1 2 3 TORONTO COMPUTER LEASING INQUIRY 4 GOOD GOVERNMENT PHASE 5 6 7 ******************** 8 9 10 BEFORE: THE HONOURABLE MADAM JUSTICE DENISE BELLAMY, 11 COMMISSIONER 12 13 14 15 16 Held at: East York Civic Centre 17 850 Coxwell Avenue 18 Toronto, Ontario 19 M4C 5R1 20 21 ******************** 22 23 24 January 19th, 2004 25

1 APPEARANCES 2 3 David Butt )Commission Counsel 4 Daina Groskaufmanis (np) ) 5 Zachary Abella ) 6 7 Linda Rothstein )City of Toronto 8 Andrew Lewis ) 9 10 Allan Powell )Jim Andrew 11 12 Janet Smith )Registrar 13 Carol Geehan )Court Reporter 14 15 16 17 18 19 20 21 22 23 24 25

1 TABLE OF CONTENTS 2 Page No. 3 List of Exhibits 4 4 5 Presentation by Shirley Hoy 16 6 7 Certificate of Transcript 198 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

1 LIST OF EXHIBITS 2 Page No. 3 4 67 Unbound document entitled 5 "Presentation on Good 6 Governance" By Shirley Hoy, 7 Chief Administrative Officer 8 - dated January 19, 2003. 9 10 pages. 35 10 11 68 Bound document entitled 12 "Good Governance Phase 13 - Toronto CAO Submission" 14 Tabs 1-5. 36 15 16 69 Unbound document entitled 17 "Management Controls - 18 Checklist for Commissioners." 19 3 pages. 120 20 21 70 Unbound document entitled 22 "Conflict of Interest Policy, 23 Chronology; development, 24 approval, implementation." 194 25

1 LIST OF EXHIBITS (cont'd) 2 No. Description Page No. 3 4 71 Unbound document entitled, 5 "Memorandum re: Soliciting 6 Donations or Gifts for charity 7 events." 8 Dated January 27,2003 195 9 10 72 Bound document titled 11 "Lobbyist Research" Tabs 1-3 195 12 13 73 Binder entitled "Procurement". 14 Tabs 1-2 196 15 16 74 Binder entitled, "Conflict of 17 Interest." Tabs 1-2 196 18 19 75 Binder entitled, "Municipal 20 Governance." Tabs 1-2 196 21 22 23 24 25

1 --- Upon commencing at 10:00 a.m. 2 3 THE REGISTRAR: The Inquiry is now is 4 session. Please be seated. 5 MADAM COMMISSIONER: Good morning and welcome 6 back. Today we begin a different and very important phase of 7 this judicial inquiry, the Good Government Phase, and I'd 8 like to explain briefly why it is so different and why it is 9 so important. 10 The Good Government Phase was originally 11 scheduled to take place at a later stage in the Inquiry's 12 proceedings. However, last Fall, prior to the municipal 13 election results, I announced that I would change the order 14 of the Hearings and hold the Good Government Phase now. 15 My purpose in doing so was to provide the 16 City, the new Mayor and the new Council with the benefit of 17 these Good Government Hearings as early as possible in their 18 mandate. Public Inquiries must always investigate very 19 carefully the events that caused them to be established. 20 It is essential that they probe deeply to 21 discover any wrongdoing that may have occurred. For the past 22 year, this has been the focus of our Inquiry. We have been 23 examining the computer leasing transactions between the City 24 of Toronto and MFP Financial Services Limited and the City's 25 acquisition of Enterprise licenses from Oracle Corporation.

1 Our focus has been on exploring possible 2 wrongdoing, mistakes, carelessness or deliberate wrong acts. 3 It is important to understand that my task does not end after 4 I have fully investigated all possible wrongdoing. 5 My Terms of Reference require that I also make 6 recommendations for change that will improve City government 7 and hopefully prevent, in the future, the kinds of mistakes 8 or misconduct that may have occurred in the past. 9 In my opening address on December the 2nd, 10 2002, I indicated that I would be hearing evidence relating 11 to good government and this is what will be taking place over 12 the next three (3) weeks. 13 Before making such recommendations, I intend 14 to benefit from the knowledge and experience of experts on 15 municipal government. The good government phase of this 16 Inquiry is designed to provide me with their insight and 17 expertise, which I can then consider in formulating my 18 recommendations on the various issues that will form part of 19 my report. 20 Many months of planning this phase have 21 occurred. Commission Counsel, David Butt, has taken the lead 22 in developing and carrying out our approach. We have 23 commissioned research and discussion papers on subjects which 24 arose as matters of concern, both during the course of our 25 investigations and at the Public Hearings.

1 Broadly speaking, these topics fall into four 2 (4) general categories. Conflict of interest, lobbying, 3 procurement and municipal governance. 4 Within these four (4) broad topics, there are 5 many issues that we intend to explore. The research and 6 discussion papers were prepared by Ms. Valerie Gibbons and 7 Mr. Sam Goodwin of the Executive Resource Group. 8 These detailed and thorough papers are posted 9 on our website at www.torontoinquiry.ca. I'm grateful to Ms. 10 Gibbons and Mr. Goodwin for their comprehensive research and 11 for the suggestions they make in their reports. They will 12 attend the Hearings on Tuesday afternoon to explain the 13 process undertaken in their work. 14 Although the discussion papers contain 15 recommendations for reform, I want to emphasize that those 16 recommendations are meant as suggestions only. As a 17 springboard for discussion in the good government Hearings 18 that begin today. 19 The papers provide important background on the 20 topics I must address, but, the suggestions contained there, 21 may or may not, find their way into the recommendations that 22 I, ultimately, make in the report. 23 I anticipate they will focus discussion on 24 realistic responses to the practical issues confronted by the 25 City of Toronto and I welcome debate on the points make in

1 the papers, in the forthcoming weeks. 2 I will devote, as I said, the next three (3) 3 weeks to the good government Hearings. During that time, I 4 will hear from a broad range of experts, academics, former 5 and current politicians, civil servants and many individuals 6 from the private sector. 7 We have deliberately sought to present 8 different views, so that we can benefit from the interchange 9 of conflicting ideas. 10 The presenters we invited have expertise to 11 share with me on topics that are central to my ultimate 12 recommendations. 13 The good government phase is different from 14 the Hearings we have conducted over the past several months. 15 Many of you will have already observed that the room is now 16 configured differently from the way it was when testimony was 17 heard at the Toronto Computer Leasing Inquiry. 18 The Hearings in the good government phase will 19 be much less like a courtroom proceeding and much more like a 20 forum for discussion and debate. 21 I will continue to preside and Commission 22 Counsel, Mr. Butt, will present the evidence. Proceedings 23 though will be much more informal. Presenters will not be 24 under oath and will not be cross-examined. 25 Sometimes we will hear from one (1) individual

1 and often we will have a panel discussion consisting of 2 several people. 3 We will be addressing important current policy 4 issues for the City, rather than past conduct and panellists 5 will be encouraged to engage in open discussion of the 6 issues. 7 We have deliberately altered our procedure in 8 this phase to encourage a vigorous exchange of ideas that 9 will provide me with the best possible foundation for 10 practical recommendations in my final report. 11 During our planning of the good government 12 phase, we invited many people to participate in this exchange 13 of ideas. The response has been overwhelming. Dozens of 14 experts have generously offered to share their time and 15 insights. Without exception, they have agreed to do so 16 without charging a fee. 17 I am deeply grateful to all these very 18 accomplished individuals for donating their time to me and 19 the City, in the examination of these important issues. 20 The dates and orders in which these experts 21 will present their views, as well as a description of their 22 respective bibliographies are on our Inquiry website. 23 The Good Government Phase is an important 24 opportunity to turn the page on past events. I welcome this 25 phase as an occasion to focus on improvements for the future.

1 I'd like now to call on Mr. David Butt, to 2 introduce our first presenter, Ms. Shirley Hoy. 3 MR. DAVID BUTT: Thank you very much, 4 Commissioner. Again, in keeping with the change in set up 5 that we've put in place for the Good Government Phase, Ms. 6 Hoy is present with us, seated at what was formerly counsel 7 table, and with her of course are Commission Counsel -- I 8 mean, counsel for the City, and Ms. Joan Taylor's is 9 assisting Ms. Hoy. 10 Now, Ms. Hoy, I understand that you -- and we 11 can all see you have a Power Point presentation for us, and 12 just before we begin that, if I could just set a little bit 13 of context by asking a little bit about your role and your 14 background. 15 And you're now of course the CAO for the City 16 of Toronto. And could -- could you help us by giving us just 17 -- just in a line or two (2), your job description, as it 18 were? 19 MS. SHIRLEY HOY: Thank you, Mr. Butt. I 20 think in simple terms, the role of the CAO is heading the 21 administration and the operational aspect for the City of 22 Toronto Government. 23 In essence I think there are two (2) main 24 roles, one (1) is to ensure that the City staff, the Toronto 25 public service, provides effective advice and support to the

1 Mayor and to counsel, and its work in developing policies, 2 plans, priorities, for the City of Toronto. 3 Secondly, I think the other main role is that 4 the CAO is responsible to manage the human fiscal and fiscal 5 resources for the City. 6 MR. DAVID BUTT: Okay, thanks -- thanks very 7 much, and just your background in -- in particular, now 8 you've been the CAO since, I understand, mid 2001; is that -- 9 is that right? 10 MS. SHIRLEY HOY: I started as Acting CAO the 11 end of June 2001, and I was appointed by Council in November 12 of 2001. 13 MR. DAVID BUTT: Okay. And before that you 14 were the Commissioner of Community and Neighbourhood Services 15 with the City? 16 MS. SHIRLEY HOY: That's right, I worked for 17 the former Metro Toronto Government as the Commissioner, 18 starting in 1996, and then after the City was amalgamated the 19 new -- well, first of all the Transition Team appointed the 20 Commissioners, did some interviews and then the Council 21 itself interviewed and appointed the senior management team 22 for the City. 23 MR. DAVID BUTT: Okay, and a Commissioner is 24 one (1) of the senior management team for the City, both 25 before and after amalgamation; is that fair?

1 MS. SHIRLEY HOY: That's right. 2 MR. DAVID BUTT: How many Commissioners -- 3 let's talk after amalgamation, are there? 4 MS. SHIRLEY HOY: There's six (6). 5 MR. DAVID BUTT: Okay, so -- 6 MS. SHIRLEY HOY: Six (6) Commissioners. 7 MR. DAVID BUTT: -- the senior management 8 team, if I understand that correctly then, would be the six 9 (6) Commissioners and -- and the CAO; is that right? 10 MS. SHIRLEY HOY: That's right. 11 MR. DAVID BUTT: Okay. Now, before that, you 12 were with the -- the Province of Ontario, I understand? 13 MS. SHIRLEY HOY: I was with the Province of 14 Ontario between 1991 to the end of 1995, and I held Assistant 15 Deputy Minister positions in three (3) different Ministries. 16 MR. DAVID BUTT: And your return to the City 17 in 1996 was indeed a return, because before your stint with 18 the Province, you did have eleven (11) years with the -- 19 approximately, with the City in -- in other capacities; is 20 that right? 21 MS. SHIRLEY HOY: That was with the former 22 Metro Toronto Regional Government, mainly as Director of 23 Policy, most of my background was in Social Policy, so I did 24 quite a bit of work in the Community Services Department, but 25 then I also went down to Exhibition Place, and headed up the

1 job of General Manager for administration at Exhibition 2 Place, and I worked a couple of years in the -- as Executive 3 Director in the Metro Chairman's office. 4 MR. DAVID BUTT: And of course education wise, 5 you have two (2) Masters degrees; is that right? 6 MS. SHIRLEY HOY: I have a Master of Social 7 Policy from U of T, and a Master of Public Administration 8 from Queen's University. 9 MR. DAVID BUTT: And so just looking broadly 10 on that background, years and years of experience in the 11 Government -- Governance context and at the senior management 12 levels, both the -- the Province and the City, is that -- is 13 that fair, in terms of capturing -- 14 MS. SHIRLEY HOY: Well, I have a real passion 15 working in the public sector, I think the issues that public 16 servants deal with are intellectually challenging and very 17 rewarding, when programs and policies are put in place. 18 MR. DAVID BUTT: Right. And I understand 19 that this morning you're here to -- to tell us about some of 20 those programs and policies and, you know, I joked with your 21 lawyer, Ms. Rothstein, that I have one (1) question to ask 22 you this morning, Ms. Hoy, so what have you done? 23 And I wonder if you could help us out just by 24 going through your presentation and giving us a brief outline 25 of the policies and procedures that have been put in place

1 over the last couple of years at the City of Toronto in 2 relation, of course, to the issues that we -- we face here? 3 MS. SHIRLEY HOY: Thank you, Mr. Butt, and 4 thank you, Commissioner, for this opportunity to present 5 today. 6 MR. DAVID BUTT: And just to help everybody 7 out, and I suppose you most particularly, I understand that 8 you're going to -- this presentation is about twenty-five 9 (25) minutes long -- 10 MS. SHIRLEY HOY: Yes. 11 MR. DAVID BUTT: -- is that right? 12 MS. SHIRLEY HOY: That's right. 13 MR. DAVID BUTT: So we'll try to hold our 14 questions and I understand that at the end we'll be able to 15 return back and revisit the subject areas that you cover in 16 more detail and ask more questions; is that -- is that right? 17 MS. SHIRLEY HOY: Absolutely. 18 MR. DAVID BUTT: Okay. 19 MS. SHIRLEY HOY: Okay. So, Joan Taylor will 20 assist me as I go through the presentation. I believe the 21 hard copies are distributed as well. 22 What I'd like to do in this presentation is to 23 provide an overview of the City's work, to date, towards 24 enhancing accountability and I will cover the areas 25 highlighted in this overview slide.

1 MR. DAVID BUTT: Ms. Hoy, I'm sorry. I 2 promised I wouldn't interrupt you. But we just need to keep 3 you closer to the microphone -- 4 MS. SHIRLEY HOY: Sorry. 5 MR. DAVID BUTT: -- so the transcript can -- 6 can pick everything up. 7 MS. SHIRLEY HOY: Okay. 8 MR. DAVID BUTT: Thanks. 9 10 PRESENTATION BY MS. SHIRLEY HOY: 11 MS. SHIRLEY HOY: We have made much progress 12 but there's still a lot more work to be done. Immediately 13 following amalgamation some building blocks were put in place 14 to develop a new culture for Council and for staff. 15 I would say that, looking back, our major 16 weakness was implementing these policies. I believe that we 17 did not spend enough time and resources in communicating and 18 training; in particular, in training staff and I will come 19 back to that later. 20 In addition to the major areas identified at 21 the Inquiry, which I will discuss in more detail in my 22 presentation, I'd like to note that Council and staff 23 established a number of additional checks and balances and 24 accountability measures, in particular, in the following 25 areas.

1 From 2001 on we set formal processes, 2 procedures and business plans in place to govern the use of 3 consultants. Working with David Gunn who was the former head 4 of TTC, again in 2001, we revamped our whole budget process 5 for both capital and operating budgets and this was designed 6 to improve the tools for budgeting and costing because, at 7 the end of the day, where we want to get to is to have good 8 performance measures for all our programs. 9 In that same year, again, working with, this 10 time, Mr. Desautels who was the former Auditor General for 11 the Federal Government, we developed a new audit framework. 12 This audit framework involves three (3) components, an 13 external Auditor General who's completely independent of the 14 administration, an Internal Auditing function and also an 15 external test audit that does the auditing of our financial 16 books. 17 In addition, we also implemented the 18 management control checklist that was recommended by our City 19 Auditor back in 2001 and, finally, Council approved a fraud 20 and waste policy and in 2002 established the hotline that's 21 still in existence today. 22 Turning to the specific areas, in particular, 23 of interest to the Inquiry, I'd like to provide some updates 24 on what Council has done to date in terms of their decisions 25 and what's been implemented.

1 As I noted earlier, certainly there was a code 2 of conduct put in place by the former Council in -- starting 3 in 1999, but, certainly, we recognize there has been 4 insufficient training of Councillors and it's interesting 5 with this new Council, given that we have a number of new 6 Councillors this term, there's certainly heightened awareness 7 of the need for them to know what's in the Code of Conduct. 8 In our orientation with the new members of 9 Council, I was asked about where the Code of Conduct's at, 10 what's happening with the establishment of the Integrity 11 Commissioner and also when are we going to put in the 12 lobbyist registry. 13 So, in terms of updating Commission here at 14 the work that's done by Council, in September 2003, just 15 before the last term of Council ended, Council did ask that 16 we seek special legislation from the province in order for us 17 to have the legislative authority for Integrity Commissioner 18 who can have the power to investigate, to impose penalties 19 and make findings public. 20 We have had discussions with provincial staff 21 and those discussions are still ongoing. However, last week 22 at the first meeting of our Policy and Finance Committee, on 23 the report from the Mayor, he has asked that I report back on 24 the actions to date, in the discussions that we've had with 25 the Province and also to basically draft the bylaw to

1 establish the Integrity Commissioner office and to also 2 discuss in this report what can be done in the making such an 3 appointment, while waiting for the legislative authority, to 4 be approved by the Province. 5 As it pertains to conflict of interest policy 6 for staff, it was approved by Council in 2000 and what we did 7 starting 2001 is that the conflict of interest policy became 8 part of the performance reviews of all management staff. 9 So every year, as part of the performance 10 reviews that we do, myself with Councillors and the 11 Commissioners with me, we reconfirm that we've read, 12 understood the Conflict of Interest policy and if we do have 13 any declarations of conflict of interest, we make sure that's 14 done and then that has cascaded all the way down through all 15 parts of the organization, but, with management staff it's an 16 actual sign-off in their performance reviews. 17 So, what we have done since 2001, is that 18 they're ongoing reminders, to all staff, in the City public 19 service, through employee newsletters, through the internet, 20 and I have also consulted with CAO's in other municipalities 21 in Ontario, on making suggestions on other changes and 22 improvements that we can make to the Toronto conflict of 23 interest guidelines. 24 As they pertain to the ABC's, we have sent out 25 the expectation of every agency, board and commission, in the

1 City corporation, having a Conflict of Interest policy. And 2 I would suggest to you, that the large ones like, the Police 3 Services, TTC, Library, Public Health, certainly have them. 4 We're working with the smaller ones like arena 5 boards right now, to make sure that they follow the policy, 6 as well. 7 And finally, with the fraud and waste policy 8 that was adopted, the Auditor General reports out every year 9 to the Audit Committee on what has been the reports that come 10 through the hot line and he also gives a detailed report 11 through the Audit Committee, as to his investigations and 12 also on those cases that he turned to the Departments for 13 follow up. 14 So that there is a real expectation on our 15 part, that it's the responsibility of staff to report 16 irregularities, waste or any potential fraud. 17 Procurement, this is a major area of the 18 review through the work here, at the Inquiry. The Auditor 19 General provided a report to us, in March of last year, 20 identifying forty three (43) recommendations. 21 We have now hired a dedicated staff team to 22 implement those recommendations. The Chief Financial 23 Officer, under which procurement is one (1) of his 24 responsibilities, has just provided an update to the 25 Administration Committee on January the 9th, on his work

1 plan. 2 It's anticipated the majority of the 3 recommendations will either be approved or implemented by 4 June of 2004 and by the end of 2004, there will be 5 substantial completion of all the recommendations by the 6 Auditor General. 7 I would say that there are basically four (4) 8 fundamental areas that we want to address in improving the 9 City's current procurement system. 10 One (1) deals with roles and responsibilities. 11 And I know that these are similar areas that the Commission's 12 external expert has also identified as key areas for the City 13 to pay attention to. 14 As you know, for an effective procurement 15 system, there has to be clear roles and responsibilities 16 between the central corporate purchasing area and the role of 17 the line departments. 18 The line department's role -- key to that, 19 would be that they have to set the specifications and the 20 requirements for the goods and services they want to obtain. 21 They have to identify clearly what the deliverables are. 22 They have to be part of the process to evaluate, once the 23 procurement process is completed, before we award. 24 And then finally, a sign off and 25 responsibility to manage the contract, once the awards are

1 made. 2 The purchasing role is a combined role, of 3 both service and control. The purchasing staff must ensure 4 that departments obtain the appropriate services and goods in 5 a timely manner. 6 At the same time they have to ensure that all 7 the policies, standards and processes are followed, that the 8 actual procurement process is openly transparent and that the 9 integrity of the system is maintained. 10 One (1) area, and as we have seen a number of 11 programs since amalgamation, because it tends to be first 12 areas of cuts when we have to look for savings within 13 training and development. 14 In hindsight, that is where much of our 15 shortcoming has been in the City. 16 So, with the recommendations coming from the 17 Auditor General's report, we are working on developing a 18 systematic approach in identifying resources required to 19 train staff -- train staff, not only in the Purchasing 20 Division, but also in the line departments who have 21 responsibility in working with Purchasing to -- to do 22 procurement. 23 You have already seen in the reports again 24 from Mr. Gibbons about our current issues and capacity, 25 within our Purchasing Division. We have had major challenges

1 in recruiting staff and retaining staff in Purchasing 2 Division, and also to ensure that the skill set and the 3 competencies that we need for an effective procurement 4 process are in place. 5 One (1) of our biggest challenges is the fact 6 that when we came together as an amalgamated City, we 7 immediately cut close to 14 percent of the staff. 8 Unfortunately the amount of procurement activity grew from 9 400 million, to where we are now in 2003, over a billion 10 dollars. So, that is why we've got to rebuild our Purchasing 11 Division and rebuild its capacity. 12 Finally, complaint system. Right now our 13 process is more of an informal complaint system, in terms of 14 what staff -- how staff deal with the bidders and vendors 15 when they have concerns. 16 I read Ms. Gibbons' recommendation to the 17 City, and one (1) area that we have been working on with the 18 dedicated staff to implement the recommendation AG is to look 19 at formalizing the complaint system for the bidders and the 20 vendors. 21 Improving management control. I would say to 22 the Commissioner, that this is the highest priority for 23 senior management since 2001. The number of issues about 24 improving management controls have been identified by our own 25 Auditor General, as well as by the Inquiry to this point.

1 The focus of the efforts in improvement have 2 to be done by both the Finance Department, as well as by Line 3 departments. And I would say there are six (6) key areas. 4 First, starting with the Finance Department 5 and the Accounts Payable area. We have a new Director of 6 Accounting, and his job has been to look at ways to improve 7 our tracking of spending and commitments. In essence, there 8 are two (2) major systems in place, as to how we ensure that 9 we track spending, so that we're not over commitments. One 10 (1) is our vendor payment system controls, and secondly, it's 11 the monthly financial variance reports that we provide to all 12 departments. 13 Currently we have three (3) projects in place 14 to do the further improvements that I am referring to, in 15 order to make sure we track spending. One (1) is an invoice 16 follow up procedure that Mr. Cam Weldon, our Director, is 17 looking at. 18 Three (3) way match, this you will hear more 19 about as -- in particular, using technology that's a way to 20 match, when a purchase is ordered, with the invoice that 21 comes in, with a sign off when goods is received and it's an 22 effective system, but again, everything else we've seen you 23 have to apply resources and put the right systems in place to 24 make it work well, but it is a major project that we're 25 embarking on right now, and finally, the imaging of vendor

1 invoices is another tool for timely payment, that the 2 Director is looking at. 3 For the departments, I've asked the 4 Commissioners to look at their four (4) instruments for 5 getting contracts for goods and services, one (1) of course 6 is through a Purchase Order, one (1) is through a Department 7 Purchase Order, when it's under seven thousand five hundred 8 dollars ($7,500). Contract lease orders on the blanket 9 contracts, and finally, through contracts and purchase 10 service agreements for a number of services, including 11 services like hospital services, childcare services. 12 What we want to do is make sure we have a 13 system in place that will give warnings to the Departments, 14 when they are at, let's say, 80 percent spent and in some of 15 the contracts, when they're a 100 percent spent, so that they 16 know exactly where their spending is, matched against the 17 budgets that are approved. 18 The other area that, in particular, in 19 contract -- in blanket contracts that we're working through 20 right now is to identify a clear custodian for those 21 contracts. I comes back, again, to the issue of roles and 22 responsibilities. 23 If there's no clarity as to, at the end of the 24 day, who's in charge of making sure there's no overspending, 25 then you get into some of the difficulties that you have

1 seen, again and again, in the Inquiry. 2 We have also issued this management control 3 checklist that I referred to earlier that the Auditor General 4 recommended to us, starting in 2001. I have also made this a 5 part of performance evaluation every year. So it's a 6 reminder to the management team every year, take a look at 7 that list, go back to it to make sure that you're looking at 8 your internal controls for expenditures, revenues and cash 9 flow management. 10 There has been a lot of talk about consultants 11 and how we manage or not have managed well, the use of 12 consultants in the City. What we have done in the last three 13 (3) budgets is to, what we call, zero base budgeting for 14 consultants. 15 It means that if I spend a certain amount this 16 year, let's assume it's five hundred thousand dollars 17 ($500,000) for consultants from my upcoming budget, I do not 18 have that amount in my budget. I've got to start at zero. 19 I've got to give detailed business cases to justify whether 20 or not I should have any budget for consultant in the 21 upcoming budget. 22 And we have found that this is an effective 23 way to, again, get everybody to look at, you know, what do 24 you need consultants for? What particular services do you 25 need them to provide that City staff cannot provide?

27
  1                 Finally, the Internal Auditing function that
  2  was recommended as part of Mr. Desautels' recommendation
  3  about the new audit framework, the new internal auditor
  4  director was hired in the Summer of 2003.  He has now hired
  5  his staff and his focus is to help senior management improve
  6  risk assessment and risk management.
  7                 And the -- my final point is the six (6) key
  8  areas here is more reporting out to Council.  The CFO is now
  9  required to report out on a quarterly basis all variances on
 10  capital, operating budget and transactions on our reserve
 11  funds and I think the further -- the additional reporting out
 12  certainly ensures that we have an open transparent processes
 13  to how we're managing our budgets.
 14                 Turning to governance, this is the third
 15  review that the City has done since amalgamation.  In 2003,
 16  the CAO staff reported on a review we did that focussed on --
 17  in four (4) areas; structures and systems to improve the --
 18  how Council functions, how Council makes its decision to
 19  ensure that we identified the supports required to make good
 20  decisions by Council.  
 21                 What are the tools that Council should put in
 22  place and use for meaningful public input to ensure that the
 23  public has its say before final decisions are made?  And,
 24  lastly, how to help Council set objectives and set
 25  priorities?

