Direction (LOD) Report Back Communications Protocols Purpose Internal Communications External Communications Promotional and Marketing Sponsorships and Studies Purpose Action Plan Interim Progress Next Steps for the Final Report Metrolinx Corporate and Administrative Costs Purpose Action Plan Interim Progress Next Steps for the Final Report Cost Allocations Purpose Action Plan Interim Progress Next Steps for the Final Report Efficiencies and Value-for-Money Purpose Action Plan Interim Progress Next Steps for the Final Report Corporate (Key) Performance Indicators Purpose Action Plan Interim Progress Next Steps for the Final Report Appendices Definitions Segmented Financial Report (Mock-up with false data) Letter of Direction Interim Report 2

3 1 Introduction 1.1 Letter of Direction (LOD) Through the passage of provincial legislation in 2006, Metrolinx (formally known as the Greater Toronto Transportation Authority) was created to play a critical role in planning and delivering a seamless, integrated transportation network for the Greater Toronto and Hamilton Area (GTHA). Metrolinx started as a planning agency and has seen considerable growth with the inclusion of three operating divisions: GO Transit, PRESTO and Union Pearson Express. The organization is currently made up of several operating divisions and public-facing programs. Operating divisions include: GO Transit UP Express PRESTO Public-facing programs include: Regional Transportation Planning Rapid Transit Implementation Transit Supportive Programs Growth is expected to continue, as the Province is committed to managing congestion and climate change through various initiatives including the implementation and construction of rapid transit, GO Regional Express Rail (RER), and the deployment of PRESTO. As part of the government s Moving Ontario Forward commitment, Metrolinx has been entrusted to transform the way the Greater Toronto and Hamilton region moves. This is demonstrated by the historic capital construction investment of $13.5 billion in GO RER and over $4.5 billion in new Light Rail Transit (LRT) projects in Finch West, Hurontario and Hamilton. PRESTO deployment by the end of 2016 will see PRESTO devices being available across the TTC, making it one of the largest fare card systems in the world. Metrolinx is transforming GO Transit from a commuter service to a true regional transit service. This will provide people in the region choices of where to live, work, and play in new ways Governance, Accountability and Oversight Metrolinx is an agency of the government and is accountable to the Crown through the Minister of Transportation. The agency is governed by a Board of Directors appointed by the Lieutenant Governor on the recommendation of the Minister. The composition of the corporation ensures the Board of Directors can deliver on Metrolinx s mandate, Letter of Direction Interim Report 3

4 with expertise in planning, finance and infrastructure development. The Board of Directors, led by the Chair, is directly accountable to the Minister of Transportation. Metrolinx is expected to provide a high level of service to the public, and is subject to requirements set out in the Metrolinx Act, 2006, the Memorandum of Understanding (MOU) with the Ministry of Transportation (MTO) signed on August 9, 2010, and applicable government oversight directives and policies. These tools and mechanisms define the accountability and oversight framework between the agency and the ministry and set out the roles, responsibilities, and reporting structure for the respective parties. Metrolinx and MTO continue to work together through a collaborative relationship to support the government s commitment to build an integrated transportation network. As part of this relationship, Metrolinx and MTO continue to find opportunities to enhance oversight and accountability and to identify areas for improved reporting and transparency Letter of Direction 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 highlighted Metrolinx s important role in the design and delivery of key transportation projects over the coming years, and identified the need for the agency, working with the MTO as part of the ministry s oversight function, to ensure the optimization of resources, value for money, strong collaboration and communication in delivering its mandate. A report back to meet the requirements of the letter is to be completed in partnership by September 30, 2016, with an interim report by June 30, The LOD 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. 1.2 Letter of Direction (LOD) Report Back To address the key areas outlined in the LOD, Metrolinx and MTO set out four working groups that report into a Steering Committee: 1) Communications; 2) Sponsorships; 3) Corporate/Admin cost, VFM, and Cost Allocations; and Letter of Direction Interim Report 4

