‘Culture of complacency’ at city hall linked to road-paving scams

City manager Peter Wallace says the city is vulnerable to fraud and that the problems may be extensive.

Thestar.com
March 24, 2017
By Betsy Powell

Toronto’s top civil servant has ripped into a “culture of complacency” within the city bureaucracy that may have allowed road paving contractors to scam taxpayers out of millions of dollars.

“Frankly there’s been slavish devotion to status quo here,” city manager Peter Wallace told councillors on the audit committee Friday.

They were reviewing Auditor General Beverly Romeo-Beehler’s report that found “telltale signs of bid rigging and inflated pricing” in city paving contracts between 2010 and 2015, and signs some city employees may have been involved.

While the audit covered five years “there’s no reason at all to believe this is not an extended pattern reaching past beyond that,” Wallace said, adding the auditor general’s findings “send a signal about the broader organization.”

“This is a fundamental wakeup call to the city of Toronto. We can’t look at this only in paving, and say ‘No it’s just that situation, that’s it.’ No, we’re going to have to look a bit more broadly.”

The city awards $1 billion a year in public contracts for construction and repairs, including $100 million for road repair and maintenance.

The probe started in March 2015. Romeo-Beehler soon alerted Wallace - a recent city hire like herself - of “irregularities.” A separate internal city probe confirmed “the potential for wrongdoing” by external vendors and internal staff. Police were notified in early 2016 but have not said if there is a criminal investigation.

Wallace called the news “upsetting”, adding the city is working on fraud detection and other measures to ensure the massive annual spend happens through fair and competitive bids. He warned improvements cost money.

“We are vulnerable to fraud and that vulnerability takes places because people are more sophisticated than we are. The core thing we need to do is be more sophisticated. That is something that requires investment.”

Romeo-Beehler told councillors that, unlike the Charbonneau inquiry in Quebec that uncovered massive corruption in public construction contracts, her probe has not implicated any elected officials.

Possible misconduct by staff is another matter. She cited improper estimates on the scope of road work that were key to “opening the door for things to occur that shouldn’t occur.”

The “irregularities” could have been caused by an “untrained person or there could have been something else.”

Councillor Josh Matlow told committee companies found to have rigged bids should be “blacklisted.”

After the audit committee went behind closed doors to hear more from the auditor general, he suggested the digging will likely lead to fresh revelations.

“I'm incredibly distressed by what we learned through the auditor general's research,” he said. “This shouldn't happen in Toronto - suggestions of insidious behaviour and nefarious conduct by either internal staff or vendors who we contract. It's just unacceptable in a city like ours.”

Councillor Chin Lee agreed. “The crooked mind is very inventive - they will find the holes if you leave it open.”

The committee reviewed a separate audit that found taxpayers are footing the bill for questionable claims for health benefits including orthopedic shoes, medical braces and therapeutic massages.

One city employee’s family claimed $31,500 for more than 60 orthotics over three years. Dependents aged 18 and under can claim an unlimited number of some medical aids under the city’s contract with staff.

Matlow called the lack of caps a “glaring loophole”, adding: “It shouldn't be this open trust system that anyone can get as many things as they want hoping that no one is going to exploit the system.”

Wallace suggested the “genuine problem” is not individual parents but “a somewhat more organized practice,” like those alleged in an ongoing TTC benefits probe. Police accused an orthotics shop of providing transit employees with receipts for goods or services never provided, and then splitting the payout.

The new audit identified two medical supplies and equipment providers with “suspicious activities.”