1 In September, just before the term ended in 2 2003, Council just made adjustments to the number of 3 community councils, reducing it from six (6) to four (4), but 4 it did not make any other decisions as it pertained to the 5 governance review paper that staff presented. 6 However, last week, at the Policy and Finance 7 Committee, again, on a communication from Mayor Miller, he 8 has asked that we bring back this report with options for 9 improvements waiting for the Inquiry recommendations. 10 However, in the meantime, because we have a 11 new Council, now in session, and about to embark and to take 12 on a number of key issues, in the presentation, the 13 orientation we did to new Councillors, in particular, but to 14 all members of Council on December 8th, we did talk about, 15 from the staff point of view, as to what we understand the 16 distinction between the -- the role of Council and the role 17 of staff. 18 In our mind, we see Council as the body that 19 sets the vision and the direction for the City. It has to 20 choose and make decisions between competing priorities. It 21 establishes, by bylaw, the City policies and programs. It 22 determines service levels in all the programs and services 23 that the City's responsible for and, finally, it monitors the 24 staff implementation of these Council decisions. 25 For the staff, we have to provide objective,

1 professional advice to Council, when it is looking at setting 2 directions or choosing between competing priorities. 3 At the end of the day, once Council makes its 4 decision, it is the responsibility of the Toronto Public 5 Service, to implement Council's decisions according to the 6 City policy and the highest standards and principles of 7 effective public service. 8 We have started a Toronto Public Service 9 initiative. It was recognized in the last term of Council, 10 that there is a need to develop a framework and a strategy to 11 strength the core values, mission and principles and morale, 12 of the Toronto Public Service. 13 We have done this work, in conjunction with 14 our union leaders, CUPE local 41679, as well as our 15 management association, COTAPSAI. 16 What we want to do through this initiative, is 17 to install a corporate culture of responsibility and 18 accountability at all levels of the Toronto Public Service. 19 Our purpose, which has been adopted by 20 Council, is that we serve a great City and its people. And 21 our commitment are to the values of service, stewardship and 22 commitment and professionalism. 23 We have done this initiative through a number 24 of different forums, different initiatives, such as, 25 involving developing workshops, having management meetings at

1 all levels, bringing people together across departments to 2 ensure that there is this sharing of our purpose, as well as 3 our values. 4 We have had a number of town hall meetings 5 already. I have monthly, say thanks lunch, to staff, which 6 brings staff from all parts of our organization into City 7 Hall, to have a chance to talk about what it means to be part 8 of Toronto Public Service. 9 Myself and management do visits to work sites. 10 So, through a number of different initiatives, we are 11 embarking on getting everybody talking and understanding what 12 it means to be part of the public service. 13 And right now, in the planning stage, is a 14 learning summit for all staff in May and the Mayor is very 15 much committed to open this learning summit for City staff. 16 So, in conclusion, I would say that what we 17 have done today, is still a work in progress. Our goal is to 18 build an organization that's robust and skilled in delivering 19 services and in resolving issues. 20 At the end of the day, the Toronto Public 21 Service, must have the capacity to prevent, monitor and 22 detect, respond and rectify problems on a timely basis and 23 that concludes my presentation. I would be glad to answer 24 any questions and go back to each of those areas to discuss 25 further with you.

1 MR. DAVID BUTT: Thank you very much, Ms. Hoy. 2 And I think again, it would probably be helpful, with the 3 benefit of that overview for us to return, if it's okay with 4 you, perhaps deal with the issues that you've presented in 5 the same order, that we've presented them. 6 And Madam Commissioner, Ms. Rothstein and I 7 have discussed some best way to efficiently address all of 8 the issues and with your permission, if we could engage in a 9 little bit of a three (3) way discussion, with Ms. Rothstein 10 asking questions where appropriate and myself. 11 And I promise we'll make every effort to make 12 sure that we're not talking over each other because, of 13 course, we need to preserve the integrity of the transcript. 14 MADAM COMMISSIONER: You don't mind if I join 15 in every now and then, do you? 16 MR. DAVID BUTT: Absolutely not. 17 MADAM COMMISSIONER: All right. Okay. 18 MR. DAVID BUTT: Now, if I could start, just 19 in terms of the Code of Conduct, unless Ms. Rothstein, you 20 have points you want to jump in earlier? 21 The Code of Conduct came in before Council in 22 1999, have there been developments -- that's reasonably early 23 in terms of this Inquiry's focus. Have there been 24 developments, enhancements that have come to your attention 25 that you're thinking about since that time?

1 MS. SHIRLEY HOY: I think the major part -- 2 the Code of Conduct is for members of Council. As I 3 indicated earlier, I think what we need to do is to make sure 4 that we have a session for Councillors to discuss and to 5 understand what is in the Code of Conduct. 6 My sense is that the communication, the 7 training need to be done. 8 MR. DAVID BUTT: And so what I hear you saying 9 then is it's -- it's less the substance that's the -- the 10 principle focus, but rather the -- keeping people completely 11 informed on the substance that -- that is in there? 12 MS. SHIRLEY HOY: That's right. 13 MR. DAVID BUTT: Is that fair? 14 MS. SHIRLEY HOY: Yes. 15 MR. DAVID BUTT: And can you -- can you 16 comment, if you would please, on the relationship between 17 Councillors and staff, vis-a-vis a Code of Conduct. In other 18 words, would the same principles apply to staff necessarily 19 in your view, if we were to look at Codes of Conduct and 20 unethical behaviour, is there a distinction there? 21 MS. SHIRLEY HOY: When -- when I look at 22 what's in our current Code of Conduct for Councillors and 23 what's in our Conflict of Interest, there are a number of 24 areas that absolutely apply to both the staff as well as to 25 the Councillors.

1 So, for example, we talk about the areas of 2 gifts, and the importance of knowing gifts and benefits. 3 Another one (1) is to make sure -- so that one (1), you know, 4 the kinds of questions that we put in the staff Conflict of 5 Interest, to know when it's not appropriate to accept gifts, 6 and what do you do when you are presented with gifts, and 7 what's the best way to make sure that the giver knows that 8 according to the -- either the Code of Conduct, or the 9 Conflict of Interest that would not be accepted, but you say 10 it in such way that you don't offend the person who's 11 offering. The -- 12 MR. DAVID BUTT: Just -- just before you move 13 on from -- from that topic, and I -- if I can dwell a little 14 bit more on -- on gifts, do you set specific limits on -- on 15 gifts, and -- and I'd like to ask you to comment, both in 16 terms of the Councillors' Code of Conduct, and the -- and the 17 staff Conflict of Interest Policy. 18 MS. LINDA ROTHSTEIN: And, Mr. Butt, can I 19 just interrupt for one (1) moment to make sure. Sorry, can 20 the court reporter hear me? Yeah? Okay. 21 To make sure the Commissioner knows how to use 22 the materials that we've provided to her, in addition to the 23 overhead that is in hard copy that Ms. Hoy has just taken you 24 through, Commissioner, all of the relevant policies that 25 she's briefly run through in her presentation, have been

1 copied and put in a very large binder, three (3) ring binder 2 and they are indexed, hopefully for easy access. 3 So, dealing with this first area on integrity 4 at Tab number 1, which is the orange tab, you'll find that in 5 fact the very first sub tab under 1, at 1.1 is the Code of 6 Conduct for Members of Council and then it's followed by the 7 Code of Conduct for Members of Council, inclusive of the 8 lobbyist provisions, followed by the complaint protocol that 9 Mr. Hoy made reference to and so on, and the Conflict of 10 Interest Policy, which you've seen many times and is in your 11 database, and I know you're very familiar with, you'll find 12 at 1.2. 13 But I just thought in terms of understanding 14 sort of the essence of what Ms. Hoy is talking about, and 15 having easy access to the materials to formulate your own 16 questions, you might want to make reference to this large 17 binder from time to time. 18 MADAM COMMISSIONER: Thank you. I think it 19 might be useful also to have it made as an exhibit, and 20 possibly the -- there are a number of other documents and 21 binders here, Mr. Butt, did you want to have those made as 22 exhibits too? 23 MR. DAVID BUTT: If this is a convenient time 24 for -- 25 MADAM COMMISSIONER: Hmm hmm.

1 MR. DAVID BUTT: -- that would be great. 2 Perhaps the first exhibit, since it was the first one (1) 3 that we dealt with, could be the paper copy of the -- of the 4 Power Point Presentation -- 5 MADAM COMMISSIONER: All right. 6 MR. DAVID BUTT: -- that Ms. Hoy has given to 7 us. 8 MADAM COMMISSIONER: Okay, and that would be 9 the next exhibit, do we remember what that is? 10 Ms. Smith, from before, it would be the -- th 11 next number. 12 THE REGISTRAR: It'll be Exhibit 67. 13 MADAM COMMISSIONER: Sixty-seven (67), thank 14 you. 15 16 --- EXHIBIT NO. 67: Unbound document entitled 17 "Presentation on Good Governance" 18 By Shirley Hoy, Chief 19 Administrative Officer - dated 20 January 19, 2003. 10 pages. 21 22 MS. SHIRLEY HOY: So, Mr. Butt, I just pull 23 out under the Code of Conduct, under gifts and benefits for 24 Councillors, it doesn't specify an amount, it talks about: 25 "No member shall accept a fee, advance,

1 gift or personal benefit that's connected 2 directly or indirectly with the performance 3 of his or her duties of office." 4 MR. DAVID BUTT: Okay, if -- if I could just 5 stop you there for a minute, we -- we just need to make one 6 (1) more binder an exhibit, and then we can get to that 7 answer. And Exhibit 68 then, Madam Commissioner, if that's 8 okay, the Good Governance Phase Toronto CAO's Submission, 9 which is the title that appears on the thick binder -- 10 MADAM COMMISSIONER: Okay. 11 MR. DAVID BUTT: -- of documents that the City 12 has provided for -- for this part of the Proceedings. 13 MADAM COMMISSIONER: Exhibit 68, thank you. 14 MR. DAVID BUTT: Sixty-eight (68). 15 16 --- EXHIBIT NO. 68: Bound document entitled "Good 17 Governance Phase - Toronto CAO 18 Submission" Tabs 1-5. 19 20 MR. DAVID BUTT: Thank you. So -- 21 MS. SHIRLEY HOY: So, in the code for 22 Councillors, it doesn't seem to have an actual amount. But 23 in the Conflict of Interest guideline for staff, certainly 24 there's such a heightened awareness about the conflict of 25 interest, and I'll just give you a specific example before

1 Christmas. 2 As you know, during Christmas time, in 3 particular, people do tend to get gifts and that's when the 4 questions come and I guess a very good indication the system 5 is that both the Commissioners and myself are getting more 6 questions about what is appropriate and not appropriate. 7 So having that discussion itself is very good. 8 And I got this particular incident where the new President of 9 the Firefighter's Association wrote me a letter saying that, 10 from year to year, they always give a very nominal kind of 11 gift, valued about fifteen dollars ($15), it's a mug with 12 some treats in it, and he wanted to make sure that that was 13 in keeping with the Conflict of Interest guidelines. 14 Which made me start thinking that we should 15 look at an actual amount in the guidelines as a further 16 improvement to our staff Conflict of Interest policy. As you 17 know, we set up our policy in such a way that we give 18 specific examples already but I know that one of the 19 recommendations from Ms. Gibbons is that, you know, maybe we 20 could add more life examples so that people know in what 21 situation it's acceptable and what is not. 22 So I had a conversation with the President and 23 I said, that's acceptable, that's nominal, but that's the 24 kind of conversation we want to have in the public service so 25 that there is a good understanding of what is appropriate and

1 what is not. 2 MR. DAVID BUTT: Could you -- 3 MADAM COMMISSIONER: Just, sorry, presumably 4 if -- if there were specific examples in the Code of Conduct, 5 then something like that wouldn't have to be ratcheted up all 6 the way to the CAO -- 7 MS. SHIRLEY HOY: That's right. 8 MADAM COMMISSIONER: -- and you could 9 concentrate on -- on doing other things? 10 MS. SHIRLEY HOY: Yeah. 11 MADAM COMMISSIONER: All right. 12 MS. SHIRLEY HOY: I think it's just, right 13 now, heightened awareness. Another example, as you know, 14 people are very concerned about any tickets that are offered 15 to staff because of what we've gone through -- 16 MADAM COMMISSIONER: We understand that's 17 happening also in Ottawa. 18 MS. SHIRLEY HOY: So we just -- Exhibition 19 Place, which is an agency of the City, just opened the new 20 Coliseum in which, of course, is now the American Road Runner 21 hockey league. It is an agency of the City. We -- a number 22 of the staff were invited to the opening and, again, the 23 question came up; is this appropriate? 24 So, what it means is that, right now, because 25 of the fact that people are not quite sure and because of the

1 media scrutiny, at the end day, I think people want to have 2 the assurance of their managers and supervisors and that, in 3 essence, is what we want staff to do; have that conversation. 4 You know, if you're not sure, make sure that 5 that conversation takes place because you can never give 6 enough examples to cover all circumstances, but we want to 7 make sure that people ask that question of themselves. You 8 know, is this appropriate? 9 MS. LINDA ROTHSTEIN: And Ms. Hoy, in the 10 current environment, where do Councillors go if they have 11 those kinds of questions? Who do they ask? Are those 12 questions coming to you? Are they being routed through you? 13 Are you routing them back through some process? And what do 14 you envisage as being a good way of having Councillors' 15 questions of that nature and kind addressed? 16 MS. SHIRLEY HOY: I think, right now, the -- 17 certainly the new Councillors ask me that and it would not be 18 appropriate that it go through the administration. It must 19 go through the -- either the Mayor's Office right now, 20 because the Mayor is the head of Council, he is the CEO of 21 the Corporation. 22 I think that's why Cou -- the new Councillors, 23 for example, asked me when we would get the Integrity 24 Commissioner in place and I think that's why the Mayor's 25 letter at the Policy and Finance Committee last week was to

1 say, let's set it up so that the advice giving can now begin 2 to happen because that part doesn't need Provincial 3 legislation. 4 We can have somebody in place who can start 5 now giving advice to Councillors, but that separation between 6 what advice myself and Commissioners give to staff needs to 7 be separate from what Councillors get and where they would be 8 able to get that advice is through an Ethics Commissioner or 9 an Integrity Commissioner. 10 MR. DAVID BUTT: Now, this question that I'm 11 about to ask does take us a little bit into your discussion 12 of respective roles and responsibilities but can you help us, 13 just why is it that you feel it's inappropriate for you, as 14 -- as staff, to be advising Councillors on those sorts of 15 ethical issues? 16 MS. SHIRLEY HOY: Well, Mr. Butt, because 17 when I look at the Code of Conduct, and I guess, that was 18 trying to answer your first question about whether -- what 19 areas are similar and what areas are different -- 20 MR. DAVID BUTT: Yes. 21 MS. SHIRLEY HOY: -- there are a number of 22 areas that are different when I look at the Code. For 23 example, the conduct respecting their use of staff for 24 election campaign work. 25 The area regarding their, you know, there's

1 one (1) section that talks about the conduct of Councillors 2 vis-a-vis staff. So, I think that if myself or any other 3 staff on the administration side start giving advice to the 4 Councillor on their code, since some of the Code covers our 5 relationship with them, that would make it very difficult. 6 MR. DAVID BUTT: Okay. And there was just one 7 (1) other issue I wanted to return to, I -- I hear as a -- as 8 a theme, specific examples which are illustrative, but, just 9 in terms of the general principle that seems to be guiding 10 this area of gifts and those kinds of benefits, I hear you 11 saying, if it's nominal, don't worry about it. 12 Can you help us, just again with -- with your 13 sense by perhaps using a neutral example, can you tell us 14 your vision of something that would cross that line and no 15 longer be nominal and would therefore be unacceptable? 16 MS. SHIRLEY HOY: Well, I would say that 17 nominal in my mind, is like a mug. I -- We do have, for 18 example, a lot of visits from other countries, and often they 19 come with very elaborate and expensive gifts. 20 In some cases, you cannot turn them back 21 because it would be -- offend the -- the giver. So what we 22 do there, is to make sure that staff know what you do with 23 such a gift. You report it to the senior -- to your manager 24 and then you give it over to protocol and they will know what 25 to do with that.

1 In terms of gifts, for example, in -- and we 2 have specific questions in the Conflict of Interest for 3 staff, you know, for suppliers that we currently have 4 contracts with, it's not appropriate to have lunches with 5 them. 6 We have a number of areas where we want to 7 make it clear to staff and to maybe give specific examples, 8 even for you know, meals at night, you know, and lunch -- we 9 say, keep that to a minimal. 10 Do your business at work during the business 11 hours. I -- I think it's really important that there is some 12 clarity as to what is expected and that you don't need to do 13 work during lunch or supper break, in order to get the work 14 done; I think that's the clear message that we want to give 15 to staff. 16 MADAM COMMISSIONER: Sorry, just with respect 17 to that, you're saying that it's not appropriate for a staff 18 to have lunches with suppliers who are currently doing 19 business with the City? Did I -- I just want to make sure I 20 understood that right? 21 MS. SHIRLEY HOY: Yes. 22 MADAM COMMISSIONER: Okay. 23 MS. SHIRLEY HOY: That is what I'm saying. 24 MS. LINDA ROTHSTEIN: But, you mean at the 25 suppliers expense, you don't mean that if there's a business

1 lunch that's hosted by the City inside for whatever reason, 2 because there's a business meeting, that that would be an in 3 -- that would be, in all cases, inappropriate, do you? 4 MS. SHIRLEY HOY: No, if we host it, and we 5 were to convene for whatever -- for presentation or whatever, 6 and we pay for it, that's fine, but, at the expense of the 7 supplier, it's not appropriate. 8 MADAM COMMISSIONER: Okay, is that for -- are 9 you talking about, sort of a one (1) on one (1) lunch, or are 10 you talking about an event that a staff member would go to? 11 MS. SHIRLEY HOY: I'm talking about if it is a 12 supplier calls you up and I guess in particular, the bad 13 habits that you have seen in the Inquiry, where on an ongoing 14 basis, you just go for lunch; that is absolutely not 15 appropriate. 16 MADAM COMMISSIONER: Okay. 17 MS. SHIRLEY HOY: However, if for example, you 18 want to do, for a reason you have to do over lunch break but 19 the City hosts the event, and there's an agenda, there's a 20 reason for that kind of lunch meeting, that I think is fine, 21 because sometimes we have lunch meetings because there's no 22 other time to convene a meeting, but, I think it's not 23 appropriate if the supplier pays for it. 24 MADAM COMMISSIONER: And -- and has that been 25 told to staff?

1 MS. SHIRLEY HOY: Absolutely, it's been pretty 2 clear and if they have a doubt they would ask, which is what 3 we want them to do. 4 MR. DAVID BUTT: If I could just follow up on 5 that theme of, if you have a doubt ask. You've spoken about, 6 in the Councillor context, the recognized interest in 7 everybody at the City having an Integrity Commissioner, in 8 place. 9 I gather from what I hear you saying that you 10 would hope that that person would perform a significant 11 advice role before problem areas surface, rather than 12 primarily an after the fact, investigative role. Is that 13 right? 14 MS. SHIRLEY HOY: I would say the -- 15 especially as soon as it's established, the advisory role is 16 key, yes. 17 MR. DAVID BUTT: And -- and how do you see 18 that advisory role unfolding for Councillors? 19 MS. SHIRLEY HOY: Well, a lot of it I think 20 will be individuals, individual requests and individual 21 meetings, with the Integrity Commissioner, on issues that an 22 individual Councillor may have. 23 MR. DAVID BUTT: And -- and how was that 24 approach made, is it -- is it a confidential approach, is it 25 an approach in writing, how would you see that -- that advice

1 capacity being structured? 2 MS. SHIRLEY HOY: In order to have a sense of 3 the demand and what's required, I mean it depends on who the 4 Integrity Commissioner is. My sense is it will be a mix, 5 you're going to get some that are just, you know, here's an 6 invitation that's come in, and I'm sure the Councillors say, 7 you know, is this appropriate, and here's an issue I'm 8 dealing with you know, you will get quite a bit that's 9 verbal. 10 But as we have seen, you know, some of it, no 11 doubt, will -- will involve more detailed review by the 12 Integrity Commissioner, but my hope is that we will have some 13 way of tracking, you know, the nature of the advice, because 14 there will be a bit of learning curve for Council and 15 Councillors. 16 In particular, as to what's appropriate to go 17 to the Integrity Councillor -- or Integrity Commissioner, 18 versus your own legal advice because you'll see that a number 19 of areas Councillors have to go to their own lawyers if they 20 believe and when they declare a Conflict of Interest on the 21 floor of Council on the particular matter. 22 So, I'm sure the Integrity Commissioner will 23 want to distinguish what his or her role is not, versus when 24 it is appropriate for that Councillor to go seek legal 25 advice.

1 MR. DAVID BUTT: And as part of functioning 2 effectively, once a -- a privacy or -- or Integrity 3 Commissioner has -- has worked out the -- the two (2) areas, 4 whether it's private legal advice, or something that he or 5 she can deal with. Is there an educational role for that, 6 Commissioner, in terms of communicating that distinction, so 7 that Councillors are able to consult the appropriate 8 professional? 9 MS. SHIRLEY HOY: My -- my hope is that as we 10 have seen with the Auditor General, that there should be an 11 annual report out -- kind of -- the kinds of issues that 12 person's dealt with, because that's how you have lessons 13 learned, and to make sure that if there's a pattern of 14 particular questions, and policies should be established by 15 Council, that's how you would learn that, you know, maybe 16 there are shortcomings, either in the Code of Conduct or in 17 the Municipal Code, in terms of the Code governing how 18 Councils conduct themselves, and Standing Committees, or you 19 know, at Council. 20 MR. DAVID BUTT: Could there be an educational 21 role for an Integrity Commissioner beyond an -- an annual 22 report? 23 Would you see, for example, presentations or 24 ongoing discussions between Councillors and the Integrity 25 Commissioner?

47
  1                 MS. LINDA ROTHSTEIN:  Are you suggesting, Mr.
  2  Butt, that it would be the role of the Integrity Commissioner
  3  to be involved in conducting the training of -- of
  4  Councillors on the policy?
  5                 MR. DAVID BUTT:  That -- that's what I'm
  6  asking about.  I just wonder about your views on -- on that,
  7  as you know, we're going to be hearing from the Integrity -- 
  8                 MS. SHIRLEY HOY:  Yes.
  9                 MR. DAVID BUTT:  -- Commissioners, and this is
 10  an issue that we've been thinking about with the Integrity
 11  Commissioners, so I'd be interested in your thoughts on that?
 12                 MS. SHIRLEY HOY:  I think the public education
 13  aspect is key, because once we set up the office I think it's
 14  also important that the public knows what's expectation that
 15  role, given the fact that we -- we have the Auditor General
 16  in place at the City as well.  There may be confusion as to
 17  what does the Auditor General do that's different than what
 18  Integrity Commissioners do. 
 19                 So, the public education aspect of this is
 20  very important.
 21                 MS. LINDA ROTHSTEIN:  And you would see the
 22  Integrity Commissioner as being involved in developing that
 23  package of education, whether he or she were doing it himself
 24  or herself or simply overseeing the way that that education
 25  package is delivered, both to the public and to the

1 individual Councillors; is that -- 2 MS. SHIRLEY HOY: That's right. 3 MS. LINDA ROTHSTEIN: Okay. 4 MS. SHIRLEY HOY: Yeah. 5 MR. DAVID BUTT: Now, returning to the staff 6 side of things, if we -- if we have a vision of an Integrity 7 Commissioner who offers that kind of assistance in -- in 8 working out the -- the ethical issues that Councillors 9 encounter, what's the parallel inside the -- the staff 10 regime? Obviously there is a -- a Conflict of Interest 11 Policy, but in terms of access to advice, support, insight, 12 how -- how do you see that similar process unfolding for the 13 staff? 14 MS. SHIRLEY HOY: I think that's the role of 15 management to ensure that gets communicated out, so all 16 levels of management, that we need to understand well the 17 Conflict of Interest policy, we need to communicate, 18 communicate, communicate. 19 We need to, you know, talk to our staff about 20 situations that may arise, that they have concerns about, but 21 I see that it's responsibility of all staff, that -- that 22 management has a responsibility to make sure that it's done 23 well, that the policy is implemented well. 24 MADAM COMMISSIONER: And is that where -- 25 where the staff have now been informed that they shouldn't be

1 having lunches with suppliers? I'm just curious as to -- 2 when I asked you if that had been told to staff, you said 3 that it has, and I'm just -- I would be interested in knowing 4 how that has been communicated to staff? 5 MS. SHIRLEY HOY: That has been communicated 6 through the performance evaluation process, as I mentioned, 7 because we attach that as a conversation that every staff 8 going through the performance manage -- performance review, 9 so it's through all the management ranks. 10 And also through the ongoing reminders. We 11 talk about the Conflict of Interest guideline in our employee 12 newsletter "Inside Toronto". And as I indicated, we are 13 looking at -- when I compare our current Conflict of Interest 14 policy with those of other municipalities we have been 15 collecting, you know, additional suggestions that we have 16 seen. So going -- kind of -- the best practice approach to 17 look at a number of areas that we can further tighten up in 18 the Toronto guidelines. 19 MS. LINDA ROTHSTEIN: But I think the 20 Commissioner's question, Ms. Hoy, is, if, for example, and I 21 know this has happened so I'm going to get you to talk about 22 this, since this Inquiry, there's been a concern about 23 attendance at a charitable event, for example. 24 Something that the policy didn't clearly 25 cover, at least some people thought it didn't, and in the

1 CAO's office, you developed a -- sort of a guideline or a -- 2 a cue to staff about in what circumstances they could or 3 couldn't attend a charitable event. 4 What is the communications method that you use 5 to specifically advise that entire bureaucracy that you're 6 responsible for about what your current thinking is in terms 7 of how the Conflict of Interest policy deals with charitable 8 events? 9 Do you -- do you send out an e-mail to all 10 staff that comes directly from your office? Do you send one 11 to your commissioners and leave it to them, I think the Comm 12 -- Commissioner's actually interested in how many steps are 13 involved in providing that communication to staff? To what 14 extent it's in writing? To what extent it's verbal? 15 Like, I actually think she's interested in 16 that level of detail if you would help us with that? 17 MS. SHIRLEY HOY: Well, it certainly is in 18 writing and I'll give you a specific one because -- and it 19 affects the whole staff group, the whole Toronto public 20 service. 21 MR. DAVID BUTT: Ms. Hoy, if you could 22 perhaps help us, is -- is this specific example you're about 23 to give us in our binder of materials? 24 MS. LINDA ROTHSTEIN: I'm just looking to see 25 whether --

1 MS. SHIRLEY HOY: No, it's not, but I can 2 give you a copy that we can submit into you if that would be 3 helpful. This deals with our United Way campaign, okay, 4 which involves, of course, everybody in the whole Toronto 5 public service and there was a lot of concern about how do we 6 go to our current suppliers that we work with to get a 7 donation of a nominal gift? 8 As you know, all organizations, the United Way 9 agencies themselves, go to the people they work with and say, 10 you know, can you give us a prize for an event to -- in 11 support of United Way, because of our concern that we want to 12 make sure that the suppliers that we currently work with want 13 to support our United Way Campaign, but we don't want them to 14 get the wrong message that supporting the staff of United Way 15 Campaign would, in any way, affect the -- any of the 16 procurement processes that they may get involved with, in 17 consultation with the staff at United Way we have now put 18 into our letters during the United Way Campaign this clause 19 that says 20 "There are many worthy charities in need of 21 donations and contributions from 22 businesses, organizations and associations, 23 however, business contributions to the City 24 of Toronto's employee United Way campaign 25 will have no effect on the City of

1 Toronto's decisions in the awarding of 2 contracts or acceptance of bids or 3 proposals." 4 So we want to make sure they know the two (2) 5 are not linked at all. And how that goes out is it's an 6 e-mail -- it's a memo from me to the Commissioners and they 7 then, in turn go -- gets it through every level of 8 management, all the way through. 9 It is sent out and I have cc all the United 10 Way -- the United Way project director and he, of course, in 11 turn, gives it out to the whole group that's working on the 12 United Way campaign for the City. 13 I've given a copy to our to -- our Auditor 14 General and that's how you get it right to the whole 15 organization, but that was one that we felt was really 16 important to do because, again, people were concerned, you 17 know, is it appropriate, is it not appropriate? How do we 18 assure that the two (2) initiatives are completely separate? 19 And that's how we do it. 20 MS. LINDA ROTHSTEIN: So, a couple of things. 21 First of all, for the record, Commissioner and Mr. Butt, Ms. 22 Hoy is referring to a letter dated January the 27th, 2003, 23 that went to all of the Commissioners at the City of Toronto. 24 And it has attached to it, the particular form 25 re: disclosure of gifts and benefits that she referenced and

1 we will make copies for you and ensure that everyone has a 2 copy of that, including your Registrar, but, if I understand 3 what you're saying, Ms. Hoy, is there's time where at EMT, 4 you develop a kind of bright-line guideline, following -- 5 coming under the umbrella of Conflict of Interest, that you 6 think is necessary to actually put in writing and send out to 7 the Commissioners and then they're responsible for sending in 8 writing to all of their staff and on down, is that right? 9 MS. SHIRLEY HOY: Yes. 10 MS. LINDA ROTHSTEIN: There's other occasions 11 where, for example, in the area of lunches, where it's part 12 of the question/answer format, part of the training and 13 development package that all staff are supposed to engage in. 14 And you leave it really to that level of education, as 15 opposed to putting something specifically in writing. Is 16 that -- is that what I'm hearing from you? 17 MS. SHIRLEY HOY: That's right. Because it 18 would be part of the further clarification of the Code of -- 19 the Conflict of Interest policy. 20 MS. LINDA ROTHSTEIN: Right. So if I hear 21 you, there's always going to be a judgment call for the City 22 about when they need to actually formulate it in writing, 23 because they want to treat it as a bright-line. 24 And when they're going to rely on, sort of, 25 question and answer and general education and training to

1 create the right standards for the staff. Is that -- 2 MS. SHIRLEY HOY: That's right. 3 MS. LINDA ROTHSTEIN: -- what I'm hearing? 4 MS. SHIRLEY HOY: That's right. 5 MADAM COMMISSIONER: And is there any 6 expectation on the staff then, using this United Way 7 illustration, that when they solicit nominal gifts from -- or 8 gifts from suppliers, that they are supposed to tell them 9 what is contained in your memorandum, about -- that they 10 might -- that this is not going to have any affect on the 11 awarding of contracts, for example? It may be that -- 12 MS. SHIRLEY HOY: Yes -- 13 MADAM COMMISSIONER: -- it's really not 14 necessary to do that because it's nominal, but, I'm just 15 curious as to -- 16 MS. SHIRLEY HOY: Commissioner, I may have 17 been unclear here. That clause I read out is in the letters 18 that we send to the suppliers -- 19 MADAM COMMISSIONER: I see. 20 MS. SHIRLEY HOY: -- when we ask them if -- 21 would you like to make a donation. 22 MADAM COMMISSIONER: Right. Thank you. 23 MS. SHIRLEY HOY: So it's actually in that 24 letter and United Way indicated their suggestion that be used 25 by other agencies as well.

