The District of Sechelt “exposed taxpayers to unnecessary risks” in how it carried out two capital projects — including the largest in its history — under the previous council, the Auditor General for Local Government (AGLG) said in a damning report released Wednesday.
Among the “concerning issues” found in the audit of the $25-million wastewater treatment plant, the report identified shortcomings in decision-making processes, council direction and oversight, transparency and procurement practices.
“District representatives held separate, closed meetings with potential bidders prior to issuing a request for proposals,” the AGLG report said. “The District cannot demonstrate that all prospective bidders received the same information at the same time and that the bidding process was conducted in a fair and open manner.
“Also, council discussion of the project in 2012 was conducted in meetings closed to the public.”
Other issues included:
• The lack of a business case at the time council decided to significantly broaden the project’s scope. A document “approximating a business case” appeared several months after the District committed to the project, had already hired consultants and “made significant expenses on it.”
• Insufficient oversight of the project steering committee. Terms of reference for the committee were not approved until it “had virtually completed its work,” and most of its reporting to council was informal and verbal.
• Instability of senior District staffing due to high turnover, and inadequate involvement of finance staff.
• The absence of a policy on how to deal with allegations of conflict of interest that were raised in the community.
“Several of these issues relate to the responsibility of council to protect the interests of taxpayers by delegating responsibilities appropriately, ensuring the knowledge and skills of staff were used well and carrying out its vital oversight role. We are concerned that council did not fulfill all of these responsibilities,” the report said.
Due to the issues and size of the project, the AGLG office recommended the District conduct a post-completion review of the project “to determine if it has received value for money,” and make the report public to address residents’ questions about the plant’s technology, suitability and affordability.
On the second project — paving on Sandpiper, Mason and Heritage roads in West Sechelt — the AGLG report said there was no written contract for the paving work, which was direct-awarded to a company. The estimated cost of the project was $625,000 and the work was completed at a total cost of $548,425.
The report again cited the lack of a business case for the project, which had not been identified as a priority until 2012, the same year it was completed. As well, both projects revealed the District’s “ad hoc approach and lack of rigorous assessment of overall priorities.”
At a news conference held about 30 minutes after the report’s release, Mayor Bruce Milne walked reporters through its key findings and pledged to make the AGLG’s eight recommendations “a priority for this council.”
Milne said the audit’s findings “confirmed the community’s concerns regarding the management of some decisions” related to the two projects.
“It’s important to note that the audit only reviewed two projects … but I can tell you … that the practices identified as concerns were not unique to those projects,” he said, adding that the new council and interim CAO had “noted similar patterns of risk.”
Milne flagged the report’s comments on the procurement process for the treatment plant project, calling it “a stunning finding that was a surprise to many of us when we saw it.” He also quoted the AGLG on the issue: “This is particularly troublesome, as such practices undermine the integrity of the procurement process.”
On the lack of conflict of interest policy for staff and elected officials, Milne said the AGLG office “chose not to assess the issue or to determine whether there was in fact a conflict of interest,” as it was outside of its mandate and covered under the Community Charter.
However, he said, “I will be asking our council when this comes public to in fact deal directly with the conflict of interest issue and resolve it for the community, so they actually know whether there was a conflict of interest.”
Regarding the West Sechelt paving, Milne noted the work represented eight per cent of the capital budget for the year, but with no business case or written contract for the sole-sourced project, the District again, according to the AGLG, “is not able to demonstrate whether this project delivered value for the money.”
“That leads them to say we were at risk in a number of ways,” Milne said. “When you count the number of times they use ‘risk’ or ‘potentially at risk’ in this document, you get a sense of exactly how serious this report is.”
The report’s recommendations and District’s action plan call for developing policies and practices on business cases for capital projects, the delegation of authority to council committees, transparency of decision-making, conflict of interest, senior staff roles for major projects, procurement and capital asset management.
“Probably the most explosive” of the recommendations in the entire report, Milne said, was to undertake a post-completion review of the treatment plant.
“The Auditor General came in and looked at the largest single capital project that the District of Sechelt has ever done … and after doing a full audit on that project, they say the District should undertake a post-completion review including an evaluation of construction, project management, and costs in completing it, because they’re saying they don’t know; as well as risks, life cycle costs and its long-term financial sustainability, because the Auditor General is saying they don’t know.”
Milne said the review will span at least the first 12 months of operations at the new plant and the remaining balance of the contingency fund should cover the cost, estimated at $75,000 to $100,000.
Staff will report on implementing the report’s recommendations at the May 6 council meeting.
In his introduction to the report, acting AGLG Arn van Iersel thanked the District for its cooperation during the audit process and its “positive, constructive response,” saying the District’s action plan “indicates a commitment to addressing the issues raised in this report.”
See the report at http://www.aglg.ca/includes/docs/Audit-Topic-3-Report-2-Sechelt.pdf.