5 4) Key Performance Indicators. The Working Groups and the Steering Committee consist of Metrolinx and MTO employees who have been meeting regularly to ensure continuous progress to meet the June 30, 2016 Interim Report and the September 30, 2016 Final Report deadlines. This interim report back summarizes the action plan, progress to date, and the expected next steps for each of the areas of focus Letter of Direction Interim Report 5

6 2 Communications Protocols 2.1 Purpose A review of agency-ministry communications protocols is underway 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. Metrolinx currently follows an existing Communications Protocol. As stated in section 6.2 of the MOU between Metrolinx and MTO: The Minister and Metrolinx agree to develop a Communications Protocol which sets out a clear framework for the Ministry and Metrolinx regarding their responsibilities relating to issues management, media activities and news releases. The Chief Executive Officer and the Deputy Minister shall be responsible for ensuring that the Communications Protocol is adhered to and updated as required. This responsibility can be delegated to appropriate staff within the Ministry and Metrolinx s Directors of Communications. Communications protocols are required to set out a clear framework for Metrolinx and MTO regarding their mutually supportive roles and responsibilities relating to on-going external (communication with media and other external parties) and internal (communication between the two organizations) communications. 2.2 Internal Communications Action Plan Metrolinx and MTO will leverage 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 MTO and Metrolinx, and the Ministry of Health and Long Term Care (MOHLTC) and the Health Quality Ontario agency to develop and operationalize an RMF between each ministry/agency team as a proof of concept. The RMFs will be developed and co-created by the ministry and its agency to create a forum for effective and collaborative problem solving. It is a relationships first model that emphasizes insight-based relationships over transaction and compliance-based models. Part of this new approach includes developing a model to guide ministryagency interactions with consistent communication at all levels to foster stronger longterm sustainable relationships. For Metrolinx and MTO, the RMF will build on joint understandings of expectations, and support and even more effective and transparent relationship. The objectives of the RMF directly align with the goals of the LOD s internal communications working group, which is to achieve the following: Facilitated collaboration a platform for effective communications and collaborative work Agility Responsiveness to ministry s and agency s current priorities and challenges Alignment and flexibility a platform for managing change and making the necessary adjustments to align Letter of Direction Interim Report 6

7 Management by insights collective visibility to the opportunities and challenges given the environment and current realities Innovation use of combined resources and synergies to deliver improved outcomes Continuity relationship management continuity beyond what personal executive relationships offer The RMF will be developed and operationalized over four phases. The work plan spans beyond the LOD reporting period; however, significant progress will be made by September Phase One the ministry and the agency will be introduced to the RMF concept through orientation sessions. In June 2016 the orientation sessions will explain the RMF s purpose and aims, and familiarize stakeholders with how the framework will be developed, rolled out, monitored, and performance measured. Phase Two information captured through information sessions and interviews with Metrolinx and ministry contacts will be collected and harvested to create the RMF straw model (summer 2016). Phase Three the RMF model is finalized through collaborative Metrolinx / MTO workshops. Participants will work to refine an RMF generic model to suit Metrolinx and the ministry s unique internal communications needs (summer/fall 2016). Phase Four this final phase operationalizes the model and monitors the model s performance. There are several check points built into Phase Four, when the model can be refined based on performance data and stakeholder feedback. RMF work is expected to be completed by spring Based on the success of the proof of concepts, TBS may encourage all ministries and agencies to adopt RMFs. The RMF proof of concept provides the ministry and Metrolinx the unique opportunity of being one of the first adopters and help to shape this initiative Interim Progress The Internal Communications Working Group analyzed the RMF scope, goals, and objectives to determine whether it would provide the necessary improvements to the ministry and Metrolinx s internal communications. TBS and its RMF consultant, Strategic Relationships Solutions Inc., have met with the Working Group and despite the RMF s work plan expanding beyond the LOD preferred time period, it was agreed the RMF is the best approach to enhance internal communications. TBS has been working to develop the RMF Proof of Concept. A Project Management Governance Model has been developed that ensures leadership for the RMF development and implementation. A Steering Committee has been struck, and includes executive representation (e.g. Assistant Deputy Minister, Chief Financial Officer level) from the participating ministries (MTO, MOHLTC, TBS) and agencies. The Steering Committee will provide leadership for the development and Letter of Direction Interim Report 7

