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Briefing Note AUDITOR GENERAL’S REPORT Review of Complaint Regarding the June 29, 2016 Toronto Transit Commission Briefing Note October 13, 2017 Beverly Romeo-Beehler, CPA, CMA, B.B.A., JD, ICD.D, CFF Auditor General TABLE OF CONTENTS SUMMARY ...................................................................................................................... 3 BACKGROUND .............................................................................................................. 5 THE BRIEFING NOTE .................................................................................................... 8 THE LAUNCH OF OUR INVESTIGATION ................................................................... 10 MAIN ALLEGATIONS REGARDING POLITICAL INTERFERENCE ........................... 11 FINDING DETAILS ....................................................................................................... 12 A. RIDERSHIP NUMBERS ......................................................................................... 12 B. RESPONSES RELATING TO THE STAGE OF COMPLETION OF KENNEDY STATION ................................................................................................................ 16 C. QUESTIONS ABOUT TIMING, CRITICAL PATH AND STARTING AT THE NORTH END .......................................................................................................... 18 C.1. Was Kennedy Station on the critical path? ................................................... 18 C.2. Was preparing the cost escalation (Order of Magnitude) reasonable? ........ 21 C.3. What was the impact on the cost escalation if construction on the LRT started earlier – including if construction could start at the north end? ......... 22 D. ALLEGATIONS ABOUT STAFF BEING POLITICIZED BY PREPARING A BRIEFING NOTE .................................................................................................... 24 D.1 Who requested the briefing note? ................................................................ 24 D.2. How was the content of the briefing note developed? .................................. 24 D.3. Were there deficiencies in the dissemination of the briefing note to councillors? .................................................................................................. 25 E. SCOPE LIMITATIONS ........................................................................................... 29 E.1. Investigative review ...................................................................................... 29 E.2. Factors not an issue ..................................................................................... 29 CONCLUSION .............................................................................................................. 30 Exhibit 1: The Briefing Note .......................................................................................... 31 Exhibit 2: The Complaint Letter to the Auditor General with a Brief Chronology .......... 38 Exhibit 3: The Complaint Letter to the Ombudsman (shared with the Auditor General by the news media) ...................................................................................... 46 -i- Appendix 1: Management’s Response to the Auditor General’s Report Entitled: “Review of Complaint Regarding the June 29, 2016 Toronto Transit Commission Briefing Note” ...................................................................... 48 -ii- SUMMARY 1. This report provides the Auditor General’s findings primarily in relation to a complaint about political interference in the crafting and dissemination of a particular briefing note about large transit project options for the City of Toronto. The title of this particular briefing note is “Issues Relating to Re-introduction of LRT Replacement for Line 3 (SRT)” (Exhibit 1). 2. This investigation was initiated by complaints from a citizen group (the complainant) received in January and February 2017 (Exhibits 2 and 3). 3. The main complaint is that political interference resulted in inaccurate, incomplete and misleading information being provided to City Council about the costs of the Scarborough Subway Extension (SSE) compared to the Scarborough Light Rail Transit (SLRT) option. The complainant provides examples to support their assertion that misleading information was provided as a result of political interference. 4. The briefing note was prepared for Toronto Transit Commission (TTC) Chief Executive Officer (CEO) Andy Byford and the Chair of the TTC Board, Councillor Josh Colle, ahead of TTC Board, Executive Committee and City Council meetings. 5. City Council had many studies, reports, presentations, information and deputations available when making transit decisions for Toronto over the past several years. In the complainant's view, Council's decision to proceed with a one stop subway “was made in large part” on the basis of the briefing note and that "Council has committed billions toward a one-stop subway extension…without the benefit of an objective and complete comparison of costs, delivery dates and funding commitments…for the seven-stop LRT option". 6. The complainant asked the Auditor General’s office to essentially do three things: i. to conduct "an examination of the circumstances involved with the decisions to construct the SSE instead of the SLRT". More specifically, the complainant alleges that the briefing note “erroneously and deliberately inflated the price of the SLRT option by approximately $1 billion.” ii. "to investigate whether the mayor, city council and city administrators have appropriately exercised their responsibility of stewardship over public funds" in making the decision that they made to proceed with the SSE option. iii. to investigate whether the SSE will achieve value for money. 7. This report addresses how the briefing note came to be drafted, evaluates the reasonableness of financial and other information in the note, addresses possible 3 pressures influencing the contents of the note, and considers the process used to distribute the note. 8. It is not the Auditor General’s role to question the policy decisions of elected officials, nor is it the Auditor General’s role to reopen City Council decisions. Therefore, the Auditor General did not investigate items ii and iii in paragraph 6. In relation to the complainants concern that a further business case was needed, after considering all the information that had come before it, Council decided a further business case study to compare the SSE and the SLRT was not needed. Council’s decision will not be reopened by the Auditor General. 9. A value for money/performance audit to examine management practices, controls, and reporting systems to achieve Council's direction in a cost-effective manner is within the purview of the Auditor General, and may form part of a future audit. 10. Our investigation included our own staff, as well as a Senior Managing Director of an external reputable forensic firm to lead the investigation. We found: i. no evidence of any lack of integrity on the part of CEO Byford or other TTC personnel in its preparation. ii. no evidence of a systemic problem of political interference or staff being pressured by elected officials, including the Mayor and his office, in relation to the development of the ridership numbers and the preparation and distribution of the note. iii. that in our view, the briefing note estimate was within an acceptable range given the stage of the project, the nature of a briefing note and the caveats contained therein. The briefing note highlights that the figures are "estimates only," intended for a "high level cost comparison". After evaluating the reasonableness of the figures, it is our view that even if construction on the SLRT could have begun several years earlier, the potential difference between the briefing note figures and our calculated escalated cost is within an acceptable range for estimates at that stage of completion. 11. These findings are described in further detail in the body of this report. We also made recommendations that will help prevent similar situations from arising in the future. The report includes some background information about the recent history of large-scale transit projects in the City of Toronto, which will help to put the complaint into context. 4 BACKGROUND 12. In order to fully understand the contents of the briefing note and the complaint, which are contained in the next section, an overview of these two transit options is important. 13. The Scarborough Rapid Transit (SRT), Line 3, currently runs between McCowan Station and Kennedy Station, where there is an interchange with the Bloor- Danforth subway, Line 2. The SRT is an aging infrastructure in need of replacing. City Council approved its replacement with a seven-stop SLRT. A Master Agreement between the City, the TTC and Metrolinx, a provincial transportation agency, was signed in November 2012. It provided a legal framework for the delivery of the Toronto Light Rail Transit Program, a transit program that included the SLRT, Eglinton Crosstown LRT (ECLRT), Sheppard East LRT, and Finch West LRT. 14. On May 9, 2013, Toronto City Council voted 35-9 in favour of EX 31.3, motion 3, which states "That City of Toronto City Council support the extension of the Bloor Danforth Subway Line from Kennedy Station to the Scarborough Town Centre and north to Sheppard Avenue" demonstrating conditional support to overturn the decision to replace the Scarborough SRT, Line 3, with a seven-stop SLRT. 15. In 2013, Metrolinx, was in the process of planning
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