1 MADAM COMMISSIONER: Okay. I might have 2 misunderstood that. It wasn't just to the staff, it was 3 actually what went out to the suppliers -- 4 MS. SHIRLEY HOY: That's right. That that 5 clause need to be included in all letters going out to the 6 suppliers. 7 MR. DAVID BUTT: Ms. Hoy, a question if I 8 could, on the process of how a policy or a direction like 9 we've just been discussing in the United Way context, comes 10 to fruition? Are these problems sort of generated from the 11 top down, or do they peculate up from the bottom and if so, 12 is -- is there process for encouraging the bringing forward 13 of these kinds of issues? Can you talk a little bit about 14 that inside the organization? 15 MS. SHIRLEY HOY: Well, this is an interesting 16 illustration of what we're going through right now. I do 17 think that because of the Inquiry, there's a lot of concern 18 by staff, rightly so. 19 I would say that the risk taking level by City 20 staff right now, is pretty low, unless they know it's in 21 policy they're saying, you know, I want to make sure I'm 22 doing the right thing. 23 So, what happened here is that we for exa -- 24 the other reason why this was needed and how it came up, was 25 that this year, in 2003, we did not allow the use of golf

1 games to be part of our United Way campaign. 2 We said, we want to see what's coming out from 3 other regions, and that's when I did my consultation with my 4 colleagues, CAO's across the municipalities and in reading 5 Ms. Gibbon's report on best practice and charities and golf 6 games, we said, well, this year because we're still waiting 7 for the recommendations coming from the Inquiry, let's rely 8 on other events. 9 So, in the discussion, it came from bottom up, 10 as the project team said to themselves, you know, then how do 11 we make sure that we are following the Conflict of Interest 12 guidelines; we sent these letters out. They identified that 13 as an issue and then it came all the way up to our executive 14 management team meeting. 15 We then consulted with United Way, got the 16 wording in and then staff implemented and I send the memo out 17 to make sure that it gets done. So, it was kind of both, 18 because the issue was beginning to identify to make sure that 19 we had a successful United Way campaign, but, at the same 20 time, knowing that we had a lot more restrictions, as to the 21 kinds of activities that we will be using to do the campaign, 22 that discussions started. 23 MS. LINDA ROTHSTEIN: And, Ms. Hoy, for those 24 who thought that it wasn't possible to raise money for the 25 United Way without golfing, why don't you tell the

1 Commissioner about the success of the campaign? 2 MS. SHIRLEY HOY: We -- we over achieved the 3 target again, and we're over 1 million. This is the third 4 year in a row, that we have ach -- over achieved our United 5 Way campaign target. 6 MADAM COMMISSIONER: And is there no more 7 golf, is that what I hear you saying, from Ms. Rothstein's 8 question at lease? 9 MS. SHIRLEY HOY: Well, there was no golf in 10 2003, I -- certainly it's a very popular activity that does 11 provide opportunity for staff to have fun, and at the same 12 time raise money for a very worthwhile charity. What I have 13 said to them, and the question that already came back to 14 staff, well, what about 2004? 15 I said, well, set out a good policy, we have 16 given them the report from Mr. Gibbons, and we said, if you 17 have a good policy that we report out to Council, supported 18 by the Mayor and Council, then set out the rules and perhaps 19 we'll put it back in. And that's where we are at right now, 20 and they're busily looking at that. 21 MS. LINDA ROTHSTEIN: But, Commissioner, if I 22 can just add this aside, you'll remember that a year ago we 23 spent a lot of time hearing evidence about golf, and I think 24 Ms. Hoy, in light of that evidence and her EMT, thought it 25 prudent at least for the duration of -- of the year, to think

1 about other ways to do fundraising, particularly and 2 precisely in response to that evidence. 3 MADAM COMMISSIONER: Thank you. 4 MR. DAVID BUTT: Just -- just from a human 5 resources perspective, and we -- we can talk at length on -- 6 on the avoidance of these kinds of conflicts and -- and their 7 importance, on the other hand there's obviously morale issues 8 for staff in terms of these outings and the potential they 9 have to contribute to informal networking and -- and -- and 10 on morale. 11 What attention do you pay to the morale side, 12 so that these policies don't seem relentlessly prohibitive? 13 MS. SHIRLEY HOY: Well, improving the morale 14 in the Toronto public service is one (1) of our high 15 priorities, as the senior management group, but I think as 16 the United Way campaign indicated, staff are also very 17 resourceful. I mean, the launch of our campaign was just 18 phenomenal in terms of other activities that they came back 19 with and made it very, very successful. 20 I think the expectation of staff is that if 21 we're clear on the policy, the reason why -- what they want 22 to understand is why do senior management put a policy in 23 place, you know, what is it trying to do. And if you have a 24 good reason for it, and they understand where you're coming 25 from and what you're trying to achieve, then they always have

1 other ideas that will help. 2 The United Way campaign at the City has been a 3 major, major morale booster. I mean all parts of the 4 organization come together, and what we have seen is that, 5 you know, if there's clarity on the policy they can work with 6 it. 7 MR. DAVID BUTT: And just again, just to 8 develop a little bit further, this -- this notion of -- of 9 responding to new ethical challenges from the bottom up. 10 Practically speaking, what would your ideal view be, of the 11 appropriate route of a problem that -- let's say a front line 12 worker right here at the front desk at East York, encounters 13 an ethical problem, he scratches his or her head and said, 14 you know, I'm probably not the only person who's in the -- in 15 the City staff who's encountered this difficulty. 16 Where does that person go with that issue, and 17 how does it -- how does it make its way as -- as horizontally 18 broad as it needs to across the organization? 19 What's your ideal vision of how that problem 20 would get dealt with? 21 MS. SHIRLEY HOY: Ideally I would hope that 22 that person that has the problem would have enough of a very 23 good relationship with his or her supervisor to say, I have 24 this dilemma, what do you think? What's your advice? 25 If the -- the one (1) thing that we have found

1 where you get into difficulty is if the person -- the 2 supervisor doesn't respond, either timely, or know the policy 3 well enough to give good advice. 4 How one (1) incident like that be identified 5 as, you know, across the Corporation as, maybe, one (1) that 6 has broader policy implications, that's when the kind of 7 cross-inter-departmental committees that we set up, I think 8 is a good route to -- to -- to identify those issues. 9 The senior management group, the Commissioners 10 and I, have three (3) sub-committees that we have set up that 11 involve all the departments, but at the Director level and 12 sometimes Director/Manager level, because that's when you 13 will then hear what are the issues coming from all the 14 departments. 15 One deals with financial administration 16 issues, it's the Financial Admin Coordinating Team and we 17 rotate the chair of that group from department, department. 18 Another one deals with human resources issues and a third one 19 deals with policy issues. 20 So, in the same way that sometimes specific 21 program policy issues are -- have common themes that need to 22 be pulled together, that would be the sub-committee. So we 23 have three (3) sub-committees that report into the Executive 24 Management Team and that is a way when we can catch problems 25 that cut across more than one particular program area or

1 department. 2 MR. DAVID BUTT: Where would you see 3 wrestling with ethical and conflict issues fitting into those 4 three (3) committees? Would it be one (1) of those three 5 (3)? Would it be all of those three (3)? Where would you 6 see those discussions happening? 7 MS. SHIRLEY HOY: I think it would happen 8 probably in all three (3) but where it would come up to make 9 some suggestions as to whether we need to look again now at 10 the Conflict of Interest, most likely, would be the workforce 11 strategy because it's out of these also are key initiatives 12 for developing the Toronto public service as well as the 13 people strategy. 14 So, in talking about those areas, often the 15 issue about conflict of interest would come up. 16 MR. DAVID BUTT: Now, I'd like to ask this 17 question, you've said that, hopefully, that front line worker 18 would be comfortable under his or her supervisor; do you ever 19 see difficulties in the sense that that supervisor is also 20 responsible for evaluating that individual and perhaps 21 sharing a sensitive ethical issue may be perceived by the 22 worker as exposing a weakness in his or her judgment or 23 potentially problematic in that sense? 24 Do you have any concern that that might 25 inhibit the tendency of the employee to share those dilemmas

1 with his or her supervisor? 2 MS. SHIRLEY HOY: Depends on the nature of 3 the issue that you're thinking of. If it's work related I 4 would hope that that kind of situation doesn't arise too 5 often, but if there is a concern, we also have in our HR 6 Division, employee assistance, employee support staff, 7 consultants who also provide that kind of advice to staff as 8 well. 9 So that -- that is a resource to staff if they 10 want to go and get advice. 11 MR. DAVID BUTT: And, of course, at employee 12 assistance end, the consultation between the staff person and 13 the employee assistance person would be -- 14 MS. SHIRLEY HOY: Would be -- 15 MR. DAVID BUTT: -- confidential? 16 MS. SHIRLEY HOY: Yes, that's right. 17 MR. DAVID BUTT: And could you foresee the 18 employee assistance regime offering advice or assistance with 19 respect to conflict issues? 20 MS. SHIRLEY HOY: They may get into that as 21 well. I would -- yes, absolutely. 22 MADAM COMMISSIONER: So the employee 23 assistance plan allows for employees to ask questions about 24 ethical issues? It's not just physical ailments or problems 25 in the family or stress or anything like that?

1 MS. SHIRLEY HOY: Well, I would say that, 2 depending on the nature of the problem it becomes a stress 3 issue; right? 4 MADAM COMMISSIONER: Yes. 5 MS. SHIRLEY HOY: So my hope is that the 6 staff in our human resource area would be able to direct that 7 employee to the right place to get assistance, you know, 8 depending on the particular circumstance of the issue that's 9 being raised by the employee? 10 MS. LINDA ROTHSTEIN: As I understood, Ms. 11 Hoy, Commissioner, what she was saying is that where the 12 supervisor isn't providing the right response, it would be 13 natural for the employee, or presumably self-evident, that 14 they'd go to employee assistance where they're having any of 15 those kinds of problems with the supervisor. 16 So if the supervisor is actually either not- 17 responsible or, for whatever reason, is part of the problem 18 on an integrity issue what employees would know is, when you 19 can't go to your supervisor, this is who you go to on a 20 confidential basis. 21 So that while they're not thought of as a 22 specific repository for these issues, they deal with the 23 whole range of issues that deal with the frailties of the 24 supervisor; isn't that the idea? 25 MS. SHIRLEY HOY: Yes, I would assume,

1 depending -- if the employee can't talk to the supervisor, 2 it's pretty serious and if that's the case, my sense is that 3 it probably would relate to stress issues in the workplace as 4 well. So I would imagine that those HR consultants would 5 hear some of those concerns. 6 So, they need to know what's the most 7 appropriate place to direct that employee to get assistance. 8 MS. LINDA ROTHSTEIN: The other point that's 9 not obviously linked, but, I think what it's useful for 10 everyone to understand is, the effect of the fraud policy and 11 the hot line. And while the language used is fraud and 12 alleged fraud and so on, I think it would be useful, Ms. Hoy, 13 if you told the Commissioner and Mr. Butt, about what the 14 sort of, actual practice is, that range of reporting, in 15 relation to that policy, because it's much broader, as I 16 understand it, than what might first meet the eye. 17 MS. SHIRLEY HOY: Well, actually the Auditor 18 General has a follow up report that's going to our Audit 19 Committee this week and just to give you a sense of the 20 statistics, out of two hundred (200) cases that he received 21 through the hot line, the fraud and waste hot line between -- 22 MR. DAVID BUTT: Ms. Hoy, I'm sorry -- if I 23 could just interrupt, are you referring to a document that's 24 inside Exhibit 68, our big black binder? 25 MS. SHIRLEY HOY: No, this is --

1 MR. DAVID BUTT: Okay -- 2 MS. SHIRLEY HOY: -- but, we can again, 3 provide you a copy; this is just a report going to the Audit 4 Committee agenda this week. 5 So, between September 1st, 2002 to August 6 31st, 2003, this report indicated there were two hundred 7 (200) calls into this hot line. Of the two hundred (200), 8 sixty six (66) of them, he indicated there was not enough 9 information, so those weren't pursued. 10 But, out of the hundred and fourteen (114), 11 that were referred to departments to examine, to investigate 12 and then they have to report back to the Auditor General, as 13 to what they did with it, he summarized the kinds of 14 complaints, the nature of the allegations, going from 15 irregular employee work hour, for example, excessive 16 overtime, coming in late, going early, allegations about 17 staff attending social events on corporate time. 18 Dealing with issues such as not following the 19 Conflict of Interest policy, inappropriate conduct by staff, 20 using donated clothing items for personal use. So those are 21 the kinds of allegations that if an employee feels, you know, 22 there is no use reporting to the supervisor, there is a route 23 through reporting to the hot line because the Auditor General 24 will determine which ones he will investigate directly, and 25 which ones he expects the departments to follow up on and

1 resolve. 2 MR. DAVID BUTT: And I take it then, that that 3 is the primary vehicle if an employee perceives that there is 4 supervisor misconduct? 5 MS. SHIRLEY HOY: That's right. 6 7 (BRIEF PAUSE) 8 9 MR. DAVID BUTT: And again, just to clarify, 10 that hot line of course is confidential and -- 11 MS. SHIRLEY HOY: Yes -- 12 MR. DAVID BUTT: -- the initial recipient of 13 all of the calls is the Auditor General? 14 MS. SHIRLEY HOY: That's right. 15 MR. DAVID BUTT: So, it is going to an 16 external -- 17 MS. SHIRLEY HOY: That's right. 18 MR. DAVID BUTT: -- source? 19 MS. SHIRLEY HOY: Yes. 20 MR. DAVID BUTT: And the Auditor General would 21 then make decisions about which complaints he would 22 investigate himself, as opposed to referring back to the 23 departments? 24 MS. SHIRLEY HOY: That's right. 25 MR. DAVID BUTT: And can you help us, how does

1 the -- how does that decision get made? 2 MS. SHIRLEY HOY: It's made by the Auditor 3 General and his staff and so they assess the information that 4 they receive through the hot line. 5 MR. DAVID BUTT: And so presumably they're 6 looking at the potential for the department to itself, be in 7 a conflict, to be investigating the allegation? 8 MS. SHIRLEY HOY: That's right. 9 MR. DAVID BUTT: Could I ask a question now 10 about the comments that you made earlier in the morning, 11 pertaining to the Conflict of Interest policy and you 12 mentioned that it has become part of the performance review. 13 Would you be able to help us a little bit, 14 with how that process unfolds and what objectives you're 15 seeking to achieve by adopting that aspect of the performance 16 review? 17 MS. SHIRLEY HOY: I have seen in other 18 jurisdictions and certainly again in my comparison of notes 19 with CAO's that we meet every six (6) weeks or so, we did 20 talk about, you know, Conflict of Interest guidelines and the 21 various municipal jurisdictions. 22 In some areas, we have new staff when you come 23 in, you sign it to say that you have read it and you 24 understand it. 25 My desire and support by the Commissioners, is

1 that we want to make sure people are reminded of it every 2 year. 3 So, now we I'll use the Commissioners and 4 myself in the example. We sit down before the year is 5 finished to review the objectives that were set, what was 6 achieved, what's outstanding and you know, where are the -- 7 where objectives are fully met and where the areas perhaps 8 requiring further development support. 9 And as part of it, there are three (3) things 10 attached to that performance evaluation. One (1) is to 11 confirm that they've read again and reviewed the Conflict of 12 Interest Guideline, the second one (1) is that they have 13 reviewed the Management Control Checklist, so that they have 14 to assure me that they're working with their staff, have 15 reviewed in their department, the internal controls are in 16 place. 17 And the last one (1) is the approved positions 18 in their Department, that there be major changes in the 19 number of staff positions in the Department. 20 And the purpose is just a reminder, because I 21 think reading it once -- when you begin your employment and 22 then kind of forgetting about it means that over time we're 23 going to get into difficulties, bad habits form. 24 What we want is to make sure that people 25 recognize that this is important, and it's important to

1 continuously update oneself as to what the policy is, because 2 only with that, then you can make sure that's communicated on 3 an ongoing basis out to the rest of the staff in the 4 Department. 5 MR. DAVID BUTT: And you -- you mentioned that 6 part of that process is reviewing, for each manager to review 7 him or herself, but also to review with his or her staff, 8 what you've called a Management Control Checklist. 9 Can you -- can you tell us a little bit about 10 Management Control Checklists and how they augment or -- or 11 -- or supplement the -- or relate to the Conflict of Interest 12 Policy? 13 MS. SHIRLEY HOY: And we could submit this 14 into you as well. This was a checklist that came out of a -- 15 an audit by the Auditor back in 2001, and I think the title 16 of it is something to the affect that Management Control is a 17 Department Responsibility, I believe is the name of the 18 report that he did. 19 And basically, he's saying that you know, 20 there are three (3) major areas where managers should again 21 remind themselves from time to time, the number of questions 22 as it relate to the balance sheet, number of questions 23 related to statement of revenues and expenditure. 24 Questions of ourselves about do the way we 25 deliver the programs, do they comply with City policies and

1 finally, we have a set of questions that we ask managers to 2 ask themselves about the use of consultants. 3 So, there may -- there are four (4) sections, 4 and the expectation is you check off, you know, have you got 5 a system in place to review controls relating to cash, 6 because how -- given how big the City is and how many 7 programs do deal with cash transactions, we want to make sure 8 that up and down the system we've got checks and balances in 9 place. 10 MS. LINDA ROTHSTEIN: And specifically, Mr. 11 Butt, with relation to the linkage between the Management 12 Control Checklists, and for example, the Conflict of Interest 13 Policy, part 3 of the checklist, and we'll get you a copy at 14 the break, Commissioner, and, Mr. Butt, requires the manager 15 to specifically answer questions like, how are policies 16 communicated to your staff, how do you make staff aware of 17 the delegation of authority policy, have you made staff aware 18 of the Conflict of Interest Policy, and ensured that all 19 levels of management apply rigorous and consistent 20 application of compliance? 21 So that as Ms. Hoy said, together with the 22 performance of review, where you're signing off on the 23 Conflict of Interest Policy, reviewing it again, you're 24 specifically asking yourself the question, as a manager, what 25 have you done, lately, to ensure that all of your staff have

1 been reminded and have an adequate understanding with respect 2 to that policy. 3 So, there's -- there's those kinds of double 4 checks, if you will. 5 MR. DAVID BUTT: And you mentioned that this 6 performance review exercise, is -- is done annually for your 7 -- for your managers. And one (1) of the questions that I -- 8 I've just heard is part of the checklist from Ms. Rothstein 9 is -- is have you communicated with your employees? 10 Again, what's your vision for an ideal way for 11 a manager to convey these Conflict of Interest Policies, and 12 the principles in the -- in the policy to his or her 13 employees? 14 MS. SHIRLEY HOY: I think you have to use a 15 number of different tools, for sure you know, the updating 16 that we do on the Internet, but we have a number of sites 17 that don't have computers, you know, the fifty-seven (57) 18 childcare centres that the City operate, you know, staff are 19 not sitting at the computers all day, they're looking after 20 the kids. 21 So, there has to be conversations, there have 22 to be -- in their review and in their evaluation of those 23 staff in the childcare centres, they've got to make sure that 24 the Conflict of Interest guideline is up there. 25 With the Conflict of Interest guideline as

1 well as the fraud hotline, in particular the fraud hotline, 2 for example, working with the Auditor General, we have agreed 3 with him and that ongoing communication is really important 4 so we have posters reminding staff about the hotline number, 5 reminding them about the policy. 6 I think it is a whole variety of tools that 7 one needs to use all the time to have ongoing discussions and 8 communication with staff. 9 MR. DAVID BUTT: Could you offer us a 10 comment, with the benefit of your experience, the fraud 11 hotline received two hundred (200) calls, do you have any 12 expectation or any -- any thoughts around that number? Is 13 that a lot? Is that not enough? How do you -- 14 MS. SHIRLEY HOY: Well, when I look at the 15 size of the City and the operations and the size of a budget 16 of $6.5 billion and that we're in over forty-three (43) 17 different businesses across the City, businesses or programs, 18 and when I think of the two hundred (200) that -- that came 19 in, of that the Auditor General has sent a hundred and 20 fourteen (114) to the departments and the departments have to 21 report back to him as to -- in a timely way, as to what they 22 did with those, to his satisfaction. 23 And if he isn't, he will take them into 24 further investigation. It seems to me that it's manageable. 25 I mean, I think, you know, we would love to have a system

1 where we won't have any that the Auditor General can need to 2 investigate, but I think that's probably too optimistic, 3 given the size and scope and complexity of an organization 4 like the City of Toronto. 5 So, when I look at two hundred (200) that came 6 in, he is looking at about 10 percent of it, that he is 7 working on. I mean, a percentage breakdown is, of the two 8 hundred (200), 57 percent were referred to departments, 33 9 percent he concluded no further action is required. So that 10 basically means that 90 percent of it is already being dealt 11 with. 12 He's -- he's got investigations that he's 13 doing directly of about 4 percent. Referring to outside 14 agencies about 5 percent. The outside agencies include 15 Social Services because we often get a number of welfare 16 related complaints or to the Provincial, Federal agencies 17 because sometimes people, you know, get mixed up as to which 18 order of government a particular issue should be at. 19 And he is making preliminary inquiry at 1 20 percent. So out of the total of the two hundred (200) cases, 21 there are about 5 percent that the Auditor General is 22 following up on. So it seems to me that, you know, it's a 23 system where we are managing, but there's always room for 24 improvement and we've got to continue to look at how we can 25 do that.

1 MR. DAVID BUTT: Now, -- 2 MADAM COMMISSIONER: Mr. Butt, I have a clock 3 behind me, I think, so I can't tell if it's 11:30; is it 4 11:30? 5 MS. LINDA ROTHSTEIN: Just passed, 6 Commissioner. 7 MADAM COMMISSIONER: Just passed. Well, 8 there you go, I'll have to change my computer. Would this be 9 an appropriate time then, we'll just take morning recess? 10 MR. DAVID BUTT: That would be fine. 11 MADAM COMMISSIONER: All right. Why don't we 12 take fifteen (15) minutes from whatever that says up there; 13 all right? Thank you. 14 THE REGISTRAR: The Inquiry is in recess for 15 fifteen (15) minutes. 16 17 --- Upon recessing at 11:30 a.m. 18 --- Upon resuming at 11:45 a.m. 19 20 THE REGISTRAR: The Inquiry will resume, 21 please be seated. 22 23 (BRIEF PAUSE) 24 25 MADAM COMMISSIONER: Mr. Butt ...?

1 MR. DAVID BUTT: Thank you Madam Commissioner. 2 MS. LINDA ROTHSTEIN: Just, Mr. Butt and 3 Commissioner, the reason Ms. Hoy was speaking quietly to me, 4 is that she did advise me that she neglected to mention one 5 (1) thing, in terms of Councillors and the advice they can 6 get at the moment. 7 And there is an Ethics Steering Committee; I 8 know, Commissioner, that you're aware of that and we just 9 wanted to make that note for the record, at this stage. 10 11 (BRIEF PAUSE) 12 13 MR. DAVID BUTT: And just, if I could ask a 14 follow up question on that, Ms. Hoy? This is an Ethics 15 Committee that is available for confidential con -- 16 consultation for the Councillors? 17 MS. SHIRLEY HOY: Mr. Butt, I neglected to 18 mention that Council approved the Ethics Steering Committee 19 -- the Ethics Committee, which basically has also been 20 responsible for having this -- there's an interim complaint 21 process that the Committee is in charge of. 22 So that if there is a concern, by a member of 23 Council, it goes to the Ethics Steering Committee, and then 24 there is a protocol and we can give you a copy of it -- 25 because there is a report.

