The City of Ottawa’s Auditor General is investigating the Manotick BIA over expenses incurred in 2021 and 2022.
On Friday, Sept. 22, Auditor General Nathalie Gougeon tabled two reports stemming from an investigation of the Manotick Business Improvement Area. The reports are an investigation of the Manotick Business Improvement Area Expenses; and an investigation of the of the Manotick Business Improvement Area – role of the City of Ottawa.
The Office of the Auditor General (OAG) conducted the investigation into allegations of potential inappropriate expenses incurred by the Manotick BIA that were raised through the City of Ottawa’s Fraud and Waste Hotline Program.
The investigation identified a need for the MBIA to strengthen controls over the approval and reimbursement of expenses and petty cash. The investigation highlighted several instances where expenses lacked sufficient and appropriate documentation to confirm that the expenses incurred were reasonable and related to Manotick BIA business. The investigation also identified expenditures that the Auditor General has classified as inappropriate.
“While the MBIA Board is independent and responsible for managing the affairs of its Business Improvement Area (BIA), through our investigation we also identified areas where the city can play a greater role in supporting BIAs and enabling strengthened expenditure management and governance”, said Gougeon.
Gougeon’s report summarized the role and procedures of the BIA.
Each year, the Manotick BIA Board prepares an annual budget which is approved by the BIA members at the Annual General Meeting and by City Council. Upon approval of the annual budget by the Board and by City Council, the BIA tax rate is calculated to produce the levy amount that is needed to fund the annual budget. The levies are collected by the City through the BIA members’ property tax bill and are administered by the City.
As the Manotick BIA does not have a bank account, all expenses incurred and approved by the BIA are paid through the City’s standard payment process.
Members of the BIA expect that the funds collected by the City are spent in accordance with the BIA’s approved annual budget and for expenses directly related to the MBIA’s business activities, and for the mutual benefit of its taxpayers within the geographical boundary. Therefore, it is important that appropriate controls are in place so that expenses incurred undergo a sufficient level of scrutiny to ensure they are reasonable, in the ordinary course of business and within budget.
In June 2021, City Council directed each BIA Board to adopt and provide mandatory governance documents to City staff by March 31, 2022, including policies with respect to the procurement of goods and services. Following City Council’s direction, City staff notified the Manotick BIA of the new documentation requirements and, to an extent, provided policy language guidance and templates to facilitate the implementation.
Investigation of Manotick BIA Expenses.
Gougeon’s report summarized that rom an expenditure management perspective, “this policy document does not provide sufficient direction on the acceptable types of expenses in the ordinary course of business. This is necessary to ensure that spending is appropriate and allows approvers to ensure that the expenses are directly related to MBIA business and in line with the MBIA’s budget. Such a policy would enable the MBIA to effectively monitor costs.
Lack of supporting documentation
As noted above, the MBIA does not have a comprehensive policy that outlines the nature of acceptable expenses and expected documentation requirements to support the expenses incurred. In the absence of a policy that clearly outlines what would constitute an appropriate expenditure, we applied our professional judgement in the conduct of our work.
The investigation examined a total of 23 purchases of goods or services based on the nature of the allegations that were brought to the auditor general’s attention. Fourteen (61%) of the expenses reviewed lacked sufficient evidence to conclude whether the expenses directly related to Manotick BIA business activities. Examples included restaurant receipts that did not indicate the purpose of the expense or the attendees, and some credit or debit card receipts that did not have detailed information.
“We also observed gifts of a personal nature without sufficient evidence to link back to MBIA business,” the report said. “Without appropriate supporting documentation, the OAG was unable to determine if the transactions were aligned with the spirit of the BIA Governance By-law or aligned with the MBIA’s mandate.”
Gougeon said the investigation revealed instances in which the MBIA incurred expenditures approved by the Board that, while in the absence of prescribed definitions of appropriate expenses, we would deem inappropriate as they do not appear to align with a BIA’s mandate.
“One example included a retirement gift of $2,400 in the form of a gift card that was approved by the Board for a staff member,” Gougeon wrote. “While the MBIA does not have prescriptive guidance that stipulates the types of eligible expenses and allowable amounts, using the City of Ottawa’s Employee Recognition Program Guidelines as a guide, this type of gift (i.e., a gift card) and the dollar value would not be acceptable.”
“Other examples included expenses for flowers and salon/spa accessories that were gifted to Board members or their family members for compassionate reasons. While MBIA representatives indicated that these types of gifts are provided to support those within the community and