Corporate Affairs and Audit Committee (CAAC) Meeting - January 27, 2012

Public Agenda

Chair’s Poll re: Conflict of Interest

Confirmation of Corporate Affairs and Audit Committee Public Minutes –  November 24, 2011

Business Arising from Minutes and Action Item List

Approval of Agenda and Review of Agenda Order

Review of Agenda (all items not held will be voted together without discussion)

For Approval:

1 – Five Year Capital Plan 2012-2016       

For Information:

2 – Implementation of the Auditor General’s Recommendations Status Report 
3 – Update on the Eviction Prevention Work Plan and LeSage Review 
4 – 2011 United Way Campaign Results        

In Camera Agenda

(A) Confirmation of Corporate Affairs and Audit Committee In Camera Minutes – November 24, 2011 and December 19, 2011

Business Arising from the In Camera Minutes and Action Item List

For Approval:

(B) Confidential item respecting the business of the corporation                                                                        
(C) Confidential item respecting the business of the corporation                                                            

For Information:

(D) Confidential item respecting the business of the corporation
(E) Confidential item respecting the business of the corporation                                                                          
(F) Confidential item respecting the business of the corporation                                                 
(G) Confidential item respecting the business of the corporation  

Public Minutes

The Corporate Affairs and Audit Committee of Toronto Community Housing Corporation met on January 27, 2012, in the Main Floor Conference Room, 931 Yonge Street, commencing at 9:07 a.m.

Committee Directors present:

Jason Gorel, Chair

Brian Kwan

Councillor John Parker

Regrets:

none

Additional Directors present:

Ms. Catherine Wilkinson

Also present:

Marta Asturi, Assistant Corporate Secretary and Legal Counsel

Mary Boushel, Legal Counsel

Paul Chisholm, General Manager, Access Housing Connections Inc.

Michelle Haney-Kileeg, General Manager

Ismail Ibrahim, Legal Counsel

Len Koroneos, Chief Executive Officer (Interim)

Hugh Lawson, Director - Strategic Planning & Stakeholder Relations

Ahmed Samater, Director Finance – Asset Investment Planning

Deborah Simon, Chief Operating Officer

Michael Vear, Senior Manager, Audit and Compliance

Mr. Jason Gorel, the Chair, called the meeting to order and Ms. Mirela Bolentiru served as recording secretary.

Declaration of Conflict of Interest

The Chair requested members of the Corporate Affairs and Audit Committee to indicate any agenda item in which they had a conflict of interest, together with the nature of the interest. None were declared.

Confirmation of Agenda

Motion carried

ON MOTION DULY MADE by Mr. Jason Gorel, seconded by Mr. Brian Kwan, the Corporate Affairs and Audit Committee unanimously approved the agenda as presented.

Minutes – Confirmation of Corporate Affairs and Audit Committee Minutes: November 24, 2011

The Committee had before it the draft Corporate Affairs and Audit Committee minutes for the November 24, 2011 public meeting.

Motion carried

ON MOTION DULY MADE by Mr. Jason Gorel, seconded by Mr. Brian Kwan, the Corporate Affairs and Audit Committee confirmed the above-captioned minutes and recommended they be forwarded to the Board of Directors for information.

Motion carried

ON MOTION DULY MADE by Mr. Jason Gorel, seconded by Mr. Brian Kwan, the Corporate Affairs and Audit Committee unanimously approved the rolling Action Item List.

Item 1 – Five Year Capital Plan 2012-2016, CAAC:2012-01

The Corporate Affairs and Audit Committee had before it the above-captioned report (CAAC:2012-01) from the Interim Chief Executive Officer.

Mr. Len Koroneos presented the Committee with a summary of the report including the following highlights:

