WUC Report Whitewash

Special Council meetings Friday at 4 p.m. on interim control bylaws so few can attend. Releasing WUC audit reports to the media at 5 p.m. so that TV news at 6 p.m. will accentuate the positive since the Reporter would not have a chance to read the entire report, be able to analyze it and to report it on the news within the hour.

Now why does Eddie need a team of PR flacks when he knows how to spin the news so well on his own!

Now I don't want to say I told you so but I told you so. It is a whitewash audit at about $2,000 per page. As an example, the auditors identified a key question that caused concern:

• "Concerns voiced by some Councilors and citizens including:
  􀂃 Fees received by WUC for “capital replacement reserves” were used for general revenue
  and/or operations."

I am still trying to find out where they answered it! I do NOT think they did because it was outside the scope of their mandate.

Of course, there is a smoking gun in all of this that I will describe later. It is a damning indictment of why we are in this mess.

Here is one sample:

• "Toward the end of 2004 it became apparent from the declining cash position and increase in net debt that even these rate increases were insufficient to stem the cash drain and WUC undertook a review of “rates design”. The process of “rates design” continued for a number of months through 2005 and into 2006 and culminated with the engagement of external consultants to assist in the development of a rates design strategy. In the meantime rates remained unchanged for all of 2005 and 2006. "

I am so glad the auditors "Conducting interviews with senior management and senior accounting staff." Too bad they did not talk to WeACT members! Can you imagine the fee they would have received if they had. It would probably have gone up dramatically given all the issues that WeACT would have raised.

The question is where we go from here. Obviously the Mayor will be happy and so will a few Councillors. However, Councillor Marra now has to do what he promised to do: demand a proper forensic audit if this one proved unsatisfactory. And it did.

Will Councillor Marra do now as he promised? Will any other Councillors have the nerve to support him or will they leave him out there alone to try to destroy his chances to run for mayor? We'll see what are Councilors are made of before this incident is over.

Let's be blunt about it. The Report does not answer the questions that were asked by citizens when this matter first arose. Obviously the Mayor is very fortunate that Dwight and Sandra were his friends at the time when the Section 9 audit was set up. Notwithstanding that the City asked as well for the the much broader section 10 audit, the Ministry chose not to do that. Can you imagine what would have happened had Councillor Halberstadt's Auditor General value for money audit taken place?

I want you to read the Summary of the Findings very carefully. These are the Findings of a financial audit examination and not of a forensic audit investigation. The issues set out are not the ones that the public was concerned about. The issue was never "did the Commission follow generally accepted accounting practices." It was much broader than that and involved political matters as well.

It is no wonder now that the Ministry refused to meet with the citizens of Windsor so that citizens could provide input into what the Terms up Reference were. One should not blame the auditors answering the questions that they were asked. It is just that the Ministry refused to ask the right questions.

• Summary of Findings
  
  For the periods ended 2003 to September 30, 2007:
  
• 1. The financial analysis and budgeting processes implemented by the City and WUC followed many of the “Recommended Budgeting Practices” (Appendix 8). The analysis including all relevant budgets and capital plans was adequate for the purposes of determining water and sewer rates, the recommended increases in those rates and the financing and billing to support those rates and increases.
• 2. Capital expenditures by WUC on watermain infrastructure projects for each of the periods ended 2003 to September 30, 2007 exceeded the Watermain Replacement Levy revenues in each of these periods. (Appendix 10).
  3. Sewer surcharge revenues collected by the City were allocated 100% to capital infrastructure replacements and repairs and/or sewer operations.
• 4. The accounting policies followed by management of the City and WUC as disclosed in their audited external financial statements were in accordance with Canadian generally accepted accounting policies.
• 5. The accounting policies and internal financial records of WUC and the City appropriately “track” revenues and expenditures, including capital expenditures, by source for all water and sewer related activities.
• 6. Expenditures allocated to the Water Treatment and Distribution Division at WUC including the Management Services Agreement expense were reasonable, in accordance with contracts and agreements and supported by invoices or other supporting documentation.
• 7. The policies and accounting procedures followed by WUC for the period 2003-2006 regarding installation of water meters by third party contractors were deficient in that monthly fixed meter charges may not have been recorded in many instances for the period from the time of installation by the third party contractors to time of sale of the property by the developer. The new policy implemented beginning in 2007 has corrected this deficiency. The potential unrecorded fixed meter charge revenue for the period 2003 to 2006 is not estimated to be significant.
• As an observation we would comment that the communication strategy to keep ratepayers informed of the state of the water infrastructure and the implications of the water rate decisions was generally ineffective, and indeed contributed to the confusion and misunderstanding of the circumstances faced by WUC and the City.

