Audit says City of Toronto's financial records often 'erroneous,' 'incomplete'

An independent accounting firm tasked with auditing Toronto City Hall’s financial practices says the city’s bookkeeping is “often erroneous” or “incomplete.”

KPMG, which annually reviews the municipality’s accounting, has submitted a letter to the city’s Chief Financial Officer highlighting control deficiencies that it says “are of sufficient importance to merit management’s attention.”

The deficiencies could result in errors, omissions, and inefficiencies that could cost the city, the report notes.

“Watching over the public’s money, and over the finances and resources of this city is tremendously important, not just to me as a councillor but to every taxpayer,” audit committee chair Stephen Holyday told CTV Toronto Friday. “I’d like to see those controls maximized.”

KPMG concluded that in “quite a few situations” city staff did not have the appropriate level of accounting and finance knowledge to perform their job properly, and that “the quality and timeliness of the information received by the Accounting Services Division is often erroneous, incomplete and/or untimely.”

The city agreed with the need to strengthen the financial reporting acumen and technical expertise of its staff, according to the firm, and is developing new training materials.

The report also highlights inconsistencies in internal assumptions about future economic events like inflation, rates of return, and borrowing costs. It notes that the city had extraneous bank accounts — 122, not including petty cash funds — for no clear reason.

The petty cash accounts, the letter says, lack proper oversight, which increases the risk of misappropriation.

The process of consolidating the 80 workbooks of the city, its agencies, and corporations still has to be done manually, KPMG notes, which is an inefficient process prone to human error.

“I would cut the city some slack in why they haven’t moved more quickly, why they haven’t resolved this,” Myer Siemiatycki, professor emeritus at Toronto Metropolitan University said Friday. “The design and conversion from paper to electronic is complicated and difficult.”

The city said in a statement that it welcomes KPMG’s recommendations, saying “in all cases the City was already taking action to address issues and implement fixes.”

It also noted that staff are committed to accountability through internal audit channels.

“We continually look for ways to improve our systems and processes in the service of Torontonians,” a spokesperson said.

The audit committee will address the report next week.