• The Capital Repair strategy is based on a real estate industry standard that rates the state of repair of the Corporation’s buildings, known as the facilities condition index (FCI); the goal is having a portfolio average of 12%.
• Capital Planning in the Corporation has historically reflected one to two year financial commitments to capital projects.
• The current Capital Plan is a holistic approach of a stand alone financial proposal from management on a five-year rolling spending capital; it is a long term plan that aligns prioritized building repair and energy needs, strategic procurement and well planned and coordinated delivery of capital jobs through Housing Services Inc. as the single delivery arm for capital projects.
• The Capital Plan consists of three categories: planned capital repairs, recurring programs and energy programs.
• The energy programs depend on the Corporation’s initiatives.
• The combined baseline budget for the planned and recurring elements of the building capital program is $53.375 M per year with the exception of 2012 when $3.850 M is carried forward from 2011, bringing the 2012 budget to $57.375 M.
• Energy Programs are budgeted at $51.4 M in 2012 only; they require an annual capital budget of approximately $50 million from 2013 to 2016 as government funding sources and external financing/funding commitments are firmed up. Management can arrange with suppliers for $50 million per year for five years (approximately $250 million in total).
• Management can maintain the FCI target range with base funding until the end of 2012 only.
• In 2012 the total capital repairs backlog increased to $750 million, which results in a $150 million backlog per year within the five-year period; the suppliers can provide the Corporation with $50 million per year towards capital repairs, but there is still a shortfall of $100 million per year.

The Committee requested background information with respect to the energy programs from the previous year. Mr. Len Koroneos informed the Committee that management could not present the requested information as the Corporation did not receive the necessary funding for those programs.

In response to a question raised by the Committee with respect to prioritizing capital repairs spending needs, Mr. Len Koroneos informed the Committee that the first priorities to be addressed are building structure and life safety issues. The Committee Chair recommended that management ensure the safety of buildings by addressing, as first priority, all safety related issues such as bricks falling off the buildings, roofs, etc.

The Committee Chair requested details with respect to the process of assessing the priorities for capital repairs for a building, including an engineer report. Mr. Ahmed Samater provided the Committee with the following details:

• Asset Planning and Investment Unit determined the priorities for capital repairs that need to be undertaken in 2012 through 2016 within the constraints of small annual budgets;
• The selection of priorities is supported with input from Operating Unit staff, HSI capital delivery and maintenance personnel and the application of Asset Planner life cycle data and FCI calculations.
• Asset Planner is the hub of a structured priority assessment framework that is applied to identify priorities for planned capital repairs.
• Asset Planner applications to support capital planning are being improved for 2012 by converting the old customized Corporation’s building component breakdown structure to the new Ameresco Uniformat II industry standard structure, for categorizing major building components at the beginning of 2012; the system calculates the information portfolio-wide.
• Engineers produce a report that feeds the Asset Planner through Ameresco, together with a cost analysis.

In response to a question raised by the Committee with respect to a device (such as an aging boiler or elevator) having its life span expired, but it is still in use, Mr. Ahmed Samater informed the Committee that there has been implemented a preventative maintenance program consisting of two parts:

• Identifying the mechanical component that is documented on a regular basis; and
• Repair work performed by a qualified technician who replaces the defaulted part(s), so the device runs properly and does not represent a hazard for tenants.

In response to a question raised by the Committee with respect to the advantages of a longer horizon of five years versus a two-year horizon, Mr. Len Koroneos explained to the Committee that due to scarce resources, in five years down the road the status will be worse than now, so management cannot defer the capital repair issues any longer. The backlog grows constantly each year until where will reach the level of a crisis stage, unless it is addressed in due time. Mr. Ahmed Samater specified that the engineer reports cover periods no longer than five years. The life cycle of a device is usually four to five years, with a tendency towards a 10-year horizon.

In response to a question raised with respect to the money spent on single dwelling units and the concept of ensuite work that are not included in the capital repairs budget, Mr. Ahmed Samater informed the Committee that the money spent in preparing the units for a tenant’s move is included in the operations budget; there is an annual budget of $8 million to move out and $4 million to move in. Staff determined an estimate of the money needed based on the experience of the last two years. The numbers included in the current Capital Plan are adjusted according to inflation.

In response to a question raised with respect to whether the money to meet the electrical standards have been included in the current Capital Plan, Mr. Ahmed Samater informed the Committee that there is a blanket certificate budget included in operations of $440,000 per year.

In response to a question raised by the Committee Chair with respect to the proceeds raised from the sale of the stand alone units, Mr. Len Koroneos informed the Committee that he visited a building yesterday together with Councillor Nunziata and the mayor to assess the state of repair. The proceeds from the sale of the stand alone units are estimated to $220 million that will be geared towards the $750 million capital repairs backlog through a four to six-year plan. Due to a shortfall of $50 million per year, management will have to look into other options to increase the funding for repairs and to start the capital repairs as soon as possible. The sale of the stand alone units has been deferred from the January 24, 2012 City Council meeting to the February 13, 2012 Executive Committee meeting. As the proceeds of the sale are public information, management will determine the best way of releasing them as well as their allocation across the city in terms of fairness and transparency.

