Region audit clears staff of wrongdoing
Investigation looked at 163 purchases going back to 2017 and recommends improved staff procedures
A special audit of 163 Niagara Region purchase orders has found no evidence of any wrongdoing but strongly suggests the municipality improve its procedures.
Accounting firm KPMG undertook an in-depth investigation of purchases dating back to 2017, and were identified in an audit of noncompetitive procurements.
The additional audit was partly in response to Niagara Falls Coun. Bob Gale, who has made unfounded allegations of corruption at Region headquarters and demanded further investigations.
Todd Harrison, commissioner of corporate services and treasurer, told the Region’s audit committee KPMG specifically identified the potential for invoice splitting but didn’t find any
evidence of it.
“The message I get from that report is that the opportunity exists, and we need to clamp down,” Harrison said. “Part of the solution for us is a sourcing analyst, and we are in the process of finalizing the hiring of the person for that position.”
The auditor flagged the contracts in question because they were not clearly recorded in the Region’s Peoplesoft software system. Peoplesoft integrates the proper permissions and documentation to manage financial transactions for a large corporation or government body.
One of the issues KPMG looked at was contract splitting — whereby someone breaks up government contracts into smaller quantities or amounts to circumvent the approval process laid out in procurement bylaws. Contract splitting ends up favouring a company already under contract and can effectively eliminate competitive bidding. At worst, it leaves open the possibility for corruption and kickbacks.
Harrison said the “bulk” of the 163 purchases audited by KPMG dealt with emergency or unforeseen developments. The correct documentation and justifications were there all along, but not in the Peoplesoft system.
“The vendor would do the work, and an invoice would go to our accounts payable staff,” Harrison said. “The accounts payable staff would say there is no PO (purchase order) on this, and they would have to go back to the staff member or project manager and get a PO number. There are no examples of an invoice being paid without a PO. That was the system — finance would do callbacks.
“It was especially challenging because of the pandemic, but we decided that if the invoices show up, they will go right back to the vendor.”
The laissez-faire billing practices were identified as an issue during the audits and investigation into the Burgoyne Bridge replacement procurement. Gale said his concern was that the practices were continuing.
Acting chief administrative officer Ron Tripp issued a directive on Oct. 16, 2020, that ended the laissez-faire practice
“If there isn’t an absolute emergency, and something is done out of convenience, and the rules aren’t adhered to, it becomes a performance issue,” Tripp said. “Mr. Harrison and I refer to the October directive as ‘martial law.’
“That’s when everything stopped. We aren’t going to be dealing with this anymore. Quite frankly, we are tired of having this conversation with you as well.”
Fort Erie Mayor Wayne Redekop said it was problematic that some procurement activities had become ingrained in the organizational culture.
“I hope staff continues on the road it is on now, and I do hope employees, and staff members who are involved in procurement, understand how concerning this is to council,” Redekop said.
“I understand it is like trying to turn around a battleship, but it is terribly, terribly important that we address this. While we may not want to keep hearing about it, I think we will keep hearing about it until we are assured that it is under control.”
Tripp joined the Region in 2014, and since that time he said there have been efforts to improve the systems, one of which is Peoplesoft which has allowed increased oversight.
“The organization itself has come from some very outdated, archaic systems, which perpetuated some bad habits,” Tripp said.