1 MS. LINDA ROTHSTEIN: You -- you have that 2 actually, Commissioner. 3 MS. SHIRLEY HOY: In the reports, yes -- 4 MS. LINDA ROTHSTEIN: You have it at 1.1.3 -- 5 MADAM COMMISSIONER: Thank you. 6 MS. LINDA ROTHSTEIN: -- the complaint 7 protocol for Councillors Code of Conduct. 8 MS. SHIRLEY HOY: So, it actually involves 9 going out for legal assistance in the investigation of a 10 complaint, if required. So that there is resource limited -- 11 but, some resource provided to deal with that. 12 MR. DAVID BUTT: As I hear you describing it, 13 it's primarily complaint driven then, is it? 14 MS. SHIRLEY HOY: Well, the Ethics Committee 15 itself, is responsible to look at the policy so, the Steering 16 Committee will look at the actual Code of Conduct and suggest 17 whether any changes need to be made and then through the 18 Committee it will go to Council for approval; any policy 19 changes, but, at the same time, there is also a complaint 20 protocol that Council adopted, while we're waiting for 21 setting up the Integrity Commissioner office. 22 MR. DAVID BUTT: And so again, based on some 23 of our earlier conversation about the Integrity Commissioner, 24 from what I hear you say, is it -- is it fair to say that you 25 would expect that the Integrity Commissioner would be the

1 front line person, in terms of confidential advice in 2 advance, alleviating difficulties before they arise? 3 MS. SHIRLEY HOY: Absolutely, yes. 4 MR. DAVID BUTT: Ms. Hoy, unless you have more 5 thoughts in detail you'd like to share with us on the 6 integrity aspect of your presentation, I'm wondering if we 7 might move to the procurement aspect? 8 And again, just to remind everyone, that I'm 9 trying to cover these topics in the same order as your 10 presentation. 11 MS. SHIRLEY HOY: Yes, that's fine. 12 MR. DAVID BUTT: And can you tell us, much of 13 what you said in your presentation this morning was -- was 14 premised on implementation of the Auditor General's review. 15 What prompted that review? 16 MS. SHIRLEY HOY: Well, I think as I indicated 17 earlier, I think for a number of years since amalgamation the 18 Auditor General at the City, has seen the procurement 19 activity, as from a risk assessment point of view, as a high 20 risk area. 21 The Auditor General just recently presented to 22 senior management his framework in assessing all the programs 23 at the City as to which ones are high risk; that he will be 24 coming back to look at from year to year. 25 And procurement is one (1) of those areas. So

1 I think that's why he -- he has done quite a comprehensive 2 review of our current procurement process at the City. 3 MR. DAVID BUTT: And can you help us please, 4 what is -- what do you mean when you say it's a high risk 5 area? 6 MS. SHIRLEY HOY: It is because of the need to 7 make sure that it is a process that's transparent, open and 8 that in this -- obtaining and securing goods and services, 9 that it's fair to everybody who wants to have work at the 10 City; that in that way it's high risk. 11 And also, because of the fact that the system 12 you set up in -- and because the goods and services are so -- 13 there's so many, they're so diverse; the number of suppliers 14 we deal with, there's so many of them out there. And it also 15 calls for very clear roles and responsibility between the 16 procurement function and what the departments have to do. 17 And again, coming back to the size and 18 complexity of the City, the Departments themselves have to 19 look at acquiring those goods and services in a timely 20 manner, so often they want to do their own process, so you 21 have to have a policy that looks at what's a good system in 22 place that allows that flexibility, allows that delivery of 23 services in a timely manner, balancing that with controls 24 that need to be in place to make sure that you are not 25 treating anybody unfairly, but also at the end of the day

1 that you've got a system in place that you're not going to 2 overspent -- once budgets are approved. 3 So, it's just -- there are so many different 4 dimensions that makes it a high risk area. 5 MS. LINDA ROTHSTEIN: And just on the order of 6 magnitude, Ms. Hoy, can you give the Commissioner and Mr. 7 Butt some guidance on, sort of, what the procurement services 8 were for City Departments and the Toronto Police Service, and 9 the Toronto Atmospheric Fund in nine -- in 2002, do you have 10 the stats on the number of purchase orders and the -- and the 11 value of those purchase orders? 12 MS. SHIRLEY HOY: Well, the total value of the 13 purchase orders in 2002 was about $982 million dollars. When 14 we started and came together as one (1) City in 1998 it was 15 at $462 million dollars. 16 So, it gives you a sense of how much 17 transactions and how much business procurement the City is 18 involved with. 19 MR. DAVID BUTT: And obviously then when we're 20 talking about risk, we're talking about financial risk here? 21 MS. SHIRLEY HOY: Yes. 22 MR. DAVID BUTT: Now, again, part of your 23 earlier presentation is that the -- the Auditor General 24 recommended and you begin -- begun to work on changes in the 25 respective roles and responsibilities, the division of

1 responsibility, if I can call it that, between the line 2 departments and Purchasing; is -- is that right? 3 MS. SHIRLEY HOY: That's one (1) key aspect, 4 yes. 5 MR. DAVID BUTT: Okay, and can you tell us how 6 that division of responsibility between a line department and 7 procurement has -- has changed, or perhaps evolved, upon 8 implementation of the Auditor's recommendations? 9 MS. SHIRLEY HOY: Well, as I said, we're -- 10 we're just in the beginning stages of -- of the forty-three 11 (43) recommendations, but as it pertained to roles and 12 responsibilities, I think -- and I would use an area that is 13 one (1) that is definitely still work in progress, because 14 senior management and I are still having a lot of 15 conversations about how to do this well. 16 In the -- those contracts that are specific to 17 a department; so let me use the one (1) I know best, the 18 Community and Neighbourhood Services Department. If there 19 are contracts that we have, for example, with hundreds of 20 non-profit and for profit childcare centres, who deliver 21 services on behalf of the City, we provide them with an 22 agreement as to the kind of subsidies they will receive in 23 providing so many spaces for low income parents, requiring 24 childcare. 25 Those are pretty clear, they're in the mandate

1 of the Department, they -- they manage them. 2 But when you look at what we have termed as 3 corporate or blanket contracts, and sometimes the term is 4 used, as Ms. Gibbons said, Vendor of Record. For basic 5 commodities, and let's use one such as uniforms, all kinds of 6 uniforms are used, right? You have them in the homes for the 7 aged division, you have uniforms for the garbage collectors, 8 you have uniforms for the public health, it goes on and on 9 across the whole corporation. 10 In those contracts the -- there are -- and 11 because we're so decentralized, because we have ten (10) 12 homes for the aged, we have many, many places where public 13 health staff work, we have many places, of course, where the 14 works and emergency staff work, that if I'm a direct line 15 supervisor and I see that my staff group needs uniforms and I 16 see that there is a price and the purpose, of course, of -- 17 of Corporate contracts is that we put out a request for 18 quotations, right, because uniforms you can specify what's 19 the commodity you want and then you're looking for a quote. 20 You're looking for a best price because of the 21 volume; right, of the City because there are a number of 22 different programs that require uniforms, for example. And 23 then usually the way it would put out is that that's the 24 quote, lowest, whatever it is and we have -- award that 25 contract.

1 And usually in a contract like this for two 2 (2) -- up to -- usually up to about three (3) years, we would 3 report back after first year's experience whether we want to 4 renew and you usually have an option to renew up to, maybe, 5 three (3) years and then you've got to go out again for a 6 full request for quotation. 7 However, in that system, sometimes if I'm that 8 front line supervisor in a work unit and I'm in a hurry, I 9 would say, you know, I can go through the department purchase 10 order because it's going to cost less than seven thousand 11 five hundred dollars ($7,500). I would just put it through 12 there, get my staff the uniforms that I need. 13 If I start doing that, it means I have now 14 identified a separate stream of payment into the system. It 15 wouldn't be capture under Corporate contract, right? So 16 there, in itself, there's a problem because then it means 17 that because I haven't used a contract release order, which 18 is the instrument that helps to capture all the transactions 19 in the Corporate contract, because I was in a hurry, I want 20 to get it done. 21 It fit the criteria, it's under seven thousand 22 five hundred (7,500) but when I then ask the question of the 23 Finance staff, how much is spent for uniforms? I'm not going 24 to capture all of it, right? 25 That is, right now, one of the issues we're

1 trying to solve. So this is where, in my presentation, I 2 said two (2) major issues; we've got to review all the 3 instruments of how we secure and obtain goods and services to 4 make sure in corporate contracts the CRO is the main 5 instrument in order to make sure you capture. 6 I think you heard some of this in the MFP 7 issue as well that not everything's captured because 8 everybody was not trained, resources weren't applied enough 9 to make sure that CRO's were applied completely in the MFP 10 situation. 11 Second major issue is, who's responsible for 12 this Corporate contract of uniforms since everybody has a 13 part, right? Is it the person who sets the standards 14 overall; that when I talk to my Purchasing staff they say, 15 but everybody sets a standard because we got comments from 16 everybody. 17 So we set out a set of specifications and 18 requirements that met everybody's needs, right, because 19 everybody has a part of it. Should it be whoever is the 20 primary user -- the prime user be the custodian of that 21 contract, right; that's the debate I'm asking staff to engage 22 in to say, come back with some recommendations as to what's 23 the best way to ensure then, in a corp -- Corporate contract 24 like that, that all the costs are -- are covered and be able 25 to track all the spending in that one contract?

1 So that's what I'm saying to you, it's still a 2 work in progress and we will discover probably there are a 3 few more contracts that are like that because, as I indicated 4 earlier, basically, there are four (4) instruments that 5 departments need to pay attention to when they want to obtain 6 goods and services, you know, the department orders which are 7 the -- the purchasing orders that are above the seven 8 thousand five hundred (7,500), the DPO's which are the 9 department purchase orders below seven thousand five hundred 10 (7,500), the CRO's for the Corporate contracts and then the 11 individual contracts as well as purchase service agreements 12 which they're responsible for. 13 And that review we're just going through now 14 as to what are the principles and guidelines that we should 15 all follow to make sure that we manage our contracts well. 16 MR. DAVID BUTT: And I take it then that part 17 of -- or really the heart of -- of this ongoing conversation 18 is going to be reaching a conclusion on, essentially, the 19 locus of responsibility for management of the whole range of 20 -- of contracts that the City enters into; is that right? 21 MS. SHIRLEY HOY: That's right. And that 22 there are different centres of responsibility, depending on 23 the type of contract, but, that we should make sure that gets 24 written down, a set of guidelines to be developed, so that 25 again, it's not just information that I have and the

1 Commissioners have, but, that it goes all the way out to the 2 whole organization, because there is confusion. 3 Sometimes people will say, we thought if it's 4 a Corporate contract, that Purchasing should be in charge of 5 the whole thing, so if there's overspending, there must be a 6 problem there, right? 7 And we're saying, well, if there is not a 8 single instrument that one (1) uses to make sure that 9 everybody use that one (1) instrument, which in this case, 10 I'm saying like a CRO, then there's no way I can hold 11 Accounts Payable or Purchasing accountable for -- for any 12 overspending, so that's what we need to work through. 13 MR. DAVID BUTT: Simply because they don't 14 have the tools to be able to track whether there is, or is 15 not -- 16 MS. SHIRLEY HOY: That's right. 17 MR. DAVID BUTT: -- that kind of overspending? 18 MS. SHIRLEY HOY: That's right. 19 MR. DAVID BUTT: So, in addition to 20 establishing the locus of responsibility for every single 21 contract, you are also in the process, if I hear you right, 22 of designing documentation flow that will enable the party, 23 who is responsible to discharge those functions? 24 MS. SHIRLEY HOY: That's right. 25 MR. DAVID BUTT: Is that right?

1 MS. SHIRLEY HOY: Yes. 2 MR. DAVID BUTT: And again, from what I hear 3 you saying, is it fair to say, that -- that you contemplate 4 different loci of responsibility, if I can put it that way, 5 so that some contracts will remain administered by line 6 departments, others managed centrally through finance? 7 MS. SHIRLEY HOY: That's right. Depending on 8 the type of contract. 9 MR. DAVID BUTT: Of contract. And so the 10 discussion really is around when it goes one (1) way or the 11 other? 12 MS. SHIRLEY HOY: That's right. 13 MR. DAVID BUTT: There's no third option is 14 there, that I'm overlooking? 15 MS. SHIRLEY HOY: No, it will either be a line 16 department or it will have to be Finance. 17 MR. DAVID BUTT: Right. Okay. So the -- the 18 discussion is around when you go in -- in either direction? 19 MS. SHIRLEY HOY: That's right. 20 MR. DAVID BUTT: Now, you -- you've mentioned 21 an amount, seventy five hundred dollars ($7,500) amount, as 22 one (1) of the present, at least, determinates of -- of a 23 department's ability to enter into a contract. 24 Would an amount like that, I realize it's a 25 work in progress, but, is that going to be one (1) of the

1 factors that you would look at in determining the locus of 2 responsibility for administering a contract? 3 MS. SHIRLEY HOY: I can say to you that the 4 line departments, we're hoping, and even when we first set 5 out the -- our purchasing bylaw, they were hoping it would be 6 much higher, because for an organization the size and the 7 number as we've seen, in terms of the amount of goods and 8 services procured, that they believe it was too low. 9 And there was discussion about ten thousand 10 (10,000) and then Council decided it should be seven thousand 11 five hundred (7,500). And I know that in reading Ms. Gibbons 12 report, one (1) of her suggestions was that maybe it shou -- 13 it should go up to twenty five thousand (25,000), rather than 14 leaving it at the seven thousand five hundred (7,500). 15 Our challenge right now at the City, is that I 16 believe until I can give confidence to Council that our -- 17 all our internal control systems, you know, our control 18 measures are in place, I don't think they will want to change 19 that seven thousand five hundred (7,500) figure. 20 So, we have to put a number of these control 21 measures in place, and I think then once they have some 22 confidence and trust, then we could look at increasing that 23 amount. 24 MR. DAVID BUTT: And -- and as -- as I hear 25 you, putting those controls in place, to increase the line

1 department contract amount, means putting those controls in 2 place, separately in every single line department. 3 So, it's not just a question of putting 4 controls in place, at -- in Finance, but, you'd have to then 5 address each department individually, in terms of those same 6 controls? 7 MS. SHIRLEY HOY: Well, that -- whatever the 8 figure is, would have to apply to all the departments 9 equally, yes. 10 MR. DAVID BUTT: Can you give us a sense of 11 what a move from seven thousand five hundred($7,500), to 12 twenty five thousand dollars($25,000) would mean, in terms of 13 the movement of contracts? 14 Is that going to make -- is that going to have 15 a significant increase in the amount of contract management 16 that line departments are responsible for, if -- if it were 17 to happen? 18 MS. SHIRLEY HOY: I can't off the top of my 19 head. I could probably get somebody to take a look at it and 20 maybe get that information after our next break to you, Mr. 21 Butt. 22 MR. DAVID BUTT: Yes -- 23 MS. SHIRLEY HOY: Because right now -- so, 24 just to give an example, I mean, Departmental purchase orders 25 issue to date -- we didn't have the information the first

1 three (3) years of our experience, but certainly from 2000 to 2 2003, it increased from 54.7 million to 78.2 million. So, 3 certainly there's a lot of activity at the Departmental level 4 already, and as to how that would increase further if we were 5 to, you know, increase the amount, we could probably get our 6 Purchasing staff to take a look at it and see how -- you 7 know, what those figures may look like. 8 MR. DAVID BUTT: And in terms of the IT 9 procurement sector itself, do you have anything to -- to tell 10 us about where the conversation is at in terms of that -- 11 again, establishing a locus of responsibility for management 12 of -- of IT procurement? 13 MS. SHIRLEY HOY: Well, I think, certainly 14 since 2000/2001, in particular, we have tightened up in that 15 area considerably. I think what we have done in anything 16 pertaining to IT we have centralized, so any procurement 17 needs of Departments, that are of what I would see as the 18 kind of general IT requirements and Departments, so it's not, 19 for example, the Welfare IT program. That's specific to 20 Community Services Department, right? 21 MR. DAVID BUTT: Right. 22 MS. SHIRLEY HOY: But if the need is for 23 general, you know, support of software/hardware for an office 24 to be set up for new staff coming in; that's a Corporate IT 25 responsibility. So, there is no acquisition for IT

1 requirements without going through the IT Division of 2 Corporate Services. 3 MR. DAVID BUTT: So, if I -- if I understand 4 your comment correctly then, there's -- there's been a 5 strengthening of the commitment to centralized IT 6 procurement, but then I also hear you saying that there may 7 be department specific types of Information Technology, that 8 are required Department by Department; how are they handled? 9 MS. SHIRLEY HOY: They're handled by the 10 Department, and it comes through the -- the management, 11 through the Commissioner of the Department. However, there 12 often will be interface issues. So there is -- 13 MR. DAVID BUTT: Yes. 14 MS. SHIRLEY HOY: -- still conversations and 15 sign off by Corporate It. 16 MR. DAVID BUTT: And how -- how has that -- 17 how has that evolved in the last couple of years, I mean, how 18 have you -- how have you come to that -- that particular 19 vision? 20 MS. SHIRLEY HOY: Well, again, because of the 21 size and complexity of all the programs, it is hugely an 22 interface issue. So, we have to be able to find ways where 23 there are areas that's program specific, department specific, 24 and then the Corporate IT, because whatever the program, and 25 I can think of, you know, the Ontario Works Program, a lot of

1 the Public Health IT systems, for example, there are 2 interfaces into the Corporate IT area. 3 So, those discussions have to take place, 4 between the IT staff and Public Health, with the IT staff 5 Corporately, but in terms of the responsibility and the 6 control of the main IT systems in the City, it is with 7 Corporate IT. 8 MR. DAVID BUTT: Okay, now what you've been 9 describing for us is -- is the process of defining roles and 10 responsibilities, and obviously defining those roles and 11 responsibilities is the first step. There's also, as you 12 mentioned in your presentation, the implementing of an 13 understanding of that -- of those roles and responsibilities, 14 and that's the training and development, I understand, that 15 you -- you spoke of. 16 Can you tell us, first of all, and you did 17 mention in your presentation that this has been one (1) of 18 the first areas to -- to be hit with cuts when cuts have had 19 to come, but -- and I want to deal with that, but if we could 20 start; can you give us a sense of -- of what you would like 21 to see as the CAO, in terms of imp -- improvements in -- in 22 training and development? 23 MS. SHIRLEY HOY: In the procurement area? 24 MR. DAVID BUTT: Yes, and -- and what you are, 25 you know, currently working on in -- in terms of

1 implementing? 2 MS. SHIRLEY HOY: The CFO has set up a 3 Steering Committee consisting of himself, the Commissioner of 4 Works and Emergency Services, the Commissioner of Corporate 5 Service and the Director of Internal Audit to basically 6 oversee the implementation of the Auditor General's report on 7 the forty-three (43) recommendations. 8 So, with that, one of the areas, and I met 9 with the project director responsible for working with Mr. 10 Pennachetti who's our CFO and also Mr. Lou Pagano who's our 11 Director of Purchasing responsible for the day-to-day, so we 12 felt strongly that, as the Director responsible for the day- 13 to-day, he could not also take on the implementation of all 14 the recommendations because we want somebody who basically is 15 a change agent for us, working with the Director and working 16 with the CFO to make sure we're going to implement these 17 recommendations. 18 So, the Director responsible for implementing 19 these recommendations indicated to me last week that one of 20 the things he's looking at is to make sure that he develop a 21 manual as to how we do the training. As I said earlier, part 22 of our challenge has been -- has not been systematic training 23 of the purchasing staff in Finance Department but also to 24 train the staff in the line departments because the two (2) 25 have to come together.

1 And our hope is that by mid-year this year 2 that will be done, done to the degree that there's real 3 clarity on who's responsible for what piece in the 4 procurement process. 5 MR. DAVID BUTT: And you've -- you've 6 mentioned that there have been cuts that have affected your 7 operations in this area, can you tell us; do you have a sense 8 of why an area like this would be so heavily affected by -- 9 by cuts? 10 MS. SHIRLEY HOY: Well, I think when we came 11 togther as the amalgamated City the desire, of course, to 12 ensure that there's no interruption in services to the 13 residents in the City. So from garbage collection to road 14 cleaning to, you know, recreation programs, we made sure that 15 the services continued. 16 And in the first three (3) years the former 17 Provincial government assigned a target of the number of 18 positions we had to cut by the third year of amalgamation and 19 it was about a thousand, seven hundred (1,700) positions 20 which meant it was a 15 percent cut out of the workforce of 21 the City, the direct departments. I'm not including the 22 agency boards and commissions. Those would be police, CDC, 23 that we did not touch. 24 So, in order to get those positions out and 25 without affecting direct front line delivery, the only places

1 you can go to would be CAO office, Finance Office, Corporate 2 Services Office. So it meant that those are the departments 3 that got hit the hardest. 4 So, Finance Department, when I look at 5 accounts payable, purchasing, the -- the support to the 6 systems, they were all cut and Corporate Services, every one 7 of those divisions, you know, from the IT to communication to 8 facilities, every one of those had major cuts in the first 9 three (3) years of amalgamation and purchasing was one of 10 those and that was the 14 percent reduction that happened. 11 MR. DAVID BUTT: Now, I can see a certain 12 logic in terms of front line services being visible and these 13 sorts of support functions being less visible, from your 14 perspective as a -- as a manager, is visibility necessarily 15 the sole criterion that you would employ if you were in the 16 position of having to make reductions? 17 MS. SHIRLEY HOY: Well, actually in hindsight 18 now, and also looking at lessons learned from other areas 19 that have has this kind of -- this size of amalgamation, 20 usually people put resources in, in the first two (2) years. 21 And if it wasn't for the fact that there was 22 Provincial commitment that a level of reduction and savings 23 should be achieved from amalgamation, we would have 24 recommended that you put those resources in, ensured the 25 systems are, you know, well amalgamated and that you take --

1 we had, like, in the Finance area and other Corporate 2 Services area, sometimes you're taking forty (40) or fifty 3 (50) systems and putting it in one (1). Labour contract, for 4 example, we had over fifty (50) contracts that we've now 5 reduced to six (6), right? 6 So, in order to do those kinds of major 7 transformation of systems, you have to -- have the resources, 8 do it well and then get the savings out. Whereas I think we 9 did a bit backwards. 10 There was a commitment that savings had to 11 happen immediately. So, without effecting service delivery, 12 then where we went to were in the administrative and support 13 area. So, what suffers then is internal control and that's 14 what happened in the City. 15 MR. DAVID BUTT: Now, not to be too simplistic 16 about it, but, there's a certain attractiveness in the logic 17 of -- well, you used to have six (6) of everything, and when 18 you amalgamate you only have one (1), so savings are 19 inevitable. 20 Would you like to comment on that? Do you 21 have a perspective on that, from your experience coming 22 through amalgamation? 23 MS. SHIRLEY HOY: I think there are certain 24 positions that are clearly achievable immediately. So, seven 25 (7) CAO's have one (1), absolutely, immediate that you can do

1 that. You know, twenty (20), thirty (30) some odd 2 Commissioners that were identified in the former seven (7) 3 municipalities, we cluster the departments into, you know, 4 major cluster departments, is what we've got, so you have six 5 (6) Commissioners. 6 So, there were huge savings out of the senior 7 management rank. I think where we short changed ourselves a 8 bit there, was in the systems -- systems that need to be put 9 in place. 10 If you don't invest first and make sure the 11 legacy systems that you have and that the new system, is 12 robust enough -- I mean one (1) of the things we did not get 13 a chance to test is how well are the systems working, you 14 know, before you're committed to taking the savings out and 15 producing the savings. 16 And that's what we did in the first year. We 17 just said, you know, well, regardless we're just going to, 18 you know, take the savings now. And as we have seen, what 19 suffers is that in order to maintain services, we did not pay 20 enough attention to make sure all the controls and checks and 21 balances are in place. 22 MR. DAVID BUTT: So, if I hear you correctly 23 then, you'd settle on one (1) system in any particular area 24 of function and without waiting to see if that one (1) that 25 you've settled on is up to the job, you dismantle all the

1 others? 2 MS. SHIRLEY HOY: Because we have to find -- 3 MR. DAVID BUTT: And you take the savings 4 there -- 5 MS. SHIRLEY HOY: -- savings. That's right. 6 MR. DAVID BUTT: Right. Whereas an ideal or a 7 better way to have approached that, would have been how, can 8 you tell us how it would be different from that? 9 MS. SHIRLEY HOY: I would have -- in the ideal 10 world, you put the investment in and I guess a good area is 11 look at the six (6) areas I mentioned in management control. 12 You know, you would almost have a check list to make sure 13 that those systems are in place in accounts payable and you 14 probably heard, just through the Inquiry, that we had a lot 15 of complaints by suppliers, in particularly, the first three 16 (3) years, that we weren't paying them in the timely manner. 17 And City lost because, of course, we were 18 paying interest often when it's, you know, over sixty (60) 19 days of payments, some ninety (90) days and some even to a 20 year. 21 And one (1) of the things again, we fix, 22 starting 2001 was trying to get our payment schedules much 23 earlier. Right now, we're at the point of 84 percent, we pay 24 within the sixty (60) days. I know the Director of 25 Accounting is trying to improve that even further.

1 So, ideally those systems I mentioned on the 2 slide talking about management controls, we would make sure 3 that we had the resources that we needed, put those systems 4 in place and in addition, to just putting them in place, you 5 would test them, make sure that they're robust enough to deal 6 with all the volume of transactions in the City of Toronto, 7 before you take the savings out. 8 So, ideally, savings from this kind of huge 9 amalgamation should probably come in the third or the fourth 10 year. Not in the first couple of years when you come 11 together as an amalgamated City. 12 MR. DAVID BUTT: So, as I hear you offering 13 your assessment, it's less a question of whether, in terms of 14 savings, but, a question of when, it's most prudent to take 15 those savings. Is that fair to say -- 16 MS. SHIRLEY HOY: That's right. 17 MR. DAVID BUTT: -- in general terms? 18 MS. SHIRLEY HOY: That's right. 19 MR. DAVID BUTT: Now, just another area again 20 in your procurement piece, that of capacity building. Can 21 you tell us, what do you mean by capacity building and why is 22 that -- what is that, in terms of a challenge for the City? 23 MS. SHIRLEY HOY: I think there are two (2) 24 challenges there. One (1) is the -- we haven't set out 25 clearly enough, as to what are the skill sets that we want

1 staff to have in the Purchasing division and be very clear on 2 the competencies that we're looking for. 3 And secondly, when in the past couple of years 4 we've put out advertisements to try to recruit, we've had a 5 major problem with vacancies, turnover. What the Director of 6 Purchasing and what the CFO said to me is that we are 7 competing with the GTA Region, and we have had staff who -- 8 who have left the City and they've gone to work in other 9 Municipalities, and indeed, to the Provincial level of 10 Government, because the workload is less, because the -- the 11 pay is similar, so they're saying, you know, given the -- our 12 workload and the complexity of the number of transactions, we 13 have had a hard time recruiting, and then retaining staff. 14 So, that's why I think scenario, we need to -- 15 to be very clear about. 16 MR. DAVID BUTT: So, as I -- as I hear you 17 then, capacity building is essentially -- you want to grow to 18 the point where you have both the numbers and the expertise 19 to conduct the procurement transactions that have to be 20 conducted for the City to do business? 21 MS. SHIRLEY HOY: That's right. 22 MR. DAVID BUTT: Okay. So, I -- and I'm 23 sorry, I interrupted you there. Did you -- 24 MS. SHIRLEY HOY: I forgot where I was going 25 with that, sorry.

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1 MR. DAVID BUTT: Okay. 2 MS. SHIRLEY HOY: I'll come back to it. 3 MR. DAVID BUTT: Yeah. No, no, not a problem. 4 And I -- I guess I'd like to ask you this. Given that you 5 have this capacity building, as -- as you put it, challenge, 6 does that influence your thinking at all in terms of where 7 you would define that locus of responsibility for procurement 8 management as -- as between the line departments, and the -- 9 and Finance centrally. 10 In other words, in looking for the requisite 11 expertise, is it appropriate to say, well, let's lean more 12 heavily on the line departments to do the procuring, because 13 they have the folks already who -- who know the products they 14 need to buy? 15 MS. SHIRLEY HOY: No, because I think the 16 roles are different. The line departments absolutely will 17 always be needed there for them to set what are their 18 specifications, requirements, and their deliverables. 19 Purchasing centrally can't do that, but what 20 I'm looking for in the competencies for staff in Purchasing, 21 is that they have to be able to play that role of balancing, 22 being of service to the Departments, and controlling the -- 23 the implementation of the procurement process in a consistent 24 manner, and that it is, you know, that -- that they maintain 25 the integrity of the procurement process.