Mr. Len Koroneos specified that management will release the allocation of the $220 million proceeds of the sale, building by building. The information will be provided to the Committee. Every four years there is a review of the Corporation’s entire portfolio, so 25% of the portfolio is reviewed every year.

In response to a question raised with respect to whether the Board of Directors was informed about the deferral of the sale of the stand alone units, Mr. Len Koroneos informed the Committee that the deferral was a big surprise to management. It was addressed as a public agenda item. Mr. Len Koroneos apologized for not informing the Board of Directors in due time about deferral. He will issue a brief statement on the deferral and will be posted on the internal website and circulated to the Board of Directors.

Motion carried

ON MOTION DULY MADE by Councillor John Parker, seconded by Mr. Brian Kwan, the Corporate Affairs and Audit Committee unanimously adopted the report and forwarded the report to the Board of Directors to:

1. Approve the five year rolling Capital Plan for 2012 to 2016 with the Capital Repair Budget in the amount of $271,725,000 over the five years and a 2012 budget of $51,400,000 for 2012 Energy Programs to be updated annually from 2013 to 2016.
2. Authorize the CEO (Interim) or his designate to contract directly or with Housing Services Inc. for the work included in this 5 year rolling budget up to a maximum of $323,125,000 for Capital Repairs and the 2012 Energy Program.
3. Authorize the appropriate Toronto Community Housing officials to take the necessary action to give effect to the above recommendations to implement the 5 year capital budgets for the years 2012 to 2016.

Item 2 – Implementation of Auditor General 2010 Recommendations: Status Report, CAAC:2012-02

The Corporate Affairs and Audit Committee had before it the above-captioned report (CAAC:2012-02) from the Interim Chief Executive Officer.

In response to a question raised by the Committee Chair with respect to the timeframe of completion, Mr. Michael Vear informed the Committee that the implementation of the Auditor General’s recommendations is a collaborative effort of the staff. The procurement part was addressed by the procurement department. Late in the fourth quarter of 2011, a procurement director was hired to review the status of the implementation of all procurement recommendations.

The Committee recommended that on page 41 internal audit unit conducting ongoing audits of all expense claims, the time line be noted as an ongoing process.

In response to a question raised by the Committee with respect to the purchase cards used, Mr. Michael Vear informed the Committee that the system used now is different from the system used when the implementation process started. From over 300 purchase cards used originally, now there are only 8 purchase cards in use.

In response to a question raised by the Committee with respect to the feedback from the Auditor General related to the implementation process, Mr. Len Koroneos informed the Committee that he meets with the Auditor General monthly. The Corporation is seen as moving fast towards completion and the Auditor General is very pleased with the status of the implementation process.

In response to a question raised with respect to the responses submitted by management relating to internal control deficiencies to the Auditor General before the Board members had a chance to review them, the Committee Chair explained to the Committee that the Auditor General presents his final report to the Board of Directors only when it is ready for public review. The Committee Chair requested that management inform the Committee, prior to management’s responses being submitted to the Auditor General, so the Committee members can be made aware of what issues exist.

Mr. Michael Vear informed the Committee that the entity being scrutinized by the Auditor General’s office has to report back on the status of the implementation of all recommendations usually in June. The Auditor General prepares a list with annual reviews of different entities. Each entity will be duly informed that it is being reviewed prior to the commencement of review.

In response to a question raised with respect to sole source contracts, Mr. Michael Vear informed the Committee that the sole source contracts were reviewed and reported once in 2011 only. Starting in 2012, the sole source contracts will be reviewed and reported upon quarterly.

In response to a question raised with respect to the risk of ending the arrangements related to the overseas procurement of products such as kitchen and bathroom fixtures, Mr. Len Koroneos informed the Committee that there is no risk to ending the Corporation’s overseas relationship. There are implemented policies such as the Conflict of Interest Policy and staff are required to comply with them. The scope is to use Canadian sources whenever possible instead of overseas sources.

In response to a question raised with respect to split orders being monitored or discontinued, Mr. Len Koroneos explained to the Committee that there is a stronger process in place that will prevent procurement or purchase order transactions to be “split” in order to circumvent procedures. The policy does not change; it is just a matter of control and compliance. The current process requires three approvals and two signatures versus two approvals and one signature required originally.