8 implementation of the RMF and other proof of concept work. An aggressive work schedule has been developed. A key early step for the RMF was the orientation sessions. All Internal Communications Working Group members, along with other management and key staff from Metrolinx and MTO, participated in the RMF Orientation Sessions in May. Two sessions were concluded including a management level and staff level session. The orientation sessions launched an important part of the RMF work, which is to start information gathering on the internal communications and relationship needs of Metrolinx and MTO. This information gathering phase will inform the beginning designs of the RMF Next Steps Work on the RMF will be closely monitored by the Internal Communications Working Group to ensure it meets the intent of the LOD. In addition to oversight of the RMF information collection and model workshops over summer 2016, the working group will actively engage in the identification of performance metrics for the framework. The LOD September Report will provide an update on the RMF s progress, which should include details on the following: The development of the RMF o Metrics for performance measurement, primary research o Details of the straw model o Refinements of the model based on convergence workshops. o The RMF charter Operationalization o Launching of the RMF model Longer-Term Work o Following RMF implementation, four RMF performance reviews will be conducted. Performance reviews will use agreed upon metrics that measure the performance of the relationship and will inform refinements to the framework o A Final Report will cover RMF proof of concept findings for MTO and Metrolinx and the MOHLTC and Health Quality Ontario agency and make recommendations to TBS for potential broader adoption o A 360 Review will be conducted to close out the RMF proof of concept work. This would include engagement feedback and interviews 2.3 External Communications Action Plan Metrolinx and MTO communications staff were required to discuss and update the existing communications protocol regarding roles and responsibilities for external Letter of Direction Interim Report 8

9 communications, including issues management, media relations, events and announcements. The timely exchange of accurate information and routine consultation between Metrolinx and the Ministry of Transportation is essential for optimum success. MTO and Metrolinx regularly share information that is relevant to transportation and transit. The communications protocol ensures Metrolinx and MTO maintain a positive, constructive working relationship to deliver the best communications products and services possible. The Ministry supports Metrolinx s communications activities including activities directed by Metrolinx s Board of Directors. Conversely, Metrolinx recognizes the Minister/Ministry s accountability for Metrolinx and its actions and supports the Minister/Ministry in carrying out these responsibilities. The communications protocol promotes the spirit of collaboration in exchanging and sharing information so as not to impede either Metrolinx or the Ministry in undertaking their normal businesses. It ensures the credibility and reputation of both entities is upheld and that respect for the public is paramount Interim Progress Metrolinx and MTO have updated the existing external communications protocol. This protocol includes principles and working assumptions and details how products will be approached such as: Major Publicity Opportunities / Special Events / Speaking Engagements Advertising content Media and Conferences News Releases and Backgrounders Contentious Issues Media Relations Correspondence received by MTO dealing with Metrolinx issues The protocol stipulates that Metrolinx will submit annual communications and advertising and marketing strategies for planning purposes Next Steps Both parties have agreed to the contents of the updated policy. Metrolinx and MTO will confirm that the proposed communications protocol satisfies the LOD requirement. The protocol will require approval by MTO senior management, the Minister, and the Metrolinx Board of Directors Letter of Direction Interim Report 9