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1 So, I -- I believe it's a different set of 2 skills that's required there. 3 MR. DAVID BUTT: And -- and what you're 4 looking for, if I hear you then, is -- is essentially those 5 individuals who are skilled in -- in the -- the freestanding 6 expertise of procurement, as opposed to the particular line 7 delivery service expertise that would exist in the 8 departments. 9 MS. SHIRLEY HOY: And more than that, because 10 all Government Departments are part of the National Institute 11 of Government Procurement, that they are -- that they 12 understand what it means to -- to administer and to manage a 13 Government procurement system, that's open and transparent, 14 with a set of standards that's required. 15 MR. DAVID BUTT: Now, you've -- you've 16 identified -- identified a certain competitive environment 17 that's affected your ability to retain. Can you share with 18 us either some of your difficulties in coping with that 19 environment, or some of your strategies to respond to -- to 20 that environment? 21 MS. SHIRLEY HOY: Well, I -- I think in terms 22 of strategies, is to clarify this roles and responsibilities 23 will help, because I think there's a sense by the Purchasing 24 staff of confusion, as to what's expected by the Departments, 25 and what's expected by the -- the City, as to their role.

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1 I think we do have to review the compensation 2 level of our jobs right now, in how competitive or not 3 competitive it is in comparison to the -- the GTA area, in 4 particular. So, that's a review that's underway right now 5 and I think that will help, once we finish that review. 6 MADAM COMMISSIONER: And how -- how do you 7 keep them there, once you have them there? 8 MS. SHIRLEY HOY: Well, I think if they -- 9 MADAM COMMISSIONER: Assuming that -- that 10 they -- they've been there for a while and they have a salary 11 that they're satisfied with, just making that assumption, how 12 do you keep them there? 13 MS. SHIRLEY HOY: I think if there is some 14 job satisfaction as well as dealing with stress level. A 15 number of our staff in Purchasing left because of the stress 16 level. So we'll have to look at how we can help manage that. 17 MS. LINDA ROTHSTEIN: Although not directly 18 related to that point, Ms. Hoy, one of the other aspects of 19 the AG's work and recommendation that, I gather, has been 20 echoed by Val Gibbons' work is with respect to the really 21 complex, sensitive, high-value procurement exercises and how, 22 where you've got something that everyone at the outset, both 23 in the department and in Purchasing recognizes as one of 24 those kinds of procurement exercises, how the City might 25 approach those in the future and I think there's some

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1 recommendations in terms of a Fairness Commissioner for 2 those? 3 MS. SHIRLEY HOY: And we're reporting back 4 February, March time line on suggesting to Council, from the 5 experience of other jurisdictions, when best to use a 6 Fairness Commissioner. 7 But also -- 8 MADAM COMMISSIONER: What do you mean exactly 9 by a "Fairness Commissioner"? It's not the sort of name that 10 automatically leads one to knowing what it probably means? 11 MS. SHIRLEY HOY: Well, I haven't had -- got 12 enough of the detail in the review that my staff in the CAO 13 office has undertaken but my understanding of what it's 14 attempting to do is that you, kind of, have a third party in 15 the more high profile, high value procurement processes where 16 the purpose of that individual is to make sure that the 17 person stays with you throughout the whole process to make 18 sure that every step of your process is fair. 19 That's kind of the general intent of having 20 that function. So, to figure out when it's appropriate to 21 apply, what's the value added of having that function there, 22 the kind of work that we're doing right now and doing some 23 investigation into. 24 MS. LINDA ROTHSTEIN: And just on the other 25 question that was being asked about the stress of your staff

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1 in procurement, to what extent have you found that when you 2 enhance the training component of people's jobs, when you 3 give them better training and -- and offer them more 4 continuous training, both in the procurement side of the 5 operation, central procurement, Purchasing department itself, 6 and outside with the departments about the procurement 7 process, to what extent have you seen that have some effect 8 and reduces some of the stresses of your staff? 9 MS. SHIRLEY HOY: Well, unfortunately, in the 10 area of procurement we haven't done enough yet to be able to 11 say what will happen but my assumption is that it will help 12 people. 13 The other area that staff have said to me 14 we've got to do is especially because we do tend to have a 15 number of high volume, high profile, high value types of 16 procurements is that there has to be enough planning time 17 because the one thing that sometimes we get ourselves into 18 difficulty in the procurement process is that before we kind 19 of issue, whether it's an REOI, just for to try to get 20 expression of interest or an actual RFP, people don't even 21 know when to use which tool and which process, partly because 22 we don't give ourselves enough planning time. 23 The City Solicitor and her staff said to me, 24 you know, it would be much more helpful if you involve me and 25 my staff in the planning stage rather than fixing the problem

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1 stage at the end. We often call our solicitor in at the end 2 say, now we're in trouble, what do you do? What are you 3 going to do for us? Right? 4 So, one of the things we've learned and I 5 think it's also a theme here when I look through the forty- 6 three (43) recommendations is that, in particular with the 7 more complicated and complex procurement activities that a 8 department may identify, you need to set out, right at the 9 beginning, who are the people who should be there? 10 And I would say, a good planning committee on 11 a high profile type of procurement would be have your 12 solicitor there at the beginning, have the department that's 13 looking for the service, have the Finance staff there, have 14 the Clerk there because often the Clerk staff can tell you 15 what's the proper process to follow and then you have the 16 procurement staff there as well. 17 Plan it out. Figure out which is the proper 18 route to follow and then we will avoid mistakes at the other 19 end. 20 MR. DAVID BUTT: Just to develop that 21 planning thought a little bit further, is it fair to say that 22 sometimes part of the planning challenge is to identify what 23 the heck it is you're actually looking to buy? Isn't it -- 24 and I'm thinking, in particular, in the IT sector, isn't -- 25 isn't it sometimes difficult to know, given that it's a

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1 combination of service and -- and goods, what combination is 2 available and how do you address that knowledge gap, in what 3 the market may have available and what you might need and how 4 do you have that dialogue, which it seems to me, may involve 5 some private sector input? 6 MS. SHIRLEY HOY: I actually think that it's 7 not the availability of a product or service that where the 8 problem is for the City, it's assessing our needs. It's 9 assessing what exactly are we trying to resolve or to solve 10 here? 11 What problem or what service are we trying to 12 address? And I'll give you a specific example. I mean you 13 have heard, in part, also some of the comments about our SAP 14 system. 15 We knew we needed a new financial system for 16 the City of Toronto. There's no doubt about it when we came 17 together as the new amalgamated City, but, again because we 18 didn't have enough time, we had to get a new system up and 19 running, we did not take the time to plan it, meaning bring 20 all the departments together and get a sense of what are the 21 various needs from a financial planning, financial accounting 22 system perspective. 23 If we had asked that question, and get all the 24 needs of the departments before we set out to go, you know, 25 is it SAP, is it's PeopleSoft, is it whatever else that's out

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1 there, I would say again, if we had the time, we would 2 probably have designed a better system right from beginning 3 and acquire a better system, right from the beginning. 4 But, to me, the planning is key because we 5 don't go out there enough to ask, what are the users needs 6 and have a full understanding of that before we go out and 7 say, here's the set of goods or services, that we think we 8 need to acquire. 9 MR. DAVID BUTT: Would it be fair to say then, 10 that without a stronger planning process, you're perhaps less 11 able -- well a risk arises that you could be oversold? 12 MS. SHIRLEY HOY: That's right. Or getting 13 into a system where you're immediately you're not using 14 everything that you have, you know, just acquired. 15 MR. DAVID BUTT: So again -- 16 MS. SHIRLEY HOY: Or overly optimistic that 17 immediately you can use all parts of the system. So again, 18 coming to my presentation, the three (3) way match, that was 19 an expectation that we had after the second year, by the 20 third year of amalgamation, that three (3) way match was 21 going to happen. 22 But, again at the time, I was the Commissioner 23 of Community Services and I remember the conversation at the 24 senior management table, saying well, we don't know what that 25 means yet, and we don't know whether they'll require more

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1 front line resources in the departments, in order to do three 2 (3) way match, because three (3) way match is a way to ensure 3 timely payment of services and the appropriate services match 4 against the invoice, is an excellent tool. 5 But, because again, we didn't plan it well, we 6 didn't train the staff well, right from the beginning, nobody 7 knew what it meant, everybody was afraid of it and said, I'm 8 not going to change my current system of paying bills, I want 9 to see the actual bill, right; it delayed the bill payment. 10 Now, we're working through the departments, we 11 already have Finance, Corporate Services, and Works and Urban 12 Development Services ready now to pilot it and look at how it 13 can be done, but, if we have planned that well and you asked 14 my -- the question hypothetically, at the beginning, if we 15 had you know, all the resources required, what would we have 16 done? 17 That would be one (1) key internal control 18 that could have helped when we set out and implemented our 19 amalgamated financial system, but, again, we didn't have the 20 luxury of time to do the planning. 21 MR. DAVID BUTT: Now, often in a procurement 22 context budget cycles, for example, are relatively fixed, in 23 terms of time lines. 24 You're talking about a planning process that 25 requires, in essence, the creation of an opportunity to do

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1 more work up front. Are there challenges in, sort of, 2 creating that time that opportunities for departments to do 3 -- or finance to do that work, up front? 4 MS. SHIRLEY HOY: For what we're talking 5 about, I think we can do it irrespective of when the budgets 6 approved. 7 I mean I would hope that usually for this kind 8 of planning, you would need to do it, the planning in one (1) 9 cycle, the budget and then implementation the following, my 10 sense, given constraint and everything. So, you can't do 11 both in the one (1) fiscal year. 12 MR. DAVID BUTT: So, that would involve 13 obviously, a change in practice, in terms of moving the 14 planning process forward -- 15 MS. SHIRLEY HOY: Much earlier, yes. 16 MR. DAVID BUTT: -- and -- and simply as a 17 matter of managing change for the transition year, it would 18 require the additional effort of doing a lot more in one (1) 19 changeover year; is -- is that fair to say? 20 MS. SHIRLEY HOY: That's true, yes. 21 MR. DAVID BUTT: Okay. Is that something that 22 you see as a significant impediment to implementing that kind 23 of change; moving your planning forward? That -- that one 24 (1) year bulge? 25 MS. SHIRLEY HOY: Not necessarily in this, we

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1 have seen -- we -- in doing the procurement process, what you 2 have to do is identify one (1) time resources that help do 3 that planning, because once that's done, then you can move 4 into your regular cycle. 5 MR. DAVID BUTT: Right, okay. Just -- just 6 before we move on to the complaint system, there's a couple 7 of occasions this morning when you've -- you've spoken about 8 external consultations, in the context of talking about a 9 Fairness Commissioner, you've had conversations in -- in this 10 morning talking about Conflict of Interest. You've spoken 11 about consultation with other Municipalities around Ontario. 12 Can you tell us, how does that process take 13 place? Is -- is there a -- a formal mechanism by which you 14 engage in those cons -- consultations; is it informal? Can 15 you help us a little bit with that, and how extensive it is? 16 MS. SHIRLEY HOY: It's relatively informal. 17 The one (1) I mentioned about the Conflict of Interest, is 18 that there is a CAO's forum, and there are about thirteen 19 (13) of us, or thirteen (13) to eighteen (18) of us, which 20 involve regional level CAO's, as well as single cities. So, 21 it covers the -- the big urban centres across the Province. 22 And we put items on the agenda, that's items of common 23 interest, and a lot of it dealing with cost sharing with the 24 Provincial Government. 25 But issues like Conflict of Interest, every

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1 Municipality, you know, has a Conflict of Interest Policy, so 2 we were comparing notes to try to make improvements in one's 3 own Conflict of Interest. So, that's how we do that kind of 4 consultation. 5 MR. DAVID BUTT: And -- and again, in terms of 6 your conversations around the Fairness Commissioner, would 7 have been through that same body that those issues came out? 8 MS. SHIRLEY HOY: No, actually I haven't yet 9 raised that issue about the Fairness Commissioner, that came 10 as a recommendation from our Auditor General in one (1) of 11 his reports, and then it was reiterated by Justice Osborne in 12 his report on the Union Station review that he did. 13 So -- and we have now been requested to have a 14 report back to Council. 15 MR. DAVID BUTT: And I take it that report is 16 in the process of being prepared? 17 MS. SHIRLEY HOY: Yes, it should be out this 18 spring. 19 MR. DAVID BUTT: Okay. Now, if -- if I could 20 move then to a complaint system, and again, this is something 21 that you want to move the City towards, as a way of enhancing 22 the -- the quality of your procurement process; how do you 23 see the complaint system working? 24 MS. SHIRLEY HOY: Well, I read with interest, 25 the recommendations that came from Ms. Gibbons, in her review

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1 of the procurement system right now in the City, and how we 2 handle complaints. 3 Complaints right now come in two (2) ways; 4 they can come into the staff through a bidder, a vendor, a 5 supplier, who -- whether the person's unsuccessful through a 6 -- a procurement process, or if the person didn't manage to 7 get on the list or, you know, it could be a number of 8 different things, or if they think that what was set out in 9 our call document wasn't clear. So a variety of different 10 complaints. 11 Right now it's informal, it comes into the 12 Director or the Manager of -- of Procurement, but I said to 13 the CFO, my sense is that we haven't tracked well as to the 14 kinds of complaints, because learning from that you can see, 15 you know, what part of the system is creating difficulties 16 out there. So, that's one (1) aspect that I'd like to see if 17 we can make some improvements on. 18 The other part that suppliers and vendors tend 19 to do, if they have a concern, or if they weren't successful 20 in the bid, would be to complain to the Councillors and 21 again, it's informal, in the sense that they can, you know, 22 talk to any members of the Council and the Councillors do a 23 number of different thing -- things in responding to that 24 complaint. 25 Sometimes the Councillor would suggest that

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1 Supply go and talk to staff, and make sure staff are aware. 2 And if the Councillor feels that the -- the Director level 3 may be too low, the person may escalate it up to the CFO, or 4 bring it to my attention, that there's a major concern. Or 5 the person may take -- may advise the complainant to take it 6 as a deputation to Standing Committee. 7 So, usually at the time that that particular 8 item, where an award is being made after the RFP process, the 9 procurement process, then the person will go and do a public 10 deputation to that standing committee and -- and the 11 concerns. 12 We have also had incidents where the 13 Councillor will, kind of, champion that complaint and then 14 ask for a staff report, you know? So it's all different 15 places. And if I read what is suggested here, by Ms. 16 Gibbons, is that we may want to formalize that a bit more, 17 both internal complaint, and I guess one of the suggestions 18 she had here was that perhaps the complaint that comes in to 19 staff, that we should have a system, a complaints system, 20 that we can then communicate out to all the bidders and 21 suppliers that want to do business with the City in the same 22 was we have no attached our conflict of interest policy to 23 the actual bid document, as to what they're expected to do; 24 how they're supposed to conduct themselves with staff. 25 So, her suggestion is that we may even want to

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1 put in, kind of, a two-step approach that it can still come 2 in to the Director of Purchasing but that there should be a 3 second level, as she's suggesting here, that complaints could 4 be adjudicated by a panel. 5 Although, I would disagree with her that the 6 Auditor General's office should be involved because the 7 Auditor General is supposed to be independent. He may end up 8 coming in to look at how well staff dealt with that 9 complaint. 10 But the notion of having the two-step approach 11 where, if it's still not resolved, that perhaps it's a Line 12 Commissioner with somebody from another part of Finance and 13 the Clerk's office, or something, who could make up that 14 second tier; that could be a -- a second panel if your 15 complaint makes sense. 16 And I guess in terms of dealing with the 17 political system, again, the suggestion here that I think 18 would certainly give more clarity to the system is one where 19 we set out some guidelines for Councillors as to wha -- how 20 to deal with complaints that come in from suppliers and 21 bidders so that we don't get the number of different avenues 22 that I just mentioned to you because again, then, there's a 23 sense that we don't have a clear, open, transparent process 24 to hear complaints. 25 So maybe it should be one the guideline --

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1 says that, if Councillors do receive complaints then here's 2 what you do; it should be sent directly, there should be a 3 deputation at Standing Committee so that you don't have this, 4 could be but it could also be one where the Councillor 5 champions the complaint and, you know, it just -- it's not 6 clear. 7 It's also not seen as open because people 8 don't -- people say, well, sometimes I wasn't even sure you 9 actually were entertaining complaints. I did have a concern 10 but I didn't know where to go with it. 11 MR. DAVID BUTT: Now, what would your 12 response be to a Councillor who would say, well, wait a 13 minute, it's my job to champion complaints. If I'm to be 14 responsive to a constituency out there that, that's an 15 important part of my function; how do you see this complaints 16 process fitting in with the roles and relationships between 17 staff and Council? 18 MS. SHIRLEY HOY: I think that can be done 19 and that is done now when the Councillor would come in with 20 the complainant to a Standing Committee and what will happen 21 is that the person would do a deputation on his case and what 22 his concerns are and then the Councillor would also speak, 23 you know, as to -- from his knowledge, as to what the 24 concerns are. 25 I think the key here is to make sure that it's

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1 done in an open forum and it's done with a set of guidelines 2 about having deputations at a standing committee so that 3 there isn't a sense that anything is negotiated beforehand, 4 before it comes publicly to a standing committee because 5 usually, out of hearing a complaint and maybe there is new 6 information, maybe staff misinterpreted information that's 7 submitted, then committee usually would ask for a staff 8 report and, kind of, you know, the new information you have 9 received, you know, the clarification of information; does it 10 change anything? 11 You know, can the Commissioner bring back 12 another report. So I think as long as it's done in that kind 13 of open forum and people know what the guidelines are, that's 14 important. 15 MR. DAVID BUTT: And so, as I hear your vision 16 of how this unfolds, the deputation will be taken, and then 17 staff would be able to re-evaluate in light of that 18 information? 19 MS. SHIRLEY HOY: Or further comment on the 20 information; it depends on the particular circumstance. 21 MR. DAVID BUTT: Right. And would this have 22 any potential to delay the implementation of -- of 23 procurement decisions? I mean somebody could tie this up in 24 appeals. I mean obviously procurement is an issue that has a 25 lot of time constraints around it.

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1 MS. SHIRLEY HOY: Yes. Well, absolutely, and 2 it could and we have seen situations where an award has been 3 delayed, you know, and then report back. So, as part of the 4 guidelines, I think there need to be tight time-lines there. 5 MR. DAVID BUTT: And in terms of the -- 6 obviously the legalities of it, you'd have to pay attention 7 to the extent to which an additional award that may be 8 subject to a complaint, is or is not binding, so -- 9 MS. SHIRLEY HOY: That's right. 10 MR. DAVID BUTT: -- that there's flexibility. 11 Because I take it, you would support the view that, if there 12 was an irregularity that was pointed out, it could go so far 13 as to result in a different award? Is that something that 14 you would contemplate, in terms of, an appropriate remedy if 15 there were a problem? 16 MS. SHIRLEY HOY: It could be. Or it could be 17 -- in drastic cases, you may have to go back to square one 18 (1). 19 MR. DAVID BUTT: Right. 20 MS. SHIRLEY HOY: I mean it depends on the 21 particular circumstance. But, I think here what I'm saying 22 is that I think there need to be a set of clear guidelines 23 that everybody know, you know, what the rules are. 24 25 (BRIEF PAUSE)

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1 MR. DAVID BUTT: Those, Ms. Hoy, are the 2 questions that I have on the management control issue and 3 Commissioner, I'm in your hands. 4 MS. LINDA ROTHSTEIN: Actually, no, that's 5 procurement -- 6 MR. DAVID BUTT: Or, sorry, procurement -- 7 MS. LINDA ROTHSTEIN: -- and there actually is 8 a whole other set of criteria and issues with respect to 9 management controls that I know, Ms. Hoy, can take you 10 through if you wish. 11 MR. DAVID BUTT: Right. Yes. No, moving to 12 the next line and I apologize for the -- the wording. 13 Now, again, the slide that you had identified 14 under the title of -- of management controls, you initially 15 said in your presentation this morning, that these controls 16 were identified as -- as one (1) of the highest priorities in 17 terms of constructive change, going forward. 18 First of all, can you tell us, why it was that 19 -- that these sorts of controls made it as high as they did 20 on the priority list? 21 MS. SHIRLEY HOY: They have -- I say that 22 there -- there is six (6) key requirements to improving our 23 management control, because in particular, this whole area of 24 contract management has been identified as a major issue by 25 our own Auditor General and the number reports.

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1 Some of it department specific, some of it in 2 the areas as I mentioned earlier, in the general corporate 3 contracts, the blanket contract, issues. 4 And it's still very much a work in progress, 5 because again, we just have not been able to move as quickly 6 as we wanted to, to make the changes, that are necessary. 7 I would say, that of these six (6) areas, 8 there are -- three (3) of them are in pretty good shape and 9 one (1) of course, is the one (1) that I had mentioned 10 earlier, the management controls check list. 11 I think because of the fact that, since 2001, 12 we have been using that and getting managers at all levels to 13 keep looking at it, there is now recognition how important 14 that check list is that people use it, you know, use as a 15 reminder to yourself, areas of where you may have 16 vulnerability, in terms of internal administrative control. 17 MS. LINDA ROTHSTEIN: We have a copy of that 18 for you, Commissioner, that I gather we haven't managed to 19 get up to your desk or anyone else's so -- Ms. Hoy, can we 20 just take one (1) minute and -- so the Commissioner can ask 21 you any questions about that checklist -- 22 MS. SHIRLEY HOY: Yes. Okay. 23 MS. LINDA ROTHSTEIN: -- as we go. 24 25 (BRIEF PAUSE)

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1 2 MS. SHIRLEY HOY: So, I think it's a good -- 3 MADAM COMMISSIONER: Would that be the next 4 exhibit then? Is that where you'd like to put that? 5 MR. DAVID BUTT: I'd be content with that. 6 MADAM COMMISSIONER: Exhibit 69. Thank you. 7 8 --- EXHIBIT NO. 69: Unbound document entitled 9 "Management Controls - Checklist 10 for Commissioners." 3 pages. 11 12 MS. SHIRLEY HOY: So, I think it's a good tool 13 that the Commissioners and I have been saying to all 14 managers, keep using this list, because it will help you ask 15 yourselves and your staff, what you should be looking for, 16 and where you may have concerns, you know, do we have enough 17 controls in place. 18 The second area where I think we -- we're 19 doing well in finally, is managing consultants. We have now 20 put in place quite a detailed set of policies and procedures, 21 out of a major review again that came from the Auditor in 22 2001, and partly also from the MFP experience, as to what's 23 the policy for selecting and hiring consultants. What type 24 of consultants? 25 So, we have now defined more clearly for staff

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1 what we see as the five (5) major areas of consultants, and 2 how they use them, how they hired them. 3 And because as I indicated earlier, through 4 revamping our budgeting process in the operating budget, it's 5 a zero base for consulting, it means that they don't have any 6 base budget for consulting, it starts at zero, they have to 7 give detailed business cases as to why they need any 8 consulting at all, in any fiscal year. It means that they 9 have to think about, you know, why can't their staff do the 10 work, and what are they looking for, and to set the budget. 11 With the result that -- 12 MR. DAVID BUTT: So -- so zero -- zero based 13 budgeting then is, and operating assumption going into the 14 budgeting process, that you will hire no consultants? 15 MS. SHIRLEY HOY: That's right. 16 MR. DAVID BUTT: And if you wish to, it's your 17 obligation as a department to make the business case for 18 those -- for those consultants? 19 MS. SHIRLEY HOY: And you have to submit as 20 part of your budget submission, as to what's the level of 21 consulting dollars you require, and then the back up sheets 22 on what you're looking for consultants to do in this upcoming 23 budget year. 24 MR. DAVID BUTT: Now, I guess, just if I could 25 add one (1) possible wrinkle on that. If you have

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1 consultants in some area where it's a multi-year arrangement 2 with a consultant, or a period of time that carries over into 3 two (2) budgetary periods, how would you deal with that? 4 Would you be cut back to zero again, and have to remake the 5 case, or -- 6 MS. SHIRLEY HOY: No, but that means they have 7 to have a business case as to what is that second year. So, 8 let's assume you've put in -- you need, you know, a hundred 9 thousand (100,000) for two (2) year, sixty thousand (60,000) 10 the first year, forty (40) -- sometimes the cash flow may 11 change as well as you get into it. So, you have to document 12 what is the actual spending in that first fiscal year, and 13 what more do you have to -- to do in the second year. 14 But you still have to do it as a business 15 case, to commit it. So, while in the first year it was 16 recognized you're going to do it over two (2) years, in that 17 second year you still have to carry that forward and 18 rejustify it, and also see if the cash flow figure has 19 changed or not. 20 MR. DAVID BUTT: And -- and you mentioned you 21 -- you've identified five (5) areas that are -- 22 MS. SHIRLEY HOY: Yes. 23 MR. DAVID BUTT: -- perhaps heavier consultant 24 users, or -- 25 MS. SHIRLEY HOY: Well, no, we're -- we've

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1 identified five (5) types of consultants as part of our 2 policy, so of course for departments like Works, their 3 biggest one is professional and technical, so the engineers, 4 in order to deliver on the capital programs and the projects 5 that they have in place. 6 It's the -- it was really in the area of what 7 we have now named, Management Consultant and Research, is 8 where we did not have a good handle on how much we need and 9 how much support was required, because as we were cutting 10 staff, the way to get the work done and make it happen in 11 terms of the changes that we were going through in the first 12 three (3) years was to hire consultants. 13 So, we've clarified that category. The third 14 category deals with communication, this is in particular when 15 we had our strike, you know, in order to have support for the 16 public relations and the communication area, that's a third 17 category we've put in there. 18 A fourth one (1) deals with systems of course, 19 and a fifth one (1) is legal, because sometimes legal, the 20 solicitor has to go out for legal assistance, for particular 21 planning issues -- in particular. 22 MR. DAVID BUTT: Okay. And can you -- can you 23 tell us then, at what stage is this implementation of the 24 zero based budgeting at, is it up and running? 25 MS. SHIRLEY HOY: Absolutely, the last three

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1 (3) budget years already. 2 MR. DAVID BUTT: Okay. And can you tell us, 3 are you able in -- in those last three (3) budget years, to 4 discern any changes in consultant use that you think can be 5 attributable to this policy? 6 MS. SHIRLEY HOY: Well, we certainly have seen 7 a large reduction in the consulting dollars, so that in 2001, 8 when the review was done by the auditor, there was a lot of 9 confusion as to actually how much consulting dollars we had, 10 because all these categories I just mentioned were all mixed 11 together, and there was a real need to clarify all that. 12 In the last two (2) years of our budgeting -- 13 zero based budgeting consultants, our actual spending varies 14 between about three (3) to 6 million so there has been a 15 major reduction at the time the review was done back in 2000. 16 And just in the kind of general management consulting 17 category, we thought we were probably more in the area of 18 over 20 million. 19 So there has been a major reduction in that 20 area and, you know, we are, in a number of key areas, looking 21 at transferring the knowledge of consultants to our staff and 22 we have seen that, in particular, in the areas of IT, you 23 know, we are looking at, kind of, weaning ourselves away from 24 consultants and making sure that the staff have the skills to 25 maintain systems.

