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Savings to be had, says internal auditor

By Doug Hallett
Guelph Tribune

The city’s internal auditor says improvements are needed in the way city hall deals with the hiring of external consultants.

Loretta Alonzo, whose hard-hitting report on the city’s overtime practices rocked city hall last November, now has turned her eye to the efficiency and effectiveness of the city’s use of external consultants. And her “value for money” audit has concluded that there are savings to be had.

“There is the potential for a reduction in expenses with improved business processes and guidance over the use of external consulting,” says her new report, which goes to council’s July 28 meeting.

In a report also going to council Monday, the city’s top management largely accepts Alonzo’s findings, agreeing with 10 recommendations and partially agreeing with the other two. Alonzo says she is satisfied city management is responding appropriately to her report by developing an action plan to address her findings.

Alonzo looked at the city’s use of external consultants over the past four years, during which city operating funds spent on hiring consultants increased steadily at the same time as capital funds spent on consultants was on the decline. In 2013, Guelph spent $2.8 million in operating funds and $4.4 million in capital funds on external consultants, her report says.

“It is important to note that all expenditures incurred within the review period were within the council-approved budgets,” it says.

Alonzo points to inconsistencies in the city’s financial reporting on the use of external consultants, which she says makes it harder for city managers to manage consulting costs.

She says repeated use of the same consultants by the city raises the question of whether a cost-benefit analysis would find additional city staffing to be more efficient and effective than this sort of use of consultants. It also raises the question of whether the city has a “plan for knowledge transfer to staff,” her report says. A third question is whether external consultants are being used to “increase work capacity without increasing FTE (full-time equivalent) staffing levels.”

The average spending of city operating funds on external consulting from 2010-13 amounted to the equivalent of about 20 full-time staff, or 1.63% of the city’s approved staffing levels for 2014, Alonzo’s report says.

Such data “raises the question of whether this is the most effective and efficient method to achieve the required results,” it says.

Hiring of consultants is at the discretion of administration across the city hall organization, with “no policy, guidance or set criteria available to govern the use of external consulting,” it says. The only guidance is found in the city’s purchasing bylaw.

“The use of external consulting can provide access to varying expertise and skill sets for specific, finite time periods, creating efficiencies that hiring staff would not,” the report says. “However, there is a lack of governance, controls, performance measurement and business case justification to support the decision to use external consulting.

“This does not mean a lack of due diligence in the hiring and use of external consulting, but indicates the need for improved governance. Given the level of expenditures on the use of external consulting, a corporate policy needs to be developed to ensure all decisions to use external consulting are made in compliance to a set of criteria.”

Mayor Karen Farbridge pushed for creation of the position of internal auditor after being re-elected in 2010, which led to Alonzo’s hiring in 2012 to fill the new post. Since then, Alonzo has reviewed several areas of city operations.

The amount spent on external consultants is a topic that has sometimes been turned into a political football by city hall critics. And it’s a topic that Alonzo says hasn’t been well studied at the municipal level in Ontario, even though all municipalities face similar challenges and issues related to use of consultants.

“The City of Guelph is again demonstrating its commitment to ‘doing business differently’ by auditing a process that has not been reviewed widely by other municipalities,” her report says.

It concludes that this in an opportunity for Guelph to “set a new standard for the use of external consulting through improved business processes and transparency to increase the value-for-money received.”

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