10 3 Promotional and Marketing Sponsorships and Studies 3.1 Purpose Enhancing the current process to ensure the ministry is aware of and supportive of any contributions to external parties related to promotional and marketing sponsorships and studies. 3.2 Action Plan Metrolinx currently has an existing policy that sets out the framework for the provision of funding for promotional and marketing sponsorships and studies. The Promotional Marketing and Sponsorship Policy, in effect since September 2013 includes those activities that are mutually beneficial to both Metrolinx and the external parties involved and often involve Metrolinx acting as a co-promoter of an event. This may include items such as blasts, special train services or discounted tickets for Metrolinx customers. From September 2013 to the end of February 2016, Metrolinx has entered into 28 agreements under this policy. Examples include co-promotions with the Canadian National Exhibition and the Toronto Santa Claus parade. There are defined criteria that all proposals are evaluated against including: Alignment with Metrolinx objectives; Return on investment (should be at least 10%); and Feasibility of implementation. This policy, however, does not include other funding arrangements that would also benefit from additional rigor and guidance, including: Donations or Goodwill Gestures; Academic and Non-governmental Organization Partnerships; and Community-Based Partnerships. To strengthen the existing framework, address identified gaps, and ensure Ministry support and awareness of the above funding arrangements, Metrolinx, in consultation with MTO, is undertaking the following: 1) An update to the 2013 Promotional Marketing and Sponsorship Policy. 2) Development of a new policy to guide funding arrangements for donations or goodwill gestures, academic and NGO partnerships, and community-based partnerships. Both the Promotional Marketing and Sponsorship Policy update and the new policy will include a framework for internal Metrolinx and MTO approvals to ensure appropriate oversight, as well as additional reporting to ensure transparency of these types of funding arrangements Letter of Direction Interim Report 10

11 3.3 Interim Progress The revision of the Promotional Marketing and Sponsorship Policy has been completed and both parties have agreed to the contents of the updated policy. An updated approval framework is under development and will include a hierarchy of required approvals both within Metrolinx and MTO. Approval requirements will be dependent on the type of arrangement, direct cash impacts, and implementation costs. When triggered, review and approval by the Ministry is recommended at the Deputy Minister level. The working group has agreed to the contents of the new policy, which will also include the Metrolinx and MTO approval framework for consideration by the Minister. Both policies will be subject to an annual review, at which point the approvals framework will also be revisited to ensure appropriate oversight by the ministry. 3.4 Next Steps for the Final Report Both the updated Promotional Marketing and Sponsorships Policy and the new policy will seek Minister s approval prior to being presented at the Metrolinx Board of Directors meeting in September 2016 for final approval and subsequent implementation. Prior to this, Metrolinx and MTO will move forward with internal approvals and revisions over the coming summer months Letter of Direction Interim Report 11

12 4 Metrolinx Corporate and Administrative Costs 4.1 Purpose Provide detailed information on the composition of Metrolinx s corporate and administrative costs. 4.2 Action Plan Metrolinx currently reports its budget based on direct responsibility reporting. Direct responsibility reporting refers to a practice of reporting where all costs managed by a function are reported under that function whether those costs belong to that function or not. This practice effects not only financial planning and reporting, but the resulting Key Performance Indicators (KPI) as well. Given the growing provincial investment in transit infrastructure made through Metrolinx, over the past several years there has been a significant increase in financial reporting from Metrolinx to MTO. To satisfy the requirements of this LOD for financial reporting, Metrolinx will provide additional financial and non-financial information to MTO. This information will enable MTO to strengthen its oversight responsibilities through a better understanding of corporate and administrative costs and will help inform actions to be developed under Section 6 of this report back (Value-For-Money section). The plan to satisfy the LOD requirement on financial reporting includes the following steps: Provide a better understanding of how Metrolinx currently budgets by providing a description of current budgeting practices and a crosswalk between how Metrolinx budgets and what is reported for the Program Review, Renewal, and Transformation (PRRT) as well as context as to what costs are included in each of the PRRT Programs. PRRT is a program specific approach to planning and budgeting introduced by Treasury Board Secretariat for the provincial budget cycle ; Provide insight into corporate and administrative costs reporting by further defining the corporate cost categories used at Metrolinx: o Oversight Costs: Indirect Costs including the General & Administrative activities performed by the corporate departments to support, direct, coordinate, and plan the achievement of Metrolinx mandate; o Centrally Managed Costs: Direct Non-labour costs of activities performed and coordinated by the corporate departments for purposes of realizing economies associated with centralization; and o Direct 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; Work with MNP (the third party consultant engaged to validate the cost allocation model discussed below) to provide greater detail on the activities that currently take place in the corporate departments; Identify quantitative specifics for corporate departments to better assist in the understanding of the activities in each area; Letter of Direction Interim Report 12