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1 MR. DAVID BUTT: Can you help us in the IT 2 context, for example, and perhaps in other contexts, I can 3 see a distinction between project-based consultants where, I 4 guess, the Works Department is the best example. 5 You're going to build a bridge, you need to 6 hire the engineers, versus problem-based consultants where an 7 issue arises, whether it's in communications or in legal, and 8 you need to respond by hiring a consultant; how does your 9 zero-based budgeting approach address that distinction 10 because a problem may give rise to a need for a consultant 11 could arise in the middle of a fiscal year after your budget 12 numbers are already met? 13 MS. SHIRLEY HOY: That's right. So I would 14 expect and what I have seen, especially in that, kind of, the 15 communications, the research and management consultant, there 16 would be a business case say, anticipate that these would be 17 the area of issues or problems that can come up, so it would 18 be a budgeted number only. 19 And we do -- I mean, in the area of management 20 -- and I will use the CAO Department as an example, we get 21 into all kinds of reviews and work so this fairness 22 commissioner idea is one that I'm sure my staff may say, we 23 need to spend up to, maybe, ten thousand dollars ($10,000) to 24 get somebody who can help us do that, you know, review of 25 what's happening in other jurisdictions, whatever, if we

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1 don't have enough staff or expertise to research that. 2 So, as part of my submission during the 3 budget, I would ask for up to a minimum amount of, you know, 4 hundred thousand (100,000) or whatever, anticipating these 5 are the types of management consulting work that I will need 6 to retain this year and I would highlight what they are 7 because I know what's coming as part of the CAO work plan and 8 that's what departments do from year to year. 9 But by going through that process you 10 certainly reduce, you know, the amount of dollars that are in 11 various departments' budgets for consulting because you have 12 to specify what you anticipate what may come up. 13 MR. DAVID BUTT: And I'd like to ask you just 14 a couple more questions around the IT end of things and 15 consultants but I do know it's one o'clock and I'm in your 16 hands, Madam Commissioner. 17 MADAM COMMISSIONER: Well, we're all coming 18 back right after lunch; right? 19 MR. DAVID BUTT: Yes. 20 MADAM COMMISSIONER: Okay. Well, why don't 21 we -- why don't we take lunch and break for an hour and a 22 quarter; all right? Does it give people enough time? Let me 23 just close off my computer here. 24 25 (BRIEF PAUSE)

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1 2 MADAM COMMISSIONER: See you at 2:15. Thank 3 you. 4 THE REGISTRAR: The Inquiry is adjourned for 5 lunch until 2:15. 6 7 --- Upon recessing at 1:00 p.m. 8 --- Upon resuming at 2:15 p.m. 9 10 THE REGISTRAR: The Inquiry is now resumed. 11 Please be seated. 12 MADAM COMMISSIONER: Good afternoon. 13 14 (BRIEF PAUSE) 15 16 MR. DAVID BUTT: Now, Ms. Hoy, I indicated 17 before the lunch break that I wanted to pick up on the 18 management consultant discussion and talk particularly, if I 19 could, for a little bit, on the -- in the IT context; and we 20 obviously are all aware that there was a significant amount 21 of IT activity up to and shortly after Y2K. 22 Has your evaluation of consultant needs in the 23 IT sector moved beyond that, and to the point where you have 24 a sense of -- of how the IT consultant needs roughly will 25 change, in -- in sort of in the post Y2K era?

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1 MS. SHIRLEY HOY: Mr. Butt, again, I would say 2 that we've made progress, but we're not a 100 percent there 3 yet. 4 The main focus, as you can well appreciate, of 5 our IT staff, have been the end of lease strategy, as it 6 deals with MFP. And I think the report from the consultant, 7 Mr. Chris Kerr, was very, very helpful, and with the 8 agreement and concurrence of Commission, we certainly did go 9 to him to get advice from him following his report that 10 you've made public, that we use that report to guide us as to 11 how to do the end of lease strategy. 12 So, before the previous term of Council ended, 13 the -- our IT Director at the time, Mr. James Ridge, who's 14 now gone to Vancouver, he did put forward a report first 15 through our IT sub-committee and then into Council, alerting 16 Council of the fact that there's some urgency to deal with 17 the end of lease strategy. 18 So, the IT staff have been working on that, we 19 have a plan in place, which adheres very much to the report 20 that came out of Mr. Kerr. 21 Through the budget process we will be going 22 through the details of that plan. Corporate Services 23 Commissioner will be giving those details over the next 24 couple of months, because as you know through our 2004 budget 25 process, there has to be a final approval of the budgets by

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1 April -- before the end of April of this year. 2 So, that's a large part of the focus, but at 3 the same time, what we have been doing in the IT Department, 4 working with all the line departments, is to figure out what 5 are the IT vendors that we need to continue work with, for -- 6 I guess for a few reasons. 7 One (1), as I briefly mentioned in my 8 presentation this morning, one (1) is to transfer the 9 knowledge from the consultants to the staff. So, in a number 10 of programs, we still have mainframes, we still work in a 11 mainframe environment, and there's no way we can get around 12 that easily. 13 And some of the programming, I mean, old, old 14 stuff, recently was brought to my attention, you know. We 15 have a consultant who's been helping us to do maintenance on 16 COBOL, old, old systems, right and there are very few people 17 who know that system. 18 So, we're in the process of training staff to 19 make sure that they know how to operate, and we're hoping 20 that before the end of June, that consultant will no longer 21 be required, right? 22 In other situations we will always need a 23 consultant, because partly it -- from an analysis of, kind 24 of, you know, scale of work required, as well as expertise 25 required, doesn't make sense to hire that expertise, because

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1 sometimes it may be very narrow, single focussed, and you 2 want to be able to have that flexibility to get the skill set 3 at the time you need it. 4 So, it is a mix still of some that will be 5 transfer of knowledge and skills into the City staff 6 compliment, in other cases we will still work with them. 7 But the one (1) major piece of work that's 8 being done by IT staff with the Departments is to determine 9 what those contracts look like. The major change we have 10 done since 2001, is that those types of contracts are not 11 done by Departments alone. It has to have the sign off and 12 the approval of IT. 13 So, while a particular contract to -- to 14 maintain a particular system would be identified in the 15 particular division/department, at the time we retain the 16 services of that consultant, it has to have sign off from 17 Corporate IT. 18 MR. DAVID BUTT: Okay. And does this have any 19 relationship to the value of the -- of the contract amount, 20 or is this something that's consistent in -- in all IT? 21 MS. SHIRLEY HOY: It's in all IT, where it -- 22 what -- basically, we put that in place since 2001. 23 Basically, in all IT they have to have a check in to 24 Corporate IT. 25 MR. DAVID BUTT: Now, just to pick up on a

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1 thread from -- from your -- your answer, it seems -- and 2 tying in the idea of making a business case, it sounds to me 3 like an important question that is being considered with 4 respect to IT consultants is, can we do it in-house and if 5 not, then we go outside? 6 Does -- does -- that capture at least part of 7 the -- of the concern that you bring to the assessment of 8 every proposed IT consulting contract? 9 MS. SHIRLEY HOY: Yes. I think the first 10 question is, you have to be very clear and answer as to why 11 we can't do it in-house before even considering a consultant. 12 So, once you answer that question as to why, from a financial 13 point of view, from a skill set point of view, from a time 14 line point of view, from the -- the requirements are set out, 15 you have to be able to answer all those questions as to why 16 it would not make sense to do in house. 17 And then once that decision's made as to how 18 to do it, I think, finally, because of the focus we've made 19 in IT, I would suggest that finally in the IT area we're 20 paying a bit more attention about planning and the user 21 needs. 22 And I know that currently our acting Executive 23 Director and her staff have a lot more of intergovernmental 24 committees set up so that there's a lot more conversation 25 about what are the requirements of the departments in the IT.

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1 And that's really important. 2 MR. DAVID BUTT: Now, when you say 3 "intergovernmental" is this among departments inside the -- 4 MS. SHIRLEY HOY: Sorry, inter-departmental. 5 I meant inter-departmental. Yes. 6 MR. DAVID BUTT: And this would be for IT 7 acquisitions that are -- that cut across departments rather 8 than the department specific types of IT procurement? 9 MS. SHIRLEY HOY: That's right. 10 MR. DAVID BUTT: And that, I think, takes us 11 nicely into the -- the next topic that you've identified in 12 terms of your management controls and that is the -- the 13 quarterly variance reports. 14 Now, can you tell us, please, how are these 15 quarterly variance reports an improvement on or a departure 16 from how you might have done things in the past? 17 MS. SHIRLEY HOY: Okay, prior to 2001 we 18 really did not have regular variance reports. And when we 19 reported through both the Administration Committee and the 20 Audit Committee it was recommended, and staff concurred, that 21 we should have and -- and that was partly out of the work we 22 did with Mr. Gunn as well, when he started to look at ways to 23 improve, both our capital budgeting process and operating 24 budget, is that we -- we started the process and the CFO's 25 responsible for ensuring that we report on a quarterly basis

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1 on how well we're managing our expenditures. 2 We started first just with the capital and the 3 operating budget, but then, because of -- and particularly in 4 the capital program, the extent to which we draw on reserve 5 funds because, because as you know, we have a large number of 6 reserve funds and they're very specific to particular 7 projects, you know, from development charge bylaw that we 8 have to adhere to where deals with growth and new projects 9 that happen in the community relating to, kind of, community 10 benefits. 11 You know, from community centres and parks and 12 other benefits when developments occur, to reserve funds in 13 the, as I said, mainly in the capital program area, Council 14 wanted to understand how -- when those draws are made. 15 When how -- you know, how -- kind of the level 16 of transaction activity in reserve funds. So, on a quarterly 17 basis, those reports are produced and how Finance staff 18 produce them, of course, is to -- the Finance Budgeting staff 19 relate to the Budgeting staff in -- in all the departments in 20 order to get the most updated information on their 21 expenditures and, of course, relating to accounts payable to 22 see actually what has been spent and what has been committed. 23 And in those reports, because of the focus on 24 consultant expenditure, the CFO usually -- well, he has had 25 this section in his reports in the last couple of years, he

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1 makes a specific comment on expenditures in the consulting 2 area, you know, how much we -- we have spent and so that's 3 commented on a quarterly basis. As well, he also comments on 4 the staffing update, the approved positions, compared to 5 budget, whether or not, the number of positions that 6 departments have filled, you know, are up to what they're 7 budgeted and whether there are any problems in that area. 8 As I said before lunch, I think in the area of 9 the management control list, our system now in place, for 10 hiring consultants and monitoring expenditure, as well as the 11 quarterly variance reports, we're doing not too badly. 12 I think we still have a lot of work to do in 13 contract management and I think the example I gave this 14 morning, because we do have you know, two (2) different 15 systems of a -- of booking our expenditure, let's say, 16 against contracts, it still means that all expenditures 17 against corporate contracts may not be captured. So we're 18 making changes there right now, as we speak. 19 In Accounts Payable, the projects I noted this 20 morning like three (3) way match; it's not roll out yet, 21 across all the departments, as it is to some, as well as, the 22 invoice follow up improvements that the Director of 23 Accounting is doing. 24 Once those are in place, I think it will be 25 substantially improved in terms of accounts payable, to

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1 ensure that the suppliers get their payments in a timely 2 manner and on our side, to make sure there are good controls 3 in place, to ensure that the -- we track spending, to make 4 sure we don't exceed commitments. 5 MR. DAVID BUTT: Now, just in terms of the 6 quarterly variance reports, perso -- could you help us 7 please; how does this report get generated and where does it 8 move? 9 In other words, I'd like you to explain how 10 this quarterly variance report could be a cause of some 11 corrective action to be taken? 12 MS. SHIRLEY HOY: The -- it gets generated by 13 first an email that goes out from a staff in our budgeting 14 division; it says, here's your deadline to give your numbers 15 in, as to where you think -- to give your final numbers, 16 program by program, as to what your expenditure levels are 17 and where you project to be at year end. 18 So, each quarterly report, give a sense of to 19 the end of that quarter, what are your actual spending levels 20 and where do you think you're going to be at year end, in 21 comparison to your budget. Okay. 22 So, once all that information's collected, it 23 is up to finance staff, in the financ -- financial planning 24 area, which is our budgeting staff, to then work the 25 departments, to give -- you have to give explanations as to

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1 why there is a variance, right? 2 In most cases, it's under, but, especially in 3 2003, with the problems we had with SARS, a number of major 4 projects from TTC to the Zoo to our Parks and Recreation 5 programs, we had major overspending, because their revenues 6 were way down, right? 7 And this is a challenging process for the 8 budgeting staff, because they have to go out to all of the 9 Agencies, Boards and Commissions, as well. It has to account 10 on a gross basis, the total $6.5 billion, on net basis, the 11 $2.8 billion dollars. 12 So, they have to be able to explain from what 13 is already committed and -- and identified spent, by 14 accounting area, that it matches where the departments are 15 at, and there's an explanation for any variance. 16 Once that variance report is signed off by the 17 CFO, it goes through and goes to our Budget Advisory 18 Committee, so that they know where it's at, then it goes to 19 also our Audit Committee, because they have been tracking the 20 quarterly variance reports, as well. 21 So, those are the places it would go to. 22 MR. DAVID BUTT: And presumably then, it could 23 generate discussion in Council with some direction 24 forthcoming, in terms of altering priorities, for example? 25 MS. SHIRLEY HOY: Absolutely. So, again if I

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1 use 2003 as an -- an example, there were major concerns, and 2 we still haven't seen our year-end yet because the year-end 3 for us, is December 31st, 2003, for example, but, your books, 4 they don't close until the end of February, until you get all 5 of the expenditures captured. 6 So, there is concern, as to where -- what our 7 year end looked like. As you know, municipalities cannot run 8 a deficit. So, last year Council approved that we put in 9 discretionary spending freeze, which we've done. So, we've 10 -- we've put in a freeze since September of last year, no 11 discretionary travels, no conferences, no hiring, except for 12 essential services, for services to be maintained. 13 So, we have a lot more vacant positions right 14 now because of the freeze on hiring. 15 When the new Mayor was elected I talked to 16 him, and given our constraint and what we're looking at as 17 the pressure for 2004, he said to me that he was in agreement 18 that we should extend the freeze to this first quarter of our 19 new fiscal year. So, the freeze on hiring is still 20 continuing. 21 So, that came out of a review of our concern 22 about when we look at the third quarter variance, with the 23 huge loss of revenue in TTC, and Parks and Recreation, and a 24 few other places, that we must end up with a balanced budget 25 for 2003.

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1 With the measures we've taken, we save about 2 $11 million, I think. But netting out all the pressures that 3 I've just mentioned, the CFO's projecting that our year end 4 sit -- financial situation, probably will be in the order of 5 about 5 or 6 million surplus, which is way, way less than the 6 regular year for us. 7 Usually our surplus situation is about 1 8 percent of our net budget of 2.8 billion. So, we get about 9 anywhere between 35 to 50 million surplus from year to year, 10 but last year, 2003, has been a huge challenge because of the 11 loss of revenues due to SARS. 12 MR. DAVID BUTT: And it -- it would follow 13 then that the variance -- quarterly variance reports have an 14 increasingly important role to -- to play in terms of 15 managing that -- that fine line before we reach a deficit 16 situation, which of course you're not able to -- 17 MS. SHIRLEY HOY: Absolutely, and -- and on 18 the capital budget side, what it helps us to do by having 19 quarterly variance reports, is to monitor how well all the 20 departments that have major capital programs really spend and 21 because one (1) of our concerns of course is that you don't 22 want to go out there and tax the dollars and not be able to 23 spend it. 24 So, from year to year people know that capital 25 budgets, nobody can spend up to a 100 percent, because you

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1 spend up to a 100 percent probably means you're going to go 2 over, right. 3 But a target of anywhere over 80 percent and 4 two (2) program areas always do very well in capital program 5 expenditure, because their -- their planning is so far ahead, 6 and they've got good ten (10) year planning, TTC and 7 Transportation, they can tell you from year to year, when 8 they will go and repair the roads and the bridges. TTC the 9 same way. 10 So, their expenditure level usually is over 90 11 percent, but because of SARS, in both cases they -- they had 12 to cut back somewhat, and it's more in the area of 75 to 80 13 percent. 14 When we work with Mr. Gunn in revamping the 15 capital program, because of the debt level of the City, we 16 have had to look at only saving -- well, staying with state 17 of good repair requirements, whether it's in Transportation 18 or in Parks and Recreation, or in TTC. 19 So, again, how we use the quarterly variance 20 report is to see if Departments are spending at the level 21 they're projecting. If they are not, it gives us an 22 opportunity to get Council to approve reallocation between 23 programs. 24 So, again you make full use of the budgets 25 that you set out and also to make sure that those areas that

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1 really need the funding, and that they're able to spend, 2 capture the -- the -- and use the money from the under 3 spending areas. 4 MR. DAVID BUTT: I'd like to ask you a 5 slightly different question now, and -- and that is does the 6 quarterly variance report, it's mere existence, have you able 7 -- been able to discern whether it has any disciplinary 8 effect on -- on expenditure patterns within -- within 9 Departments, by comparing typical, if I can call them that, 10 overruns, before and after the variance reports were -- were 11 regular practice? 12 MS. SHIRLEY HOY: Well, there certainly is a 13 lot of grumbling every time that deadline's issue on the 14 quarterly basis, to get your numbers in and get the 15 explanation as to why you're over or under, but as you say, 16 it becomes another tool for self-discipline -- disciplinary 17 measures because then we look at where we're at and what we 18 can do to improve. 19 And I think the departments, and I think the 20 Commissioners, appreciate the fact that now they have another 21 tool to be able to look at, you know, how is the department 22 doing. 23 MR. DAVID BUTT: What's the impact of 24 requiring quarterly variance reports in terms of the person 25 hours to actually accomplish the task; is -- is this an

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1 expensive reform? 2 MS. SHIRLEY HOY: I don't think I would put 3 it as an expensive reform, I think it's a necessary reform if 4 we want to reform because what it means, of course, is for 5 each of the supervisors and managers, we're asking that 6 everybody has to pay attention to managing their budgets and 7 managing their expenditures. 8 So I believe it's a good discipline, this 9 system, because then what you're pushing out is the 10 responsibility for managing your budget to the lowest cost 11 centres, to the lowest responsibility centres to make sure 12 that people who supervise staff, you know, have to look at 13 their budget, look at where their spending is and then it 14 rolls up to -- to head office. 15 MR. DAVID BUTT: And I can see, just looking 16 at -- having had an opportunity to look at the management 17 controls checklist that the two (2) seem to have a 18 complementary relationship in the -- in the sense that the 19 management controls checklist inquires as to whether the 20 systems are in place and the quarterly reporting requirement 21 says, okay, now, what have you actually done? 22 Is -- is that fair to say they're 23 complementary -- 24 MS. SHIRLEY HOY: Yes. 25 MR. DAVID BUTT: -- in that sense?

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  1                 MS. SHIRLEY HOY:   Yes, that's true.  
  2                 MR. DAVID BUTT:   And you spoke about pushing
  3  the -- the accountability down to the lowest cost centres,
  4  let me just go back to the management control checklist for
  5  -- for a moment which you indicated is part of the annual
  6  performance review; what level person is required to go over
  7  the management controls checklist as part of their
  8  performance review? 
  9                 MS. SHIRLEY HOY:   I would say to the manager
 10  level.  Not to front line supervisors because the roll up --
 11  so if I look at, for example, a program area like parks and
 12  recreation, I would expect that the individual supervisor of
 13  a community centre would not be going through this whole
 14  checklist.
 15                 But the managers of the district and the
 16  directors would be looking at this and then from the district
 17  operation, the directors, then it rolls up into the general
 18  manager of parks and recreation. 
 19                 MR. DAVID BUTT:   Now, if I could, I'd like to
 20  move to -- to the internal audit function and just by way of
 21  start off question, one might think that there is a certain
 22  amount of duplication if you have an external auditor and an
 23  internal audit function.
 24                 Could you begin, perhaps, by explaining why
 25  that, in your view, is not the case?  What separate and

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1 complementary roles the -- the two (2) offices play? 2 MS. SHIRLEY HOY: Prior to the work we did 3 with Mr. Desautels, the City had a City Auditor function. It 4 was a staff -- about twenty-six (26) staff at a budget of 5 about 3 million or so but it provided two (2) functions. 6 It did the independent audit of -- 7 administration and it looked at financial compliance and 8 value for money audits, but, in addition, it also provided 9 Internal Auditing function which is to serve more as a 10 resource, an advisor, to senior staff to undertake, in 11 particular, risk assessment and risk management. 12 And in particular in the areas where we're 13 getting into a new program area and new systems, the staff of 14 the former City Auditor would also provide advice as to what 15 needs to be done and what, you know, due diligence is 16 required before a system is put in place. 17 Mr. Desautels' recommendation was that given 18 the size and scope of the amalgamated City that there should 19 be a complete separation so that the Auditor General now is 20 independent of administration, he does his work plan, he 21 submits a work plan through the Audit Committee into Council. 22 Even Council cannot change his work plan. He 23 reports to Council for information on his work plan. Council 24 can add to his work plan by a two-third (2/3) vote of 25 Council, certain items can be added to, but, cannot take away

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1 what he sets out, as to what he requires to do. 2 So, I think there is quite a distinction 3 between this very independent Auditor General. The internal 4 auditor, Mr. Desautels indicated that the focus of Internal 5 Auditing is to prevent -- prevent, detect problems before 6 they happen. 7 It is -- it really speaks to helping 8 management develop systems that are robust in order to make 9 sure that you can deliver the services effectively and, in 10 particular, from a financial point of view, as cost efficient 11 as possible. 12 So, I think the two (2) functions are quite 13 different. So, when Council adopted the report, and I guess 14 the third part was that, prior to separating out this 15 Internal Auditing and external auditing, the external test 16 audit, which is, of course, auditing the financial books of 17 the City and providing an opinion on the fairness and 18 completeness of the City's financial statement; that external 19 auditor, used to report to the CFO. 20 And again, it was recommended by Mr. Desautels 21 that it would make more sense that this external auditor 22 report to the Auditor General and this is also in keeping 23 with the new Municipal Act, 2001, where the external auditor 24 of the financial statements, cannot be an employee of the 25 City. So, that's a requirement now under the new Municipal

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1 Act. 2 So, with that, the area that we really have to 3 build up is the Internal Auditing area and that's where the 4 new Director was hired last summer and he has now hired a 5 couple of his staff and we're in the process of working with 6 the commissioners, to identify areas where we want the 7 Internal Auditing group to start looking at areas they can 8 provide assistance to the senior management group. 9 MR. DAVID BUTT: Now, it's very important I 10 perceive, as you've outlined the -- the distinction between 11 having the external controls and the internal input, to 12 prevent problems before they arise. 13 Could you help us out by just perhaps giving 14 us a practical example of how that internal audit function 15 could work to prevent a problem before it arises? 16 MS. SHIRLEY HOY: Again, I -- I think usually 17 it's in areas like systems area. I'll talk about our next 18 step in trying to improve our SAP system. 19 Our SAP system now is at the stage still where 20 my sense is that, staff across the whole corporation probably 21 still don't know what it can do for them, in terms of -- of 22 making sure that we capture all the expenditures, but, also 23 we're looking at now, how we can sustain the system. The 24 sustainment phase of SAP. 25 We believe that there is still some critical

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1 areas that we need to do well and it speaks to some of the 2 issues I raise earlier; planning and security on the system. 3 So, we are in the process now of setting up, 4 what we call the SAP competency centre and the purpose of 5 that is to identify what are the skill sets required across 6 all the departments and of course, everybody uses SAP, 7 because it's our main financial system. 8 And to look at what is needed in order for us 9 to put in place a group of staff, who have the skills to help 10 us now look at planning ahead, what other systems can we now, 11 kind of, attach to SAP, for us to do our -- our -- our work 12 well. 13 And I'll give you a specific example. Works 14 and Emergency Services Department have said that they have -- 15 they want to put in place a work order system, as you -- as 16 you can appreciate, Works and Emergency Services have lots of 17 work orders, in terms of road repairs, right? 18 Right now, we're criticized, and rightly so, 19 often when you have those huge potholes across the City, and 20 you get complaints and they come in, it goes through a call 21 centre, then if -- of course, if it's a hazard to the public, 22 they immediately have to send a work crew out to fix; right. 23 So, work orders come in and right now we can't 24 -- we have not got ourselves to the place yet where we can 25 give ourselves a performance objective, let's say within

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1 forty-eight (48) hours you know, we're going to get that 2 done, and make -- make sure that whoever complained get an 3 answer as to when and how a repair like that gets done, and 4 at what cost that it takes to do it. 5 So, Works have said, you know, once you get to 6 the stage where we know what's happening in SAP, we would 7 love to be able to set up that kind of system, because it's 8 mainly Works that require it, but attach it to SAP, so then 9 it links to the financials expenditure side. It makes good 10 sense, right. To this point we haven't had the resources nor 11 the people to do the planning and to make it happen. 12 The other concern of course, from Finance 13 point of view is, it may be good serve -- client service, to 14 be able to do all that and then Public Health have other 15 needs, and you know, Parks and Recreation have their needs, 16 but at the end of the day we also have to make sure the 17 security is in place, so that as you get more and more users 18 attaching themselves to SAP, that the expenditure controls 19 are in place, and that people can't just come in and you 20 know, change accounts and change the numbers in those 21 accounts. 22 So, that's the kind of planning we want to be 23 able to -- to do. And as we're looking at that, we have 24 asked the staff in internal audit to be at the first step of 25 this thinking process, to tell us, what should we be looking

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1 for, as we move down this road of the next stage of SAP. 2 The next stage of trying to set in place now, 3 the SAP competency centre and basically to help to do a bit 4 of evaluation as to what is the resource level required. And 5 certainly, in my discussion with the staff who presented to 6 the senior management group, that they said, you know, they 7 probably need at least another ten (10) to eleven (11) staff, 8 in addition to the current existing staff about eleven (11) 9 who are working on this. 10 So, we said, you know, you have a group of 11 twenty-two (22) to twenty-four (24) staff, I need somebody to 12 comment on, is this a reasonable level, is it too much, is it 13 still not enough? And that's the kind of objective, 14 evaluation, and review I would expect Internal Auditing staff 15 to do, working with that staff group, but that's going to be 16 a priority area for us, because SAP, we need to -- to do the 17 next stage, work on it. 18 MR. DAVID BUTT: Again, you've mentioned that 19 the internal auditor is -- is in the process of -- of 20 generating priorities, do you have any perceptions as to in 21 what areas those priorities need to lie, apart from the SAP 22 that you've just given us? 23 MS. SHIRLEY HOY: Well, the top -- really top 24 priority is still contract management, he's already pulling 25 together all the recommendations coming from the Auditor

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1 General over the last few years, as to what are the areas 2 we've got to pay attention to. You know, what are the themes 3 that came out of those reports that we have not yet rec -- 4 implemented. 5 The -- he is part of the steering committee on 6 the procurement process, so we have to implement all forty- 7 three (43) recommendations and that has to be done this year. 8 And finally, it's in the area of asset management, inventory 9 management, I think one (1) thing that came out of Y2K that 10 was quite helpful to the City, because otherwise I don't 11 think we would have gotten there as quickly, is that at least 12 through the Y2K process, it gave us a chance to inventory all 13 our IT -- our equipment, you know, our technology -- IT 14 pieces -- in the system. 15 But we think we may have about 90 percent of 16 the system counted in, because of course, during those years 17 Departments on their own had also acquired other pieces of 18 equipment that we don't know about. 19 So, we think that it's really important to 20 have a full asset management system in place and actually 21 through the end of lease strategy that will help, by going 22 through the end of lease strategy, we will then be kind of 23 developing and having a system in place that will be a 100 24 percent sure of all the equipment that -- that's in the City. 25 So, those are the key areas of his -- his work

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1 plan over the next year or so. 2 MR. DAVID BUTT: Okay, and I -- I want to ask 3 a little bit more about procurement. But just before I do 4 that, you -- you mentioned that there may be up to 10 percent 5 of -- of IT acquisitions that departments would have obtained 6 on their own; would those be acquisitions that would be 7 beneath the seventy-five hundred dollar ($7,500) threshold 8 that we've spoken of? 9 MS. SHIRLEY HOY: In most, absolutely. Yes. 10 MR. DAVID BUTT: All right. Then just to 11 return to the procurement and if we could focus a little more 12 directly on procurement, where would you see the -- the 13 internal auditor involved and I'll try to be a bit more 14 specific in that, would -- would the internal auditor have a 15 role to play in designing RFP's or evaluating tenders that 16 come in in response? Where -- where in the procurement 17 process would you see the internal auditor playing a role? 18 And, of course, I'm distinguishing that from 19 the contract management aspect after the procurement has 20 occurred or the contract has been awarded? 21 MS. SHIRLEY HOY: I'm not suggesting that the 22 internal auditor sits on the evaluation of the actual RFP's 23 come in. His role right now is to help us sort out the -- 24 kind of the fundamental questions of roles and responsibility 25 that I mentioned earlier in my presentation.