The Committee Chair requested that management report on sole source contracts at the next Committee meeting.

Motion carried

Motion carried

ON MOTION DULY MADE by Mr. Jason Gorel, seconded by Mr. Brian Kwan, the Corporate Affairs and Audit Committee unanimously received the report for information.

ON MOTION DULY MADE by Mr. Jason Gorel, seconded by Mr. Brian Kwan, the Corporate Affairs and Audit Committee unanimously resolved that management will present a report on all sole source contracts at the next Committee meeting for review.

Item 3 – Update on the Eviction Prevention Work Plan and Lesage Review, CAAC:2012-03

The Corporate Affairs and Audit Committee had before it the above-captioned report (CAAC:2012-03) from the Interim Chief Executive Officer.

Ms. Mary Boushel presented the Committee with a summary of the report, emphasizing the significant impact of the LeSage report on the Corporation.

In response to questions raised by the Committee with respect to losses from late evictions and high rent arrears, Ms. Mary Boushel informed the Committee that the number of collection initiatives improved dramatically in the last year and the Corporation started to receive some money from rent arrears. Bringing the rent collection up to date is a slow and lengthy process that consists of many steps such as: phone calls, letters, applications to the Landlord and Tenant Board, agreements between the Corporation and tenants, notices of termination/eviction. The high rent arrears are not addressed directly by the Successful Tenancies department. They are addressed by a special unit within the Core Operations department.

The Committee raised a question with respect to the article “So sorry we ruined your Christmas” published in the December 14, 2011 Toronto Star by Joe Fiorito in relation to a notice of eviction served on December 25, 2011 to one of the elder tenants. Ms. Mary Boushel informed the Committee that there was a notice of termination due to hoarding, asking the tenant to move out on or before December 25, 2011 that was inadvertently served to the elder tenant. The Committee requested that staff take appropriate measures to avoid such incidents from happening again.

In response to a question raised with respect to the “changed” status of implementation of some recommendations from the LeSage report, Ms. Mary Boushel explained that staff have to adapt the implementation plan by aligning it with the changes in environment and circumstances mirrored in the changing responsibilities. The notes in the implementation status report reflect the updated information.

In response to a question raised with respect to updating regularly the Board of Directors on the LeSage report, Ms. Mary Boushel informed the Committee that an update was presented at the August 17, 2011 Board meeting and the Board resolved that the Tenant and Community Services Committee will address this topic.

Motion carried

ON MOTION DULY MADE by Mr. Jason Gorel, seconded by Councillor John Parker, the Corporate Affairs and Audit Committee unanimously received the report for information.

Motion carried

ON MOTION DULY MADE by Mr. Jason Gorel, seconded by Mr. Brian Kwan, the Corporate Affairs and Audit Committee unanimously resolved that the report be directed to the Tenant and Community Services Committee (“TCSC”) and oversight of the LeSage Review remains with the TCSC, based on the Board of Directors’ decision at its August 17, 2011 meeting.

Item 4 – Toronto Community Housing 2011 United Way Campaign Results, CAAC:2012-04

Motion carried

The Corporate Affairs and Audit Committee had before it the above-captioned report (CAAC:2012-04) from the Interim Chief Executive Officer.

The Committee Chair asked the United Way Committee members to present themselves and the audience applauded them for their time and efforts committed to this task.

In response to a question raised with respect to the tenant engagement program to support the United Way campaign, the Committee Chair recommended that the program be directed to the Tenant and Community Services Committee to identify a mechanism to implement the program and to determine the persons who will take the lead of this project.

ON MOTION DULY MADE by Councillor John Parker, seconded by Mr. Brian Kwan, the Corporate Affairs and Audit Committee unanimously received the report for information.

In Camera Proceedings

Motion carried

ON MOTION DULY MADE by Mr. Jason Gorel, seconded by Mr. Brian Kwan, the Corporate Affairs and Audit Committee resolved to meet in camera at 11:04 a.m. to consider items A, B, C, D, E, F and G.

Public Proceedings

At 12:58 p.m. the Committee Chair announced the resumption of the public proceedings and the public meeting reconvened at that time.

Adjournment

ON MOTION DULY MADE by Mr. Brian Kwan, seconded by Councillor John Parker, the meeting of the Corporate Affairs and Audit Committee was adjourned at 12:58 p.m.