13 Provide response to MTO s Additional Information Request list and work with MTO to develop a framework for regular reporting on corporate and administrative costs, including detailed reporting requirements, frequency and supporting structures/forums. The framework will ensure the Ministry is regularly provided with detailed financial information, real estate information, reporting on information technology and staffing data, including number of executive staff, management staff and remaining staff by program area and associated budgets; and Share policies such as the Code of Conduct Policy and Procurement Policy. 4.3 Interim Progress In an effort to provide more transparency of Metrolinx financial reporting on the PRRT program, a crosswalk between Metrolinx budget and the PRRT budget presentation was prepared and shared with MTO. Metrolinx also shared a document outlining details of costs included in each of the PRRT programs to provide further clarity on the financials. Furthermore, in response to additional information requests from MTO, Metrolinx is currently working on providing data related to financial reporting, freedom of information requests, support fleet, real estate, and human resources. Metrolinx has also provided MTO with policies that guide the organization such as the Code of Conduct Policy and Procurement Policy. Metrolinx will share additional policies / directives at the request of MTO. 4.4 Next Steps for the Final Report Metrolinx has engaged a third party consultant to assist in the validation of the cost allocation methodology (discussed in Section 5 - Cost Allocations below). Part of this assignment will be to validate the cost allocation drivers. It is expected that this exercise will assist in providing quantitative specifics related to corporate departments. The Final Report will include communications of key findings to date and observations based on financial information provided. Metrolinx and MTO will establish a framework for regular reporting of corporate and administrative costs Letter of Direction Interim Report 13

14 5 Cost Allocations 5.1 Purpose Improve financial reporting on the allocation of costs between business units within Metrolinx. 5.2 Action Plan As referenced in Section 4 (Metrolinx Corporate and Administrative Costs), Metrolinx s current planning and reporting practices are largely focused on direct responsibility reporting with the exception of PRRT reporting at the time of Metrolinx s budget submission to MTO. Given the growth of the Metrolinx operating divisions and programs, it is important to have fully costed income statements by division and programs which should reflect the full cost of capital program delivery. Enhancements to Metrolinx s reporting will help clarify subsidy requirements by division and program. They will also better demonstrate the cost drivers and the efficiencies of Metrolinx s business model. As stated in Section 4.2, Metrolinx categorizes corporate and administrative costs into 3 categories. Direct Costs can be directly allocated to operating divisions and programs while an allocation methodology is required to assist with the segmentation of Centrally Managed and Oversight costs. The expansion of the planning and reporting practices to support fully costed segmented financial reporting will increase transparency to the functions and costs managed within the corporate service groups. It will allow Metrolinx to better report the different growth rates of the two corporate cost categories relative to their respective divisions/programs to demonstrate cost efficiencies achieved (i.e. centrally managed costs grow proportionately with the operations/programs whereas oversight costs grow more slowly than the operations/programs). 5.3 Interim Progress A corporate cost allocation model was developed in based on the organization's priorities at that time. This model needs to be updated to reflect the current environment ( ) including priorities, cost centre hierarchy, costs, drivers and ratios. The update will also include organizational changes and improvements made in data sources and data availability (e.g, Information and Information Technology (I&IT) is an example of an area which requires remodeling). The update of the model will require additional analysis of the corporate service areas to understand how employee time is allocated in the current environment ( ) and the gathering of new cost driver information. The model will also need to be revised for any design and labour capitalization changes arising from the corporate cost allocation evaluation initiative. This evaluation commenced May 12, 2016 and is scheduled to be completed by mid-june Letter of Direction Interim Report 14