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1 He is part of the steering committee so 2 there's a whole set of when you look at the forty-three (43) 3 recommendations in total, you can, kind of, group them into 4 those headings I talked about this morning and the 5 fundamental one deals with the roles and responsibility issue 6 as to who does what and when do you bring in legal? You 7 know, what's good practice as to when do you seek legal 8 advice? What do departments do? What does purchasing do? 9 It's that level of input. 10 MR. DAVID BUTT: Do you foresee any role that 11 an internal auditor could play though at -- at the individual 12 contract level where those evaluating a procurement decision 13 might say, which one of these is ultimately going to be in 14 the best financial interests of the City and approaching an 15 internal auditor for advice on -- on that question if it's a 16 large enough contract. 17 Do you foresee any role like that for an 18 internal auditor? 19 MS. SHIRLEY HOY: My top of mind is, no. 20 Only because I don't -- I want the responsibility to lie with 21 the department that's responsible, working with Purchasing. 22 I would prefer -- so that if we get the roles and 23 responsibilities clear, if we have the -- all the, you know, 24 policy standards and the call documents clear, I don't think 25 we want Internal Auditing to -- to have a role in that way.

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1 I could see one (1) where, for whatever 2 reason, at the end of it there is a problem that's 3 identified. So I see the Internal Auditing role as providing 4 advice to fix system problems. 5 MR. DAVID BUTT: Wouldn't you want to get 6 advice on how to avoid the problem rather than wait until it 7 happens and then get advice on how to fix it? 8 MS. SHIRLEY HOY: Yes, right. So at the 9 stage of implementing recommendations we're doing now with 10 the Auditor General's report in procurement, that's why he's 11 on the steering committee and perhaps, Mr. Butt, I may have 12 misunderstood your question. I thought you meant on each 13 individual RFP that goes through, to get advice -- 14 MR. DAVID BUTT: Not necessarily on each, but 15 on a case by case basis could you see an internal auditor as 16 being somebody that somebody could approach and say, look, 17 this one (1) is really thorny and -- 18 MS. SHIRLEY HOY: My only concern is this is 19 abdicating responsibility by the department. As it is now, 20 and I'll give you an example, the-- the Purchasing area, 21 because of the fact that we haven't implemented all the 22 recommendations yet, our solicitor is saying to me that there 23 is over-reliance on the lawyers right now by Purchasing 24 staff; right, because we haven't got the clarity of 25 responsibility.

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  1                 So, I guess, when I look at the I -- the
  2  Internal Auditing function I have the same concern that if
  3  people know they're their to -- to -- to kind of, step in,
  4  they may not do their part and I -- I think that it's really
  5  important that the departments and the Purchasing staff do
  6  the actual evaluation. 
  7                 MR. DAVID BUTT:   Okay.  And in terms of the
  8  -- just the level of functionality of the internal audit
  9  office right now, what -- how far along the road to being
 10  fully functional is it?  What stage are you at in terms of
 11  the development there? 
 12                 MS. SHIRLEY HOY:   This is a sad tale.  Mr.
 13  Desautels suggested the Internal Auditing function should
 14  have, as a starting point, should have at least six (6) to
 15  eight (8) staff given the size and scope of the City.
 16                 So, he said, you know, you should look at a
 17  budget of about eight hundred thousand dollars ($800,000). 
 18  Last year, when it was approved by Council, we've got four
 19  hundred (400), we got half of that.
 20                 What we're trying to do through this budget
 21  process is -- so basically, we have one (1) Director, two (2)
 22  professional staff right now, and one (1) administrative
 23  assistant in the unit.
 24                 What we're trying to do is add two (2) more
 25  staff and what we're hoping is that because it does provide a

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1 resource and advice to the -- to the various department heads 2 in the departments, we're hoping that some of that could be 3 cost shared with the departments. 4 So, for a couple of positions in the Internal 5 Auditing function, we're saying to departments, you know, can 6 you look at your priorities and cost share and we're doing it 7 proportional to their part of the budget. So large line 8 departments would be charged a larger amount. 9 So, we're hoping with that we can, at least, 10 get it up to six (6) staff, by the end of 2004. I think 11 ideally we should try to get this Internal Auditing function 12 up in the area of about eight (8) to ten (10) staff. 13 MR. DAVID BUTT: And what again, speaking 14 ideally, what split between risk assessment based priorities 15 that the internal auditor generates and requests to look at 16 particular areas, would you see that office -- do you think 17 there should, is approximately a constant division, between 18 those two (2) tasks, or would you see an ideal balance of 19 those you could express? 20 MS. SHIRLEY HOY: I probably, at the end of 21 the day, it -- to be valuable to the senior management group, 22 probably something like a sixty (60) forty (40) split, 60 23 percent where the Internal Auditing -- auditor is looking at 24 it from system issues and advising the Commissioners and 25 myself, on things to prevent, things to -- to -- to improve

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1 and to change. 2 And then 40 percent to provide that kind of 3 advice on their departmental specific areas of concern. 4 MR. DAVID BUTT: And do you foresee any 5 difficulties in maintaining that balance? For example, do 6 you have any concern that, particularly in light of your -- 7 your recent comments on over reliance, that the auditor will 8 be inundated with the 40 percent requests to the exclusion of 9 them being able to complete their -- their self anointed 10 tasks? 11 MS. SHIRLEY HOY: That's already happening. 12 You -- 13 MR. DAVID BUTT: And what -- 14 MS. SHIRLEY HOY: -- you hit that right on the 15 head, yes. 16 MR. DAVID BUTT: Okay. And so are there -- 17 are there thoughts you have around how that process could be 18 managed so that people are basically told, whoa, hold off. I 19 mean is there any screening mechanism or anything that you 20 can help us with that would address maintaining that sixty 21 (60), forty (40), that you've -- 22 MS. SHIRLEY HOY: Well, my suggestion to the 23 internal audit -- auditor is to bring it to the senior 24 management table, so then the Commissioners and I have to 25 struggle with that priority from year to year, as to what's

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1 the work plan that makes sense for the Internal Auditing 2 group. 3 MR. DAVID BUTT: So, ultimately then, would it 4 be a case where you might foresee the senior management team 5 screening the -- the ad hoc requests and saying, well this 6 year, we'll deal with this package and they equal 40 percent, 7 we'll leave the internal auditor to 60? 8 MS. SHIRLEY HOY: That's right. 9 MR. DAVID BUTT: Let me just ask that same 10 series of questions, jumping a little bit off topic, but, 11 that same series of questions vis-a-vis the external auditor, 12 who reports to Council. 13 First of all, just in your observation, is 14 there a potential for creating that same dis-equilibrium by 15 virtue of requests from Councillors, that -- that pass the 16 two-thirds (2/3) majority? 17 MS. SHIRLEY HOY: The -- no because I think 18 the Auditor General is pretty clear about his resource level. 19 And even the report that he's taking forward to Audit 20 Committee this week, he's identified a whole list of projects 21 he cannot proceed with, right away, because of resource 22 limitations. 23 And he gives reasons as to why he's set out 24 his work plan and his work priorities and the way he's done 25 that. So because of his independence, I think he can, you

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1 know, withstand that much better, in terms of you know, 2 requests that come through, unless it's really urgent and 3 time specific, he'll say, this is what I've got on my work 4 plan. 5 MR. DAVID BUTT: So, the -- the independence 6 combined with a report that makes it clear he's already got 7 far too much to do, you say, tends to have the necessary 8 dampening affect on Council requests -- 9 MS. SHIRLEY HOY: That's right. 10 MR. DAVID BUTT: -- that may interfere with 11 the work plan? 12 MS. SHIRLEY HOY: That's right. 13 MR. DAVID BUTT: Okay. If I could turn now to 14 Governance and ask you just some questions related to -- 15 related to Governance, as you've outlined it in your report 16 this morning. 17 First of all, you identified one (1) area in 18 which staff was looked at as the -- the structures and -- and 19 functions for -- for decision making. Can you tell us, are 20 there -- is there staff work at least, because this is 21 obviously staff and Council are both deeply involved in. 22 From -- from the staff perspective at least, 23 have you identified issues around the structured functions of 24 -- of decision making that you would like to address going 25 forward?

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1 MS. SHIRLEY HOY: I think the major area that 2 we have identified in this review, is the fact that we 3 believe in -- in particular, in the setting of priorities and 4 objectives, in the current structure, it's not easy. And 5 we've seen it now through a budgeting process, that at the 6 end of the day, while Council has an adopted an overall 7 strategic plan, a number of very specific sectoral plans, 8 like a social development plan, economic plan, cultural plan, 9 environment plan; that when you look at how through the 10 budget process, we have made decisions on where resources are 11 allocated, it really doesn't speak to the priorities of these 12 plans. 13 And the prior -- the -- from year to year that 14 Council is really setting priorities, where for example, if 15 we really did set priorities, what we would do is one (1) 16 year we may give a lot more money to a particular area than 17 another one (1), so, we have not done that well. 18 And I guess in -- in that discussion, there 19 have been options through our research as well as Ms. 20 Gibbons' reports on you know, maybe a stronger Executive 21 Committee, which currently is our Policy and Finance 22 Committee. 23 The other area of concern that's been 24 identified and we've experienced is confidentiality, you 25 know, there are certain areas of the responsibilities of

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1 Council, where confidentiality is supposed to be maintained 2 from personnel issues, to legal advice from -- from the 3 solicitor, to certain property, land transaction, that's 4 supposed to be confidential, as well as labour relations, 5 when we're into negotiations. 6 Those four (4) areas I have mentioned, again, 7 what we have seen is from time to time confidentiality is not 8 maintained, right. 9 So, there has been discussion that perhaps a 10 different structure, like an Executive Committee, that has a 11 set of responsibilities about areas, such as the four (4) 12 that I just mentioned, may be helpful and that's in our paper 13 as well as Ms. Gibbons' paper. 14 So, we talk about those kinds of changes, the 15 other area we talk about is our community Council structure, 16 that deals a whole lot with kind of what is called local 17 issues, local issues in you know, transportation, garbage 18 collection and planning. Planning issues and Parks and 19 Recreation issues, for example. 20 The suggestion in our reports that you know, 21 maybe there should be more consideration of whether or not 22 the final decisions of those community Councils need to come 23 as a full agenda of Council. Is there a different way to -- 24 to deal with those decisions, because in the majority of 25 cases they -- they're all approved, you know, it doesn't get

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  1  redebated again at Council, and it shouldn't be, because they
  2  are local issues.
  3                 But, then the question also is, and because
  4  one (1) area we want -- we addressed in our research is
  5  meaningful public input.  So, how do you get that at the
  6  Community Council level, and how do you get it at the
  7  Standing Committee.  So, we struggle with that question back
  8  and forth in the -- in the paper.
  9                 MR. DAVID BUTT:   And if I could go back to
 10  the notion of establishing priorities, as I heard you talking
 11  in brief terms this morning, establishing the priorities is,
 12  from your perspective, essentially a Council function and is
 13  there anything that you can see from a staff perspective,
 14  apart from this structural change that you've suggested of an
 15  executive -- or that you've mentioned, of an executive
 16  council, which I assume would function somewhat like a
 17  cabinet in terms of establishing priorities to use a
 18  Provincial or Federal model? 
 19                 MS. SHIRLEY HOY:   Similar -- it would still
 20  have to go to Council -- 
 21                 MR. DAVID BUTT:   Yes. 
 22                 MS. SHIRLEY HOY:   -- but, as we have seen in
 23  other jurisdictions, you could have an Executive Committee
 24  that establishes priorities.  It still goes to Council for
 25  final approval but in some particular areas you may need a

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1 two-third vote of Council rather than just a straight 2 majority; right, as a way to suggest that executive 3 committee's recommendations to Council should carry; right? 4 So that's -- those are the kinds of 5 differences in some of the structures that we have seen. 6 MR. DAVID BUTT: Yes. And I can see how, 7 from a -- from a staff perspective, establishing a set of 8 priorities and then maintaining them from year to year very 9 much assists in managing and focussing your expenditures and 10 your implementation efforts in your budgeting. 11 Is there anything that you can -- want to tell 12 us about how, from a staff perspective, staff could assist in 13 the -- in the functioning of an executive council model that 14 might contribute towards setting and maintaining priorities? 15 What role -- what -- what altered role might 16 you see for staff in helping to achieve those goals? 17 MS. SHIRLEY HOY: I just want to clarify, I'm 18 not talking about a separate Council, still a committee; 19 right? 20 MR. DAVID BUTT: Yes. 21 MS. SHIRLEY HOY: It's an executive committee 22 structure. 23 MR. DAVID BUTT: Yes. 24 MS. SHIRLEY HOY: I don't think it's 25 different than what I identified this morning which is still,

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1 you know, giving the professional, objective advice. I think 2 it is where the advice received by executive committee, if 3 there was this kind of executive committee, what happens to 4 it, how it's reported out to Council and whether or not 5 there's certain areas that stays in the purview of the 6 executive committee. 7 So, for example, labour relations would be a 8 good example, a personnel matter. How much of that would 9 staff at executive and how much would be reported out through 10 -- to Council. 11 MR. DAVID BUTT: If there were an executive 12 committee, would -- would the staff role change to this 13 extent in that staff would be involved in providing reports 14 to the Executive Committee that provided background and 15 perhaps went so far as advice on priorities? Would you 16 see -- 17 MS. SHIRLEY HOY: Well, we do that now. It's 18 just nobody pays attention sometimes. Other times they do 19 but sometimes it's the -- you know, all the services are 20 important, but we do try to suggest that if a strategic 21 plan's adopted, a particular set of priorities have been 22 identified that the resource allocations should match those. 23 So -- but ultimately, at the end of the day, 24 it's Council's decision. 25 MR. DAVID BUTT: Right, but instead of just

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1 simply arguing how and in what way the resource allocation 2 should match the established priorities, would you see it as 3 ever appropriate for staff in support of an executive 4 committee to take the next step and comment on the 5 desirability of putting program X, Y or Z as a priority? 6 MS. SHIRLEY HOY: Well, as I indicated 7 earlier, I think we have done that to the reports that we do. 8 Whether it's through the -- our current budget process or 9 report to -- to a standing committee. 10 MR. DAVID BUTT: So that the existence of an 11 executive committee might be a way in which those reports get 12 little longer legs than they have now? 13 MS. SHIRLEY HOY: Well, if there -- it had 14 particular authorities in setting priorities then, yes, it 15 would probably get more attention and it would -- probably 16 more detailed discussions. 17 MR. DAVID BUTT: Now, you mentioned another 18 area in which you're looking at the structure and function of 19 decision making and that's around the important issue of 20 confidentiality. 21 And just before addressing the decision making 22 processes, I'd just like to hear your thoughts on 23 confidentiality. The view has been expressed that really the 24 necessity of openness and accountability means that virtually 25 nothing should ever be confidential, in the context of

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1 municipal governance decision making. 2 Would you place yourself at that point in the 3 spectrum, or do you see the -- do you see any benefits to the 4 level of confidentiality that you've spoke about just now? 5 MS. SHIRLEY HOY: I think the Municipal Act is 6 very clear. I would say it's like over 90 percent of the 7 business of municipal government is the open forum, it's in 8 the complete public open debate. 9 The areas that I have mentioned, legal advice, 10 is a good example, the solicitor gives advice in confidence, 11 because often you know, the City is being sued. 12 So Council is the solicitor's client. She 13 wants to make sure that she gets instruction from Council and 14 you can't have that discussion with Council to put your best 15 case forward, in any lawsuit, in the interest of the City, in 16 an open forum, before you get to present it. 17 So, I think that's an example why an issue 18 like that need to be in confidence first, with Council. When 19 I look at labour relations, same issue. When you're into 20 negotiations, as you know, it will be back and forth. 21 Council ultimately is responsible, but, it's 22 very difficult on a day to day basis, to get instruction, as 23 you're negotiating from forty four (44) members of Council. 24 So, you need a smaller group that's given the 25 authority to give advice. The Mayor, of course, as head of

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1 Council, is very much a part of that, but, in addition to the 2 Mayor, you need a committee that will be there and of course, 3 as you're going along, you cannot have an open discussion 4 while you're negotiating your strategy to do your labour 5 negotiations. 6 In the area of personnel issues, when you're 7 talking about individuals, you're talking about evaluating 8 senior staff, that has to be in confidence. So, the areas 9 are pretty limited. 10 And the fourth area that comes to mind deals 11 with property. Again, you want to get the best price for the 12 City, when your facility and real estate staff are out there 13 negotiating and we want to make sure that's in confidence, 14 but, other than those four (4) areas, I mean everything else 15 at the City is very much, you know, an open forum. 16 MADAM COMMISSIONER: What's your concern, 17 exactly, with respect to the confidence? Is it your concern 18 that the group is too large, and therefore, it's hard to 19 maintain confidentiality? 20 MS. SHIRLEY HOY: I think Commissioner, my 21 concern is that the Municipal Act, probably need to be more 22 specific on consequence, when confidentiality is not 23 maintained, as to what happens in those very, narrow specific 24 areas, but there are a few areas to do -- to conduct the 25 business of the City, confidentiality need to be maintained.

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1 So, I'm not so sure that size, alone, is the 2 problem. It is in the legislation what's the consequence if 3 confidentiality is not maintained? 4 MADAM COMMISSIONER: Thank you. 5 MR. DAVID BUTT: Do you see an executive 6 committee as being able in any way, to contribute to the 7 maintenance of confidentiality? 8 MS. SHIRLEY HOY: Well, I think in those 9 areas, I mentioned that you know, still yes, smaller would 10 help, but, I think at the end of the day, I believe, there 11 needs to be some attention to the legislation itself. 12 13 (BRIEF PAUSE) 14 15 MR. DAVID BUTT: Now, if I could just move to 16 the notion of encouraging public input in the decision making 17 process, again, do you have any -- any thoughts on how that 18 might be improved? 19 Or first of all, I guess, can you explain to 20 us any sense you might have of -- of whether there's 21 shortcomings, and whether -- and if so, how they might -- how 22 that input might be improved? 23 MS. SHIRLEY HOY: On the issue by issue basis, 24 when I looked at our standing committees, certainly there's a 25 sense that it's very open, you know, all Standing Committees

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1 when they meet at ten o'clock, there's deputations and on any 2 particular items that a resident wants to speak to, they just 3 have to tell the Clerk, or if they even show up that day and 4 usually the Chair of the Committee will ask if there's 5 anybody wants to speak to a particular issue. 6 So, in that way it's very open. What we have 7 heard and certainly what we are now seeing with our pre- 8 budget consultation that Mayor Miller has started, and the 9 input that we received just over the weekend with the three 10 (3) sessions, that has occurred already, and we have four (4) 11 more to -- to happen for the rest of this week. 12 And I was there on the -- in the Saturday one 13 (1), is a sense of an opportunity to influence and have a 14 conversation and a discussion, in particular about the qual 15 -- quality of life in the City, the challenges, and also 16 input before a budget process begins. 17 This is the first time ever at the Municipal 18 level we have pre-budget consultations. It's more common at 19 the Provincial and Federal level, but even there, I think as 20 we have done in the past, as well at the City, it's more 21 consultation with stakeholders, right? As to you identify 22 the various organizations and groups that we should go to, to 23 have that discussion, and ask basically questions about 24 priority setting, you know. 25 This one (1) is unusual, in that we just open

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1 it up to -- to the citizens in the City, and that has been 2 very favourably received and what we heard is that it doesn't 3 substitute for the individual deputations, once our budgets 4 launch, so we will still get individuals or groups coming to 5 the City, to say you haven't put enough money here in Parks 6 and Recreation, or you should be putting more here or there. 7 And individual groups, non-profit 8 organizations, who I'm sure will come and say, you haven't 9 put enough into the children services area, or the senior's 10 area. 11 But the nature of the conversation we've had 12 to this point is quite different, and I think I'm sure, 13 lessons learned so far, and I'm sure that it's something that 14 we will want to go into the kind of how to get meaningful 15 discussions with the residents of the City, who it will be 16 qualitatively quite different, and people enjoy this kind of 17 round table structure that we use, where they'll be debating 18 not with the Councillors or the staff per se, we're there to 19 listen, they're debating with their neighbours. 20 And for example, Saturday the session got into 21 a real heated discussion about user fees. We've got one (1) 22 group that thought, well that's the way to go to save some of 23 our budgetary pressures, and then you've got another group 24 say, enough, if anything, it should go down. So, again, how 25 do you reconcile that? And at the end of the day, it's up to

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1 Council to grapple with that, you know, how much more to do 2 or -- or -- or any changes that we can make in that area. 3 So, it seems to me that's the kind of thing 4 we're learning right now, already, as to different ways to 5 get better citizen input. 6 MR. DAVID BUTT: And just in terms of the 7 qualitative difference that you encounter in the discussions 8 at that earlier stage, it's more along the policy 9 establishment and priority assessment, rather than focussed 10 criticisms of particular budget proposals, is -- is that -- 11 MS. SHIRLEY HOY: That's right. 12 MR. DAVID BUTT: -- does that fairly capture 13 the distinction? 14 MS. SHIRLEY HOY: Yes, absolutely. And -- and 15 that's the part we haven't had as much input before, which is 16 on -- as you had just mentioned, the policy and the priority 17 setting. 18 MR. DAVID BUTT: Okay, and I just want to 19 explore for a minute, the potential for staff involvement in 20 -- in that sort of enhanced consultation opportunity. And 21 I'd just like to begin by asking, in terms of the formal 22 deputation process, where a proposed budget is out, and 23 people with interest respond. Tell us first, where staff 24 comes in, if at all, in terms of taking that information that 25 comes from that deputation and working with it?

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1 MS. SHIRLEY HOY: In the way that we have 2 done to this point, so 2003 as an example, you would have a 3 number of groups that appear before standing committee on 4 community services is a good example because that's where 5 usually the requests come in where -- by groups, by 6 individuals, where we haven't put enough resources in the 7 community service department. You know, whether it's 8 shelters for the homeless or more childcare spaces. 9 What staff would do with that is to summarize 10 what we heard, make suggestions and often it's directed by 11 committee, on where resources could be found in order to deal 12 with some of the suggestions that we heard from the 13 deputations. 14 And this is where, kind of, the push and pull 15 happens at Council and that's why you -- it's good, you 16 always get a number of different opinions and views. So, 17 from Community Services Committee, that standing committee 18 would come in and say, we are suggesting to the Budget 19 Committee, the Budget Advisory Committee that a number of 20 areas should be increased in resources. 21 The budget advisory committee is the one then 22 that has to deal with all the competing demands that come in 23 because that's the group then that gets it from all the 24 agency boards and commissions, all the standing committees, 25 and then it has to sift through and sort through as to which

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1 ones may or may not get additional resources. 2 So the role of staff in that is, first, 3 summarize what was heard, whatever direction comes from 4 standing committee as to where or what resources need to be 5 considered. 6 When it gets to the Budget Committee you have 7 another group of staff who supports the Budget Advisory 8 Committee. And then that group of staff, of course, has a 9 broader set of competing objectives and out of that, they 10 have to sort through as to what kind of advice they give the 11 budget advisory committee on the objectives. 12 MR. DAVID BUTT: So, with that -- with that 13 view of -- of the staff role in the -- the deputation 14 process, can you now move us back a step to that more policy 15 development round table process and tell us how you might see 16 staff contributing to maximizing the value of those round 17 table policies at an earlier stage; the consultations? 18 MS. SHIRLEY HOY: I guess, in a couple of 19 areas, one (1) is, helping set the questions. I mean, the 20 one (1) thing that's exciting about these kinds of discussion 21 tables is that you have a large group of citizens coming to 22 discuss so there has to be some kind of structure in order to 23 get the most out of those conversations. 24 So, one (1) role of staff, and we have played 25 that role in setting out these sessions, is the -- the

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1 questions to be asked. So you help to structure the 2 conversation a bit as to what you're looking for in order to 3 come back with those policy directions and the priorities. 4 The second area, of course, then is to be able 5 to compile all the data that comes in and to be able to 6 identify what the themes are and actually at these sessions 7 staff, because we have basically a whole table of staff to 8 collect the input as it was happening because we had to 9 report out to give the group that participated a sense of 10 what they were all saying to each other. 11 So you would have to have a group of staff 12 that are able to distill, from all the information that came 13 in, all the major themes, you know, that we heard. And then 14 I think the third part which, I think, staff certainly will 15 have a role in helping is to pull together what the final 16 report looks like when all the sessions are -- are done. 17 Normally, with the major themes that we heard, 18 but then what do we do with it, you know? How can we then 19 input it into the budget decision making process? 20 MR. DAVID BUTT: And, for that consultation 21 -- public consultation process earlier on as you've described 22 it to -- to take place, could staff effectively play the role 23 that you've just described with current staffing levels? 24 MS. SHIRLEY HOY: This was a real stretch for 25 our staff. I mean, people literally worked weekends,

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1 overtime, I'm sure, you know, lots of overtime has occurred. 2 The current level, by the end of the seven (7) 3 sessions, we would have probably -- have seen probably in the 4 area of eight hundred (800), nine hundred (900) residents 5 participated. 6 If this were to expand, no, we would have to 7 have additional resources to make it happen. And -- and for 8 a population of 2.5 million, I think if this is to be 9 meaningful over time, this has to be a much bigger group that 10 we're able to -- to reach. 11 MR. DAVID BUTT: Right, you don't have the sta 12 -- statistically significant sample yet -- 13 MS. SHIRLEY HOY: That's right. 14 MR. DAVID BUTT: -- in a -- in a base of 2.5 15 million? 16 MS. SHIRLEY HOY: Yeah. 17 MR. DAVID BUTT: If I could just ask different 18 questions on the Council and staff roles. Providing the 19 objective professional advice to Council, is one (1) of the 20 key components of staff's role that -- that you've identified 21 in your presentation this morning. 22 And we've seen that just as a -- as a 23 practical matter, each Councillor before each Council meeting 24 will have often a stack of staff reports, you know, that's 25 almost -- almost too much to read by virtue of its size.

