Audit reveals Toronto spent nearly $11 million on unused software subscriptions

A new report has revealed that the City of Toronto spent almost $11 million on software that wasn’t used, or was given to former employees or those on leave.

Municipal auditor general Tara Anderson published her findings in a report titled “Audit of Software Acquisition and Licence Management,” which investigated the accuracy of the city’s own tracking of software licences, cloud subscriptions, and maintenance.

It looked at seven specific software applications that are used across the city and found that “unused licences” for five of those programs, including Microsoft M365, a cloud-based productivity suite that houses Outlook, Word, Excel, and PowerPoint, cost the city $10,983,716 between 2020 and 2024.

The audit noted that roughly $1.4 million worth of those software licences were issued to staff members who don’t work for the city anymore or those who had gone on long-term leave.

It states that, overall, the city lacked a "clearly defined data strategy and plan to manage the city’s software assets" and that most of the losses occurred from buying the licences in bulk in an effort to get upfront discounts. However, those savings were never realized due to constrained network architecture, staffing challenges, and project delays brought on by the COVID-19 pandemic. 

“While bulk purchasing can result in significant cost savings, the financial benefits are eroded when a project is delayed, and licences are not utilized,” the report read.

In one example, in 2021, the city purchased Microsoft M365 licences for 10,000 users, despite being told back in 2018 by the software giant that the city could only handle 6,000 users at a time. The program cost $5.14 million annually and $25.7 million over a five-year period.

A staff report on that rollout estimated that the implementation of the software would save the city up to $27 million. But at the end of the first year of the agreement, only 2,250 of those subscriptions were activated. All remaining licences were eventually deployed in the second year, but the delay cost the city $6.9 million and the implementation benefits were “not achieved.”

The report made 10 recommendations, including automating the off-boarding process to deactivate unused accounts, and investigating whether the cost of unused software licences can be reduced or deferred to future periods.

As well, it asked the city to look into possible deferrals on future software deployments if projects are delayed.

“The issues identified in this report have been raised by the Auditor General in previous reports as well,” the report noted.

“There are 12 related recommendations from these reports that are still in progress, and many are more than five years old. Benefits from Auditor General recommendations can only be realized when they are implemented in a timely manner.”

In a statement to CTV News Toronto, the city said it acknowledged the findings of the report and stated its commitment to “delivering value for money.”

“Many of the findings were derived from COVID-19 related program delays which have since been launched,” the statement read.

The city added that it continues to put “program management in place,” based on previous auditor general recommendations, which include conducting interim audit checks for user-based licences.