15 5.4 Next Steps for the Final Report The Final Report will include the approved cost allocation method including its design, labour capitalization practice and key assumptions. It will also include a summary of the results of the corporate cost allocation evaluation initiative explaining the decisions made to ensure compliance and best practice. Below is a list of the components of the Final Report which will demonstrate the inputs and outputs of the model: High-level mapping of the total corporate services costs as they exist today, through the regrouping of costs between corporate functions and consuming groups, the charge-out of centrally managed services and direct costs, and finally the allocation of oversight costs to the consuming groups. Summary table representing percentages of corporate oversight costs by consuming groups. Summary table of oversight rates for each consuming group. Resulting Segmented Financial Report using budget data (example shown in Appendix 8.2) Letter of Direction Interim Report 15

16 6 Efficiencies and Value-for-Money 6.1 Purpose Explore possible ways to increase efficiencies and enhance value-for-money in corporate and administrative functions and processes. 6.2 Action Plan Given the growth in Metrolinx, it is vital that the agency continue to achieve value-formoney in its activities and to ensure that public funds and assets are used responsibly and appropriately with due regard to economy and efficiency. The planned approach will be informed by other areas of this review and will take place over multiple phases. Using the baseline data cost allocation information, benchmarking, and a set of to-be-established criteria, the working groups will determine what areas are in scope for further value-for-money analysis. Quick wins may be identified where there is work already underway with the province that could be of benefit for Metrolinx such as IT savings initiatives and non-fare fleet services. Beyond the quick wins, remaining areas for further assessment will go through a value-for-money review. It is expected that the value-for-money analysis will identify areas where value-for-money is currently being achieved at Metrolinx, and/or opportunities exist to help move improve efficiency and value-for-money at Metrolinx. These opportunities may include alternative service delivery models such as shared services and consideration of other efficiencies measures developed for the Ontario Public Service that could benefit Metrolinx. The ministry will also look to incorporate any best practices at Metrolinx. 6.3 Interim Progress Over the past several years Metrolinx has recognized a need to re-align various parts of the organization to better support the needs of the business. Metrolinx has undertaken a number of transformational initiatives with the aim of improved efficiencies and enhanced support in the delivery of its mandate including: Procurement Transformation (2015) Capital Project Group Re-Organization (2015) Planning and Policy Re-Organization (2015) I&IT Transformation (2016) Transforming Metrolinx s Operations (2016) In addition, Metrolinx Internal Audit and MTO Internal Audit hold bi-monthly coordination meetings to discuss areas of shared interest, including common audit approaches, opportunities for collaboration, audit challenges, and lessons learned. Management from both audit teams have dedicated training in value-for-money and performance auditing. Management within both Metrolinx and MTO are currently completing analysis to help identify opportunities for efficiencies, quick wins, and further program-level value-for Letter of Direction Interim Report 16

