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Warning signs and a way forward presented at audit meeting
A better way is possible. The County’s audit committee meeting witnessed an assortment of flares hailing from different directions last week, all saying the same thing—SLOW DOWN. From the residents pointing to the need for a more rigorous and transparent project management process, to the committee’s desire to examine the municipality’s project management capacity and bench strength, to the outside auditor pointing a nervous finger at the County’s net debt position—which combined with several large and complex capital works in the pipeline makes the municipality’s road ahead potentially hazardous.
It was a sobering three hours at the audit committee.
First up was a group of residents, each steeped with relevant experience—and two specifically in managing large capital projects. (See OpEd Page 4). The group presented a rigorous path forward for the current waterworks project. The trio of Wendy Matthews, Phyo Kyi and Tim Good suggested that had more demanding and transparent discipline been employed in the waterworks expansion underway in Wellington, “the need to answer basic questions about where we stand in the process, or how decisions were made to get where we are, or how debt will be managed to ensure that growth pays for growth” would be easily answered and understood.
Matthews cautioned that the large and longterm capital projects currently being pursued by Shire Hall represent a high degree of risk in terms of execution and financial management that will impact generations of residents.
“We need to ensure such projects are executed with precision using proven and disciplined practices,” emphasized Matthews. “This encompasses program management, cost recovery management, communications plan and management.”
Tim Good defined the terms of disciplined program management practices.
“It means grouping a related number of projects together and managing in a coordinated way so that stages of execution, overall costs, dependencies, critical path, decision points, resources, and expected cost recovery can be tracked, managed and reported easily,” said Good. “For example, if we had executed the waterworks project underway in Wellington as one project, we would not have a situation where the new water tower was completed, but sat empty for months because the pipes connecting it to the plant had not started yet. The two projects should have been approved together.”
Another example: “If we [had been] integrating actual population growth in housing development to infrastructure expansion, we would be able to anticipate and regulate the velocity of project development and know that cost recovery was timely,” said Good.
In simpler terms, had such practices been in place at Shire Hall, we would all know who was paying for what and when developers were paying their portion. That isn’t happening currently.
Tim Good managed the $100 million project to implement Maple Leaf Foods’ installation of SAP software across the organization. He explained that issues as granular as governance of the project were examined and well thought out before the project began—all to ensure clear lines of accountability.
“It is critical to understand from the outset who is responsible for what,” said Good.
Phyo Kyi served in the engineering services department for Halton Region. He modelled the region’s rapidly growing water and wastewater system. When new development concepts were brought to the region, he would add them to the model to determine what it would require from the municipality—the implications up and downstream. That process would then trigger financing negotiation with the developer. Only when this was completed would projects proceed to tender, explained Kyi.
“Oakville was about 70,000 people then, and the forecast was that it was growing to 250,000,” explained Kyi. “Our work formed part of the Oakville Master Servicing and Financing Program. I note the word financing because, without financing, there was no Master Servicing. It is important that financing come before the actual work starts.”
AUDITOR HAS SOME CONCERNS
Later in the meeting, Katie Mahon from KPMG, an accountancy, reviewed the County 2023 yearend audit with the committee. Much of it was pro forma, but the auditor’s tone changed when she turned the discussion to financial sustainability.
“We note that the County is in a net debt position at the end of 2023—net debt meaning that liabilities exceed assets by $38 million,” said Mahon. “There is nothing currently on our end flagging non-compliance or putting you in any sort of jeopardy. However, we are noting you are in a net debt position. And looking out at your capital plans and infrastructure plans moving forward, [we are] just flagging for the committee the question of how those costs are going to be funded, the timing of those future costs, how this is going to look. This is a focus, I would say, for the future—certainly, before taking on any more debt. The capital requirements coming are quite significant. And your current position is already in a net debt. We want to ensure everything flows in a way that meets ministry requirements and also keeps you in a liquid position.”
Net debt in this context means that if all the municipality’s borrowings were called, it would not have enough assets to pay them.
It wasn’t a brace-yourself-for-impact warning, more of a caution about bumpy weather ahead.
Mahon noted that the issues of debt management and cost recovery dovetailed nicely with the concepts and discipline outlined by Matthews, Kyi and Good.
THE UPSHOT
When the opportunity arose, committee member Wilma Vreeswijk proposed an examination of project management capacity.
Considering the scale, scope and complexity of the projects being envisaged for the County over the next few years and our discussions, I thought we should look at: What is our project management capacity? Do we have the right capacity for these larger projects?” outlined Vreeswijk. “It would be helpful to look at all projects over $2 million—look at where they are at in terms of completion, source of funds, the interdependency across projects, performance metrics, risk, etc. Really looking to make sure from a risk-based assessment how well they are doing.”
The motion will be discussed at a special meeting of the committee in October.
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