Finding number two might give some of some comfort because that's what the Mayor said on his white board presentation at Council. No one doubts that the actual expenditure is higher than the water Main Levy brought in. The levy was a top up amount. In order to determine whether it be proper amount of money was spent for water Main replacement, one has to add in capital amount and water Main Levy amount. As I will show subsequently, more was taken in been spent.

With respect to Finding number three, that finding is WRONG based on the BLOG I wrote "August 27, 2007 Where Did The Sewer Surcharge Money Go." If this Finding is wrong, then what else is wrong with this report.

Oh yes, the issue respecting all of those meters for which people were supposedly not charged, Finding number seven deals with those.

The Observation is what got WUC into this mess!

Take a look at these three appendices from the report. When you look at them they cry out that there is a fiasco at Windsor Utilities Cmmission, especially during the time when the Mayor was in charge.

Appendix 17 was just like the Mayor's white board presentation. It shows that the amount spent on the watermain replacements exceeded the levy. Naturally that is the case because the levy was a top up amount only. There is that fatal flaw that the Mayor's presentation also suffered, it did not include the capital amounts.

Here is where the fun is, Appendices 10 and 18.

THESE CHARTS DEMONSTRATE HOW POORLY RUN THE COMMISSION WAS AND WHY WE ARE IN THIS MESS. THIS IS THE SMOKING GUN! THE COMMISSION WAS RUN INTO THE GROUND.

What we see clearly demonstrated was that the total amount of budgetted capital and watermain Levy amounts was not spent on actual replacement. In fact we know now from the letter of Ms De Vries of Enwin/WUC that only $7 million was spent in 2007 although $15 million it looks like was budgetted and there was more than $3 million in levy charges as well.

Take 2005 as an example. $2.886 million of watermain Levy plus $9.5 million of capital budget plus $1.045 million of developer capital but only $7.279 million spent. Where did the other $6 million go?

WHERE DID ALL THE MONEY GO THAT WAS NOT SPENT?

The other Findings frankly are irrelevant to the issues that the people are concerned about.

Some of the items that still need explaining Councillor Marra and for which I expect you to demand a forensic audit include:

1. What are the facts involving the watermains and costs of replacement and were alternatives to replacement considered. NOT EXAMINED
   
   
   
2. What are the costs of replacement or repair since they have escalated to over a half a billion dollars NOT EXAMINED
   
   
   
3. Were numbers picked "out of the air" by the previous WUC Administration or did they exercise sound judgment in what they were doing NOT EXAMINED
   
   
   
4. Why were rates kept as low they were and not increased to cover capital and operating costs NOT EXAMINED
   
   
   
5. Why was debt paid off at a time when watermains needed replacement NOT EXAMINED
   
   
   
6. What role did "politics play in the decision-making NOT EXAMINED
   
   
   
7. Was water levy money diverted from the capital account to the operating account in violation of the Commissioners' express directions NOT EXAMINED
   
   
   
8. What is the true financial position of WUC today NOT EXAMINED
   
   
   
9. Did KPMG spot the diversion and what did they do about it NOT EXAMINED
   
   
   
10. Do the WUC Financials have to be restated NOT EXAMINED
    
    
    
11. The Investigator must name names and tell us who should be praised and who ought to be condemned NOT EXAMINED
    
    
    
12. Has there been an attempt made to "cover-up" this matter and to attempt to fool citizens. If so, who was involved NOT EXAMINED
    
    
13. Did the WUC Commissioners carry out their function in a proper fashion both with respect to oversight of the WUC and with respect to the issues now causing such concern in the City NOT EXAMINED
    
    
14. Did the Windsor Audit Committee carry out their functions in a proper fashion when the WUC fiasco became public NOT EXAMINED