17 money reviews. To help support this exercise, Metrolinx Internal Audit in consultation with MTO Internal Audit will lead the development of a high-level value-for-money assessment framework. The framework will be circulated by Metrolinx and MTO to create a shared understanding of value-for-money, provide practical advice to ensure Metrolinx programs demonstrate value-for-money in services delivered, and provide a blueprint for potential future value-for-money assessments and analysis. The framework will provide guidance on assessment approach where programs/areas have been shortlisted for review. Building on the work already completed at Metrolinx and current work underway, areas within scope for further assessment will be determined. These areas may include procurement, support fleet, information technology and emergency management. Consultations with each organization s Internal Audit group have taken place to determine appropriate criteria and assess opportunities for value-for-money engagements and reviews. In December 2015, Metrolinx s Internal Audit recommended a review of support fleet management and the exploration of potentially leveraging the services provided by MTO s Fleet Management Centre. This analysis is currently in progress by MTO and Metrolinx and includes the assessment of costs, controls, and transition requirements. 6.4 Next Steps for the Final Report For the purpose of the Final Report, Metrolinx and MTO expect to provide a plan regarding areas that warrant further review and assessment. A plan to conduct valuefor-money reviews will be provided. This will identify areas that will be reviewed and proposed timelines. Through a process of current state assessments, feasibility analysis and options formulation, functions that may benefit from exploring alternative service delivery will be identified. This includes an analysis of using MTOs OPS wide enterprise system for managing Metrolinx support fleet. This proposal will be evaluated from a controls and financial perspective with a report back on the analysis and potential next steps. In addition, a scan of other best practices and delivery models that could be applied to Metrolinx will be conducted. Criteria will be established to assess available options and would ensure that: The approach is consistent with corporate direction; Supports a high performing organization and key strategic goals; Allows for future growth; Provides appropriate accountability; Supports service-level improvement; and Improves cost efficiency It is expected that some quick wins may be available for immediate implementation. However, other area may require further analysis and validations prior to firm recommendations being made. Finally, a value-for-money framework will be developed to identify the areas for the review as well as the proposed timelines and deliverables. This will allow the ministry and Metrolinx to assess the success of the actions recommended in this section Letter of Direction Interim Report 17

18 7 Corporate (Key) Performance Indicators 7.1 Purpose To improved reporting on corporate performance indicators. 7.2 Action Plan Over the past few years, MTO and Metrolinx have been engaged in initiatives to develop key performance indicators (KPIs) to support internal Metrolinx reporting and agency oversight reporting to the ministry. The work undertaken through these initiatives will serve as the foundation from which to develop a framework and a suite of KPIs that can be utilized by Metrolinx and MTO to support the ministry s oversight. These initiatives are described in detail below. MTO Integrated Reporting Study In fall 2014, MTO retained consultant Deloitte LLP to assist MTO in the development of an Integrated Reporting Study (IRS). The purpose of the study was to review and enhance, where required, Metrolinx s current reporting requirements, and determine ways to more comprehensively demonstrate to the ministry that Metrolinx is meeting its reporting obligations under the Metrolinx Act, 2006, the Memorandum of Understanding between MTO and Metrolinx, and applicable provincial Directives. Deloitte conducted the study from December 2014 to April 2015 and concluded by submitting a final report to MTO for consideration. The final report included a recommendation to implement strategic outcome measures, or KPIs, to enhance the agency s reporting to MTO. The study recommended 33 KPIs for implementation. These KPIs were developed through a series of workshops held in winter 2015 with participants from both MTO and Metrolinx. The KPIs focus on high level, transportation planning, building and development, operations, and corporate health strategic outcomes. Where appropriate, the recommended outcome measures were aligned with Metrolinx s work to develop internal and public facing KPI reporting. The KPIs recommended through the IRS provided a draft framework that could be used to implement regular KPI reporting through a collaborative process between MTO and Metrolinx. Metrolinx Corporate KPI Initiative The Corporate KPI Initiative commenced in the spring of 2014 as a co-sponsored initiative between Metrolinx Planning & Policy and Metrolinx Finance. The purpose of the initiative was 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. Two corporate KPI suites were developed through this initiative - a Public Facing Suite and an Executive Management Suite. The Public Facing Suite is a set of 12 KPIs that demonstrate Metrolinx s progress in delivering its mandate to the public. This suite will be included in Letter of Direction Interim Report 18

19 Metrolinx s Annual Report and annual Business Plan, both of which are available publicly on Metrolinx s website. The Executive Management Suite consists of 119 KPIs, inclusive of the 12 public facing KPIs. This suite will be used for executive management oversight of internal performance and overall alignment with Metrolinx s strategic priorities. Reporting for both suites of KPIs will be launched in summer 2016 and will be included in the Annual Report and the Business Plan. 7.3 Interim Progress Building upon the initiatives described above, Metrolinx and MTO collaborated to complete a crosswalk of the suites of KPIs developed through the Deloitte IRS and the Metrolinx Corporate KPI Initiative to determine alignment. The results of the crosswalk show a high degree of alignment between the two suites. Building upon the crosswalk, MTO and Metrolinx are working together to determine reporting frequency and data availability for each KPI. Some KPIs requested by MTO for reporting did not directly align with Metrolinx s corporate KPI suites. For those KPIs, MTO and Metrolinx continue to collaborate to identify a plan for data collection and gradual phasing in of reporting as data becomes available. The final report will present the suite of KPIs which will include public facing KPIs as well as KPIs that will be determined by Metrolinx and MTO. This KPI suite will be used for regular reporting by Metrolinx to MTO to support strong oversight of Metrolinx s performance in delivering its mandate. The KPIs are categorized based upon the five key themes identified by MTO in the Integrated Reporting Study. 7.4 Next Steps for the Final Report Metrolinx and MTO will work together over the summer to develop the overarching framework for the implementation of regular KPI reporting. This will include developing a standard KPI dashboard for reporting, confirming accountability and ownership of KPI reporting, and determining a timeline for phasing in reporting for KPIs where data is not yet available. Metrolinx-MTO KPI reporting will launch in September The Final Report will provide the final framework for Metrolinx-MTO KPI reporting and the initial KPI dashboard Letter of Direction Interim Report 19

20 8 Appendices 8.1 Definitions Terms Program Review, Renewal, Transformation (PRRT) Oversight (As part of the Corporate and Administrative costs) Centrally Managed Directly Assigned Costs Cost Allocations Operating Division Description 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. 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 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 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 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). Metrolinx organizational unit that provides public-facing services for transit consumers. It is normally headed by a President or Executive Vice-President. Current Operating Divisions are: GO Transit Union Pearson Express (UPE) PRESTO Letter of Direction Interim Report 20

21 Regional Transportation Planning Rapid Transit Implementation (Capital Divisions) Transit Supportive Programs Functional Administration Corporate Department Fully Allocated Costing Metrolinx organizational unit that is engaged in guiding the work being done to transform the transportation network in the Greater Toronto and Hamilton Area. Metrolinx organizational unit that is engaged in designing, building, and delivering transit infrastructure. It is normally headed by a President or Executive Vice-President. There is currently one capital division (and for cost allocation purposes a second unit): Capital Projects Group (CPG) I&IT Project Management Office (PMO) Services and activities provided by Metrolinx to public consumers or agencies that are not allocable to (not caused by) the work of Metrolinx operating and capital divisions. These include: Smart Commute Transit Procurement Initiative (TPI) Regional Transit Planning Management within an operating or capital division of Metrolinx. Includes functions related to the direct management of service provision; including the supervision of contracts; the supervision of employees; and the implementation of the service plan 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 makes 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 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 Letter of Direction Interim Report 21

22 8.2 Segmented Financial Report (Mock-up with false data) REVENUE GO Transit UP Express PRESTO CAPITAL PROGRAMS Auxiliary Programs CORPORATE 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 Non-Labour Expenses $203,174,506 $7,692,251 $19,503,087 $1,076,813 $ - $52,089,449 $283,536,106 $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 $33,000,000 $2,750,000 $5,500,000 $11,000,000 $2,750,000 $(55,000,000) $ - Services Total - Direct Allocations $33,000,000 $2,750,000 $5,500,000 $11,000,000 $2,750,000 $(55,000,000) $ - Surplus/Shortfall - Direct Total - Oversight Allocations Surplus/Shortfall - Fully Allocated $(70,626,323) $(10,106,951) $(70,448,355) $(13,056,813) $(2,750,000) $(89,323,314) $(253,561,756) $49,127,823 $4,466,166 $13,398,497 $17,864,663 $4,466,166 $(89,323,314) $ - $(119,754,145) $(14,573,117) $(83,846,852) $(30,921,476) $(7,216,166) $ - $(253,561,756) Total Letter of Direction Interim Report 22