The City of Toronto needs to conduct proactive audits and more frequent reviews of its telecom expenditure to avoid the type the mismanagement uncovered by the auditor general’s report, some experts say.
They were reacting to last week’s report by Toronto auditor general Jeffrey Griffiths, which revealed the City had grossly overspent on telecom products and services.
The report had cited poor management as the main culprit in the six-figure overspend. It revealed that delays in finalizing and signing certain telecommunications contracts cost the city around $585,000.
According to the report, the city failed to follow up on billing errors, nor did it have any policies in place for cellphone and Internet use by employees.
For instance, the report noted, electronic billing records from Bell Mobility between January 1 and May 1, 2004 showed numerous cellphone calls being made during non-business hours. These calls amounted to $1,792 in extra billing. Cellphones were sometimes used to transfer data or browse the Internet for more than 30 minutes at a time, costing the city $8,181.
The report recommended that policies, procedures and standards be finalized and communicated by the end of June 2005.
In response, the city’s management said it plans to create such policies and procedures on wireless communication devices as well as procedures on cellular phone acquisition and wireless standards by that deadline.
One telecom analyst believes the overspend is typical of the cavalier attitude one sometimes finds in public sector organizations. Such mismanagement, said Roger Yang, CEO of Avema Corporation, a Toronto-based telecom expense management firm, “is more likely [to happen] in government [which is] not as focused on the bottom line as [private] corporations.”
The auditor general’s report pointed out how the City was overcharged to the tune of $30,000 by MCI Canada for Internet services, because a contract that was effective on March 1, 2004 only became effective in June of that year. (The city has since been credited with the amount).
According to Yang, this is type of thing happens in large organizations. “The carrier missed putting the contract rate for a number of months and nobody noticed it until an audit [was done] two or three years later. It is inevitable some of these things will slip by.” He suggested that the city do proactive rather than reactive audits.
Governments at every level – including the City of Toronto – are being held more accountable for how they spend taxpayer dollars, according to Roberta Fox, senior partner with Fox Group, a consulting firm in Markham, Ont. She said after City’s mishandling of telecom revenues, Toronto taxpayers unlikely to want to “open up their purse strings and say we are giving you more money for IT.”
Fox recommended the city go through all their telecom costs twice a year, as once a year is too infrequent.
The report recommended the creation of a contract management framework to ensure new contracts are properly reviewed, approved and executed before the last contract expires.
Yang agreed with the recommendation and said companies need to negotiate the right contract and each invoice needs to be verified against the prices stipulated in the contract. “Those two steps alone would have saved [the city] a ton of money.”
The city’s management response to the auditor general report indicated it plans on developing a standard template by the end of May that will ensure contract terms such as price are adhered.
The report noted the city has service agreements with five providers: Bell Mobility, Rogers AT&T Wireless, Telus Mobility, Verizon Wireless, and FIDO that total $4.2 million annually. The city has approximately 5900 active cellular and 2700 active paging units.