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1 Does that create any -- any functional problems in the 2 rendering of -- of advice, and if so, are there suggestions 3 that -- that you would have on how we might -- or how the -- 4 the information flow might be improved? 5 MS. SHIRLEY HOY: Okay. I think though that 6 certainly the -- the agenda looks very daunting, but a large 7 part of that though is the agenda coming from community 8 Councils, and I think as our research paper indicated, a lot 9 of that, you know, we don't redebate the recommendations 10 coming from community Councils. 11 I think generally, my sense is that the 12 Standing Committees do work well, because that's where the 13 detailed discussions occur, on major policy issues and 14 program issues. 15 The challenge is when there are issues raised 16 through notice of motion that don't go through Standing 17 Committees and then you're debating it right there at 18 Council; that -- that creates some difficulties for sure. 19 MR. DAVID BUTT: Can -- can you spell out what 20 sort of difficulties it might create, and -- and how it might 21 impact on -- on the quality of decision making. 22 MS. SHIRLEY HOY: Well, finally we -- I think 23 it was at the end of 2002 we got in place a -- a policy 24 whereby at least with notice of motions, because they are 25 right there at Council that it's introduced, that at least

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1 the CFO gets to comment on whether there are any financial 2 implications of notice of motions, but if it's a broader 3 policy issue, you're not getting the benefit of a good first 4 staff report, to give you all the options and the analysis 5 before a final decision is made. 6 And the second thing is you're also not 7 getting public input if it's a major policy issue, because 8 it's right there now at Council, which means you're not, we 9 don't -- you do not have deputations at Council. 10 And finally, without the benefit of a -- a 11 staff report outlining all the options and discussion, you're 12 not getting -- you're not giving enough time for the debate 13 on the various policy alternatives. So, those would be the 14 disadvantages of just adopting something that may come 15 through directly at Council. 16 MR. DAVID BUTT: So, I -- I can see how there 17 -- there may be a particular policy direction that's been 18 thoroughly researched by staff, the costing behind it has 19 been done, and the -- that the pros and cons have been 20 analysed. 21 And perhaps what seems to be almost at the 22 last minute, there is a very different variant proposed by a 23 Councillor, and immediately you're into a fundamentally 24 different debate without the opportunity for -- for staff 25 analysis.

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1 Is that the -- the difficulty that you've 2 identified there? 3 MS. SHIRLEY HOY: Yes. And sometimes, you 4 know, Council will direct that it be referred to Committee, 5 which is good, but sometimes because of -- of time lines or 6 whatever, or an event that's happening in the community that 7 it's impinging on that particular policy, then they want to 8 debate it right then. 9 MR. DAVID BUTT: Right, and the -- I guess the 10 -- the response to the suggestion that it creates difficulty 11 is the lack of analysis, is that well that's -- that's 12 quintessentially the political function isn't it? Wouldn't 13 -- wouldn't a Councillor say, well that's my job, to put 14 forward alternative proposals for debate. 15 And I'm just wondering what you would see as - 16 - as an appropriate balance between these roles and 17 responsibilities of -- of Council, there are these last 18 minute amendments that can cause problems, versus the freedom 19 of the Councillors to do what they're elected to do? 20 MS. SHIRLEY HOY: Well, absolutely their 21 right, that's a Councillor's prerogative and that's what they 22 see as their role. I think the staff responsibility is to 23 make sure that it's an informed decision making process, to 24 make sure that we provide the best advice at the time, that 25 they're going to make the decision.

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1 So, in the situation where, you know, if 2 Council says because of time lines and deadlines and other 3 factors it has to be debated, we have, and in the past, in 4 particular if there is a legal dimension to it, certainly a 5 solicitor would advise Council, at least wait a couple hours, 6 let me get my staff to give you an opinion that we can now 7 immediately present to you. I think because the important 8 thing is that it's informed decision making. 9 MR. DAVID BUTT: Is -- is there anything that 10 you would recommend again, in terms of changes to the 11 structure of the decision making process that would 12 facilitate, even on -- on tight turnaround, accepting that 13 sometimes it's important politically to act quickly, is -- is 14 there anything that you feel is -- is missing that would 15 again, facilitate informed decision making at the political 16 level? 17 MS. SHIRLEY HOY: As it pertained to current 18 City Council -- 19 MR. DAVID BUTT: Yes. 20 MS. SHIRLEY HOY: -- structure? 21 MR. DAVID BUTT: Yes. 22 MS. SHIRLEY HOY: I think as, I said, I think 23 that by them adopting at least the financial protocol that 24 they put in place with notice of motion helps a lot, because 25 that was a concern we had in the first -- in the early years

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1 of Council, that a lot of things were adopted, but it was at 2 the end that we learned there are major financial 3 implications. 4 As it pertained to, you know, whether it has 5 to have a staff report, I think that will be a case by case 6 review, and you know, if it needs a legal opinion, if it 7 needs a major policy alternative report there, then -- and 8 they want to discuss it at that Council meeting, I think 9 staff would have to just ask for a few hours, and make sure 10 that we get that information to them. 11 MR. DAVID BUTT: So, you -- it -- it would 12 essentially be a -- a system whereby the lines of 13 communication were open, and staff saying, whoa, don't go 14 there without a report, and at least give us a couple of 15 hours? 16 MS. SHIRLEY HOY: Yes, and -- 17 MR. DAVID BUTT: Okay. 18 MS. SHIRLEY HOY: -- that depends -- and that 19 very much depends on the Chair of Council and our experience 20 to date is that that has worked, when staff put up their 21 hands and say, you know, there is a major problem here, and 22 Council has to listen. 23 MR. DAVID BUTT: I'd like to ask now a 24 question in a slightly different area. Now again, what 25 you've outlined and -- and as stated, it's -- it's not

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1 terribly controversial that Council is the one (1) who sets 2 the vision and -- and direction of the City. 3 Let me -- let me just ask another question of 4 senior management. What role do you see for visionary and 5 proactive senior management? 6 MS. SHIRLEY HOY: Get the ideas there, get the 7 ideas out so it can be considered when, you know, we're into 8 the process working with Council, to look at for example -- 9 and we did that a bit when -- when the -- Council set its 10 strategic plan, I mean, we are there to give advice and give 11 ideas and options and suggestions for -- for Council to make 12 the final decision. 13 MR. DAVID BUTT: And -- and the -- and 14 particular in so many areas where -- where policy development 15 has to have professional involvement at such an early stage, 16 if it's ultimately to be successful. 17 I take it then you'd agree that you -- you see 18 a role for -- for senior management as incorporating the 19 professional advice aspects with the visionary aspects to 20 say, not only is this professionally sound, but it's -- it's 21 strategically sound. Is that a -- a fair way to capture how 22 a senior staff person should be thinking? 23 MS. SHIRLEY HOY: Absolutely, and I think the 24 amalgamated official planning process is a good example of 25 that. I mean, our -- our Chief Planner is passionate about

180
  1  where he thinks the City should go. 
  2                 And I think his -- some of his ideas as to
  3  what the new official plan could look like, how it could
  4  streamline the former, you know, seven (7) municipalities,
  5  because Metro even had a -- at the old Metro Regional level,
  6  also had an official plan, that the seven (7) official plans
  7  could now be incorporated into a new one (1).  
  8                 And his vision was one (1) that was an
  9  official plan that the residents could easily understand,
 10  understand what it's trying to do, the purpose and what it
 11  can accomplish and he, basically, with the way he presented
 12  the approach he was going to take in developing the official
 13  plan, helped Council engage in looking at different way of
 14  setting our amalgamated City's official plan.
 15                 So that combined, kind of, policy skills with
 16  a vision of where it's possible to -- to get to. 
 17                 MR. DAVID BUTT:   And -- and I take it then
 18  that part of articulating that vision is -- is forcefully
 19  setting it out in -- in the context of an appropriate report
 20  to -- to Council? 
 21                 MS. SHIRLEY HOY:   That's right.  And then
 22  also participating with the Standing Committee and Members of
 23  Council in all the public meetings; all the public forums
 24  that occur in trying to communicate the new official plan
 25  that at that point was a draft plan, to all parts of the

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1 City. 2 MR. DAVID BUTT: During the course of the -- 3 the day today, we've been covering a number of areas and a 4 number of initiatives that have been implemented and -- and 5 you're working on covering integrity, procurement, management 6 controls, governance and Council and Staff and you -- you've 7 also spoken in -- in your presentation this morning about the 8 Toronto Public Service Initiative. 9 And I'm -- I'm wondering if you can comment 10 on, in terms of moving forward on all these areas that -- 11 that we have mentioned, obviously there's a great deal of 12 substance in what you've discussed so far and the question 13 that I'd like to ask around the Toronto Public Service 14 Initiative is; how does it add to the pursuit of all those 15 other objectives that you've been describing today? 16 What is the value added on top of all these 17 other initiatives of the Toronto Public Service Initiative? 18 MS. SHIRLEY HOY: Well, I think the Toronto 19 Public Service Initiative is the vehicle by which we 20 communicate to everyone in the Toronto Public Service, to all 21 the staff in Toronto Public Service. 22 Why the areas that I mentioned earlier are 23 important? To me, the improved management controls, some of 24 the governance structure, options that we are talking about, 25 the procurement area, those are only tools. We have to be

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1 able to explain to the staff for what purpose. Why is it 2 important? And that's really why we initiated the Toronto 3 Public Service. 4 So we're saying to staff across the whole 5 organization that we need to create a sense of shared 6 direction, shared value system to make sure we're coming at 7 doing our work from a common value system and that's 8 important because I believe once you have a shared value 9 system then you -- a lot of the policies that we talk about 10 in Conflict of Interest, in dealing with, you know, when to 11 know whether you're being approached by a lobbyist, it will 12 come naturally. 13 Because then, you know, you're coming at it 14 with an attitude, as well as a value base that says, what 15 does it mean to be part of a public service? And that's why 16 this initiative was so important. It was a way by which we 17 begin to build that shared culture. 18 MR. DAVID BUTT: So, as I see, just to try 19 and capture in a word, you've been describing a number of 20 initiative tools, in effect, and this -- this addresses the 21 broader cultural question around the use of those tools; is 22 that -- is that fair to say in terms of -- 23 MS. SHIRLEY HOY: Yes. And why -- why 24 they're important. 25 MR. DAVID BUTT: And you've spoken about then

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1 the initiative culminating in -- in the learning summit this 2 -- this coming May, I understand, is that -- 3 MS. SHIRLEY HOY: Yes. 4 MR. DAVID BUTT: -- is that right? And in 5 terms of affecting and maintaining a cultural ethic, do you 6 have plans beyond that learning summit? 7 MS. SHIRLEY HOY: It has to be ongoing. I 8 mean, staff change and, you know, it needs also to be 9 confirmed from year to year. So, I mean, one of our -- one 10 of our goals is to be an ongoing learning organization. 11 And how you do that is that you have to have 12 enough opportunities for staff to come together across 13 departments because often it is so easy to kind of be 14 isolated in your own work unit, in your own work place, and 15 especially with a department -- with a corporation this size, 16 you know, departments need to come together at all levels of 17 the organization. 18 MR. DAVID BUTT: And presumably that -- that 19 coming together is initiated from a top down commitment to 20 enforcing the values that you've prioritized. I'm just 21 wondering is -- is there room for and do you have thoughts on 22 the value of -- of improving the work place culture, from the 23 bottom up, as well? 24 MS. SHIRLEY HOY: Absolutely. I -- I think 25 that's why we ask that the -- the union staff -- the union

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1 leadership also get involved with us, in terms of the 2 learning summit. 3 I mean we're -- we're -- we have already 4 talked to the -- our management association, as well as, 5 making sure that the union leaders know that this Toronto 6 Public Service initiative is important. 7 So, there has to be -- there has to be a 8 bottom up approach as well as a commitment from top down. 9 10 (BRIEF PAUSE) 11 12 MR. DAVID BUTT: Now -- 13 MS. LINDA ROTHSTEIN: Just one (1) moment, Mr. 14 Butt. 15 MR. DAVID BUTT: Sure. 16 17 (BRIEF PAUSE) 18 19 MS. LINDA ROTHSTEIN: Sorry, Mr. Butt. 20 MR. DAVID BUTT: No, that's okay, I just have 21 a few clean up questions, bearing -- bearing in mind our 22 time, and they'll jump unfortunately, because they're just 23 little issues that I missed when we passed through the -- the 24 topics. 25 Just dealing briefly again with conflict and

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1 ethics, and the notion of the -- the role of lobbyists. And 2 I'd like to ask you just a couple of questions. What if any 3 role do you see staff having in terms of relationships with 4 -- with lobbyists? 5 MS. SHIRLEY HOY: Well, I think as our 6 conflict of interest policy indicated that we wanted to make 7 sure staff know when they're being lobbied and what they -- 8 how they need to act, when that happens and that's clearly 9 spelled out in our conflict of interest guideline. 10 MR. DAVID BUTT: Right. And beyond knowledge 11 of the fact of -- of being lobbied, do you have a sense of 12 how -- whether there -- there should be that kind of contact, 13 the extent to which there should and if so, what levels of 14 staff it's appropriate to have that kind of contact, or 15 inappropriate? 16 MS. SHIRLEY HOY: Well -- 17 MR. DAVID BUTT: And just I'll -- I'll give 18 you -- part of the reason behind that question, is that 19 perhaps some lobbyist might say that, you know, it's no good 20 lobbying the -- the senior managers or the -- or the 21 Councillors. 22 The people that make a difference are the 23 people who are on the ground implementing something; so, do 24 you have any thoughts on that? 25 MS. SHIRLEY HOY: Well, generally, I would say

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1 I think it's appropriate to say that lobbying of staff should 2 be discouraged. I mean staff, as I've outlined in the 3 presentation, our main role, is to provide objective, 4 impartial advice, but, it doesn't mean that it won't happen, 5 right? 6 I think as, Ms. Gibbons' paper has indicated, 7 as all research in other jurisdictions indicated, lobbying 8 does happen in government. I mean that's part of the 9 government role, but, the lobbying should be to the elected 10 officials. I mean I read with interest the section in Ms. 11 Gibbons' paper talking about good lobbying versus bad 12 lobbying, right? 13 So, in my mind, good lobbying is lobbying 14 that's done to the elected officials so that a picture is 15 made about a good product, a good service, whatever, but, 16 then that information should be turned over in a public 17 forum, for example, through Standing Committee. 18 So, for example, if a lobbyist went to a 19 Councillor, say I have a great way to save you money, that 20 idea should go through Standing Committee, Standing Committee 21 then asks for staff report on, can you consider this idea, 22 you know, have you thought about it and is there a way by 23 which the City could look at dealing with that? 24 So that to me, is what Ms. Gibbons' outline 25 is, what is expected in terms of lobbying environment. If

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1 lobbying happens in the administration, what we have said to 2 staff in accordance with our Conflict of Interest Policy, is 3 to say that, you know, the information is received, and then 4 it should be made clear to the person lobbying or trying to 5 make a pitch, you say, here's our process, here's our 6 procurement process, here is, you know, on that particular 7 issue, is it even on the agenda of any Standing Committee, is 8 it part of work plan. That should be given. 9 So, it's more of an information giving 10 session. That's the way I -- I would say that we want to 11 deal with lobbying, and that's I think the kind of questions 12 and answers we gave in our Conflict of Interest Policy. 13 MR. DAVID BUTT: And just to ask another 14 question, again jumping to a slightly different topic, in 15 terms of outside consultants; obviously legal consultants are 16 one (1) of the categories that you've identified. 17 Is there any policy in place, or any -- any 18 thought being given to the notion of establishing rates for 19 -- for outside counsel, in much the way that let's say the 20 Provincial or the Federal Government would have a -- a policy 21 on -- on remuneration of -- of outside legal consultants? 22 MS. SHIRLEY HOY: I don't believe we have done 23 across the board, Mr. Butt. I believe though, for example, 24 as it pertained to the Inquiry, we asked Council to adopt a 25 particular policy, but we haven't done it across the board

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1 for all legal services, that the solicitor may retain from 2 time to time. 3 MR. DAVID BUTT: Are there advantages and -- 4 and disadvantages to having sort of a -- on the one (1) hand, 5 perhaps a monolithic policy that might not be responsive, and 6 on the other hand, better cost control, if -- if you had a -- 7 a monolithic policy? 8 Do -- do you have a sense of what might be 9 preferable again in an ideal world for you? 10 MS. SHIRLEY HOY: I think without having 11 talked to the City Solicitor, I would suggest that may be too 12 restrictive to try to do that, because in particular areas, 13 given the number of different, you know, programs and 14 services we're in, if she's asked for a particular area where 15 she has to seek external legal advice, you know, she may have 16 to just do it quickly, and that would be very difficult if 17 there was one (1) particular rate set. 18 MR. DAVID BUTT: But I suppose in any event, 19 given the -- the legal component as part of the -- the 20 broader approach to management of outside consultants, 21 there'd be a business case required in -- 22 MS. SHIRLEY HOY: Absolutely -- 23 MR. DAVID BUTT: -- in any event? 24 MS. SHIRLEY HOY: Yes. And it's set out quite 25 clearly in -- in the policy for hiring consultants; there's a

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1 separate part on legal services. 2 MR. DAVID BUTT: Just again, by way of wrap- 3 up, you've mentioned on a number of occasions today, how 4 you've looked carefully at -- at some of the policies in the 5 executive resource group papers that Ms. Gibbons' papers we 6 -- we put before you. Are there any areas that -- that you'd 7 like to help us out, in terms of where you might take a 8 different perspective than is -- is expressed in -- those 9 papers? 10 MS. SHIRLEY HOY: I guess there are only two 11 (2) areas in addition to the one (1) I mentioned this morning 12 about having the Auditor General as part of the second tier 13 of the complaint process that she had mentioned. 14 In the Governance area, I'm not sure of the 15 reasons why Ms. Gibbons had suggested that the solicitor 16 report to the CAO. I think in the Municipal system, in my 17 mind the -- the client for the solicitor is Council, so it 18 seems to me to make sense that a solicitor continue to report 19 directly to Council, in the same way the Auditor General 20 reports directly to Council, because of the independent 21 advice, and the Clerk reports to Council. 22 In her comments about the CAO authority and 23 responsibilities, she talked about, as -- in some other 24 Municipalities have in their City Manager approach, where all 25 the Commissioners are hired and fired by the City Managers.

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1 My general sense is that in a City the size of 2 Toronto and the complexity and the number of different 3 programs and services that we run, I think the commissioners 4 and the CAO should be bylaw appointments reporting directly 5 to Council. 6 I think -- I certainly have input into 7 evaluation of -- performance evaluation of commissioners, but 8 I think City Council has a role as well. So those were the 9 only two (2) areas where I thought maybe she's suggesting a 10 system of too much centralization, that in an organization 11 like Toronto would not work. 12 MR. DAVID BUTT: One other, fairly narrow, 13 just comparative question, sometimes we see in -- in other 14 levels of government that -- that the farther you travel -- 15 the farther up the management hierarchy the travel approval 16 has to go. 17 Is there an overseas travel or out of country 18 travel authorization process in place? 19 MS. SHIRLEY HOY: Very, very tight. None of 20 us go very far away from Toronto. Our policy is any of the 21 country travel has to have approval of the CAO and actually 22 it goes up to the Mayor approval as well for any out of 23 country travel. 24 MADAM COMMISSIONER: And how long has that 25 existed?

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1 MS. SHIRLEY HOY: That has existed for, I 2 would say, since amalgamation in terms of out of country 3 travel, for sure. Yes, it goes up to the Mayor's office for 4 approval. 5 MADAM COMMISSIONER: And is the United States 6 included in -- in that? 7 MS. SHIRLEY HOY: Yes. 8 MADAM COMMISSIONER: I know in some -- some 9 jurisdictions, the Mayor can travel and doesn't need as high 10 a level of approval as, say, going to France? 11 MS. SHIRLEY HOY: Partly, Commissioner, it 12 also depends on the cost. So, for example, any out of 13 country travel has to have a CAO approval for sure because I 14 have been approving those for -- and given our current 15 constraint environment, the only people who travel are the 16 ones that have to have mandatory training. So our EMS 17 workers, our firefighter workers because a number of their 18 training organizations certainly deal with the American 19 environment. 20 But, you're right, if we were to go to -- 21 anybody going to Europe, most likely it would also need 22 approval through the Mayor's office as well. 23 Mr. Butt -- Mr. Butt, before we finish, there 24 was one comment in my concluding paragraph that I didn't get 25 a chance to say to you and to present to the Commissioner

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1 this morning. While I was -- it said in my conclusion that 2 certainly what -- we're still a work in progress, I would say 3 to you that I think the value of the Inquiry certainly has 4 been to accelerate the review and implementation of a number 5 of our accountability measures. 6 I also want to say that, as you had noted 7 earlier in your questions to me, that the morale issue is 8 still a huge issue in the City. I think the staff at the 9 City, the Toronto public service, has been doing just a 10 remarkable -- being doing remarkable work under very 11 difficult and trying circumstances. 12 And I would note, in particular, in those 13 particular divisions where it has been under the microscope 14 where we want to make changes and I'm speaking, in 15 particular, of staff, for example, in our purchasing 16 division. 17 I think staff there have worked very hard to 18 make sure that they follow the policies and the procedures as 19 we're making change and that's not easy and as I indicated in 20 terms of the volume of work they're doing, having 21 accelerated, you know, over the last six (6) years from 400 22 some odd million all the way to over a billion right now in 23 2003; they've been doing excellent work. 24 But at the same time, we've been recognizing 25 that we've got to make improvement and changes. So I think

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1 the Commissioners, and I would certainly say to you, that we 2 still have a number of challenges ahead but every time we 3 identify the issues, we report out and we work on them. 4 And I -- I just think that I'm really proud to 5 represent the Toronto Public Service because the staff are 6 excellent. 7 MR. DAVID BUTT: Thank you very much, Ms. 8 Hoy. Those are the questions that -- that I have for you. 9 Madam Commissioner, I just don't want to 10 adjourn today without asking that the binders of research 11 material that I should have made exhibits first thing this 12 morning be made, at least at the end of the day. 13 MADAM COMMISSIONER: Okay. I also have 14 something here that is entitled "Conflict of Interest Policy, 15 chronology, development, approval and implementation" 16 MS. LINDA ROTHSTEIN: I was planning to take 17 Ms. Hoy through that this morning and didn't have an 18 opportunity. Nor do I think it's necessary. 19 MADAM COMMISSIONER: Okay. 20 MS. LINDA ROTHSTEIN: But I'd be obliged if 21 you'd mark that anyway, Commissioner. 22 MADAM COMMISSIONER: All right. 23 MS. LINDA ROTHSTEIN: Some of it is in your 24 database, but I don't think the chronology of the roll out 25 and training with respect that Policy has been as succinctly

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1 summarized -- 2 MADAM COMMISSIONER: Okay. 3 MS. LINDA ROTHSTEIN: -- as it is in this 4 document. 5 MADAM COMMISSIONER: So, why don't we may that 6 the next exhibit; Exhibit 70. All right. 7 8 --- EXHIBIT NO. 70: Unbound document entitled 9 "Conflict of Interest Policy, 10 Chronology; development, 11 approval, implementation." 12 13 MS. LINDA ROTHSTEIN: And there's one (1) 14 other document that I mentioned this morning, which was the 15 January 27th, 2003 memorandum from Ms. Hoy to the 16 Commissioners on soliciting gifts from the United Way. 17 MADAM COMMISSIONER: Right. 18 MS. LINDA ROTHSTEIN: And I think you should 19 take a look at that as well. We made reference to that. 20 MADAM COMMISSIONER: That will be Exhibit 71. 21 Could one (1) -- could someone here make sure that the media 22 room gets copies -- 23 MS. LINDA ROTHSTEIN: We will. 24 MADAM COMMISSIONER: -- of these exhibits. 25 MS. LINDA ROTHSTEIN: We will.

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1 MADAM COMMISSIONER: All right. 2 3 --- EXHIBIT NO. 71: Unbound document entitled, 4 "Memorandum re: Soliciting 5 Donations or Gifts for charity 6 events." Dated January 27, 2003 7 8 MS. LINDA ROTHSTEIN: The other thing, 9 Commissioner, just before you conclude this afternoon, that I 10 said to your -- 11 MADAM COMMISSIONER: Let me just finish these 12 exhibits, all right. So, there is one (1) binder called 13 Lobbyist Research, why don't we make that the next exhibit. 14 MR. DAVID BUTT: Yes. 15 16 --- EXHIBIT NO. 72: Bound document titled "Lobbyist 17 Research" Tabs 1-3 18 19 MADAM COMMISSIONER: And then procurement, I'm 20 just going by the order that they're physically there, does 21 that make sense to you? Does it matter? 22 MR. DAVID BUTT: That -- that's fine. 23 MADAM COMMISSIONER: All right, procurement 24 will be the next exhibit, and then Conflict of Interest, and 25 then the last one (1) would be -- would be Municipal

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1 Governance, okay. All right. Sorry, Ms. Rothstein. 2 MS. LINDA ROTHSTEIN: Sorry. 3 4 --- EXHIBIT NO. 73: Binder entitled "Procurement". 5 Tabs 1-2 6 7 --- EXHIBIT NO. 74: Binder entitled, "Conflict of 8 Interest." Tabs 1-2 9 10 --- EXHIBIT NO. 75: Binder entitled, "Municipal 11 Governance." Tabs 1-2 12 13 MS. LINDA ROTHSTEIN: I was just going to say 14 before you close this afternoon, Commissioner, it's 15 difficult, obviously, for Ms. Hoy to answer all of the 16 questions we have about what the state of the City's review 17 of its accountability and measures is. And what I told Mr. 18 Butt is that if you have any questions following today, at 19 any stage in the course of your three (3) week Proceedings, 20 the CAO's office will be happy to answer those inquiries in 21 writing or otherwise. 22 MADAM COMMISSIONER: Thank you. 23 MS. LINDA ROTHSTEIN: So, we will continue to 24 be available to you, should new questions arise. 25 MADAM COMMISSIONER: Good, thank you very

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1 much. In fact, I was going to -- to say that -- to Ms. Hoy, 2 if there was anything, Ms. Hoy, that you felt that you had 3 not had the opportunity to refer to that you would have liked 4 to have referred to, I'm certainly happy to hear fro -- from 5 you on that. 6 Or if you want to inform your counsel about 7 areas in this voluminous work that you've given me that you 8 would like me to draw specific attention to; I'm also happy 9 to hear that. I don't want to miss anything that you'd like 10 me to take a look at. All right? 11 But in the meantime, I just want to say I'm 12 very happy to have heard your presentation today, we've 13 waited a long time to -- to hear from you, and I can say 14 quite unequivocally that your presentation today has been 15 extremely helpful to me, and will be especially so when I 16 prepare my report and my recommendations. 17 I've taken a lot of notes about what you've 18 said and have made note, myself, where I think that things 19 I've already been thinking of and some things I haven't been 20 thinking of, where your presentation was helpful to me. 21 I also want to commend you and your staff for 22 the proactive approach that you have taken, as you've just 23 said, you've done a lot of work at the front end trying to 24 fix some problems that were identified by the testimony 25 during the course of the Inquiry and I'm happy that you

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1 didn't wait for my report. I prefer that the City fix any 2 problems that they identify, rather than wait all this time 3 until my recommendations come out. 4 And finally, I also want to thank you for your 5 candour today, in letting me know about areas where there is 6 still more work to be done, all right. Thank you. 7 Mr. Butt, tomorrow? 8 MR. DAVID BUTT: Yes, tomorrow, Commissioner, 9 we have the former Provincial Auditor, Erik Peters, and Mr. 10 Goodwin and Ms. Gibbons of the Executive Resource Group to 11 talk about their papers that we have here. 12 MADAM COMMISSIONER: Okay, great. Thank you 13 very much, see you tomorrow morning, whoever is here, at 14 10:00 a.m.. 15 THE REGISTRAR: The Inquiry is adjourned until 16 10:00 a.m. tomorrow, Tuesday, January 20th. 17 18 --- Upon adjourning at 4:01 p.m. 19 20 Certified Correct 21 22 23 _____________________ 24 Carol Geehan 25 Court Reporter