Item - 2018.AU13.13

The Audit Committee recommends that:

1.  City Council request the General Manager, Solid Waste Management Services to:

a. include in the next waste haulage contract the flexibility to allow the City to periodically review and adjust the fuel surcharge calculation on a fair basis to reflect market conditions; and

b. engage Fleet Services Division for their specific subject-matter expertise to assist in haulage call document development.

2.  City Council request the General Manager, Fleet Services and the Chief Transformation Officer to consult with City Divisions with major fleet intensive contracts, to determine if there is any opportunity to realize savings by taking advantage of bulk fuel purchase agreements and report to the Government Management Committee.

3.  City Council request the General Manager, Solid Waste Management Services to establish a defined process to conduct and document the basis for developing contract contingency amounts or percentages.

4.  City Council request the General Manager, Solid Waste Management Services to:

a. use a competitive procurement process for the acquisition of goods and services in compliance with the City’s approved procurement process; and

b. ensure, when non-competitive procurement is necessary, that the need to do so, and the basis for agreed upon pricing, is fully documented.

5.  City Council request the General Manager, Solid Waste Management Services to:

a. recover any overpaid landfill fees from the past; and

b. apply the fuel surcharge adjustment to the landfill operation unit rates for the remainder of the contract.

6.  City Council request the General Manager, Solid Waste Management Services to review, and report back to Council, on opportunities to reduce costs through optimizing the tonnage of waste landfilled at Green Lane. The review should concurrently assess the immediate and long term financial and other impacts of modifying the volume of waste being redirected to contingency landfill sites.

7.  City Council request the General Manager, Solid Waste Management Services to consider including annual, rather than monthly, reconciliation of the guaranteed tonnage in the next contract for landfill operations.

8.  City Council request the General Manager, Solid Waste Management Services to load the waste haulage contractor's and subcontractors' transport equipment in accordance with regulation and contract requirements.

9.  City Council request the General Manager, Solid Waste Management Services to further develop the plan for back-up waste haulage services.

10.  City Council request the General Manager, Solid Waste Management Services to:

a. maintain proper documentation of approval for using subcontractors; and

b. define the conditions for subcontractor usage in the next waste haulage contract.

11.  City Council request the General Manager, Solid Waste Management Services to:

a. require contractors to include sufficient documents in the invoice package for staff to conduct adequate review and validation of monthly invoices; and

b. use the City's external engineering consultant for work oversight and verification if needed.

12.  City Council request the General Manager, Solid Waste Management Services to:

a. ensure staff responsible for review of the Operations and Maintenance and Engineering Consulting monthly invoices are properly trained and supervised; and

b. ensure expense and payment errors are corrected timely and appropriately such that the accounting records accurately reflect actual transactions.

13.  City Council request the General Manager, Solid Waste Management Services to:

a. reallocate the costs grouped together and incorrectly booked under Miscellaneous Contingency to their correct contract line items;

b. enter the correct contract number for the monthly guaranteed minimum landfill fee payments in the Interface system to link them to the SAP contract;

c. correct the line item coding for the transferred transactions impacted by the change to the Engineering Consulting contract;

d. once the coding corrections have been made, review the contract spending to date to ensure contract line items are not over-spent; and

e. improve and monitor the accuracy of coding of contract line items.

14.  City Council request the General Manager, Solid Waste Management Services to:

a. ensure all change order requests are supported by appropriate documentation and approved at the staff level and timeframe required by the Division’s procedures;

b. implement additional review and approval by Solid Waste Management Services senior management for change order requests submitted after the work is completed; and

c. enhance the change order log to include key information related to each change order. This log should be analyzed and used to inform the scope of work for future contracts.

15.  City Council request the General Manager, Solid Waste Management Services to:

a. comply with the approved procurement policy and obtain the necessary quotes for purchases over $3,000.00; and

b. obtain vendor and subcontractor quotes with sufficient details to enable reasonable evaluation of quantities and pricing for labour, materials and equipment. Quotes should be dated.

16.  City Council request the General Manager, Solid Waste Management Services to:

a. conduct a thorough review with the contractors to properly understand and apply markups in change order work; and

b. use a risk-based approach to review invoices related to past change orders to determine if markups were properly applied and to recover any overpaid amounts immediately.

17.  City Council request the General Manager, Solid Waste Management Services to obtain from contractors adequate supporting documents for verification of change order payment requests (including progress payment requests).

18.  City Council request the General Manager, Solid Waste Management Services to:

a. develop an operational manual that outlines key processes and controls, taking into consideration the various stakeholders involved in activities and contract requirements; and

b. establish a set of key performance metrics to track and monitor site performance.

This report provides the results of the Auditor General's review of the effectiveness of the management of Green Lane Landfill Site (Green Lane) operations to ensure the City's interests are adequately protected. This audit was identified in the Auditor General’s 2017 Audit Work Plan. The audit focused on the effectiveness of procurement and contract management processes and controls of landfill operations. The City has contracted out landfilling, construction, haulage and engineering consulting services related to the handling of its solid waste material. The total value of these multi-year contracts is approximately $373 million.

This audit report contains 18 recommendations to reduce costs, enhance efficiency of site operations, maintenance and monitoring, and strengthen compliance with regulations, policy and procedure requirements. It appears that Green Lane operations are relatively well managed by City staff. Overall, there are a number of strategic and operational factors facing Solid Waste Management Services Division (SWMS) management. We recommend that SWMS assess the current costs and benefits of its landfilling options and, where appropriate, propose refinements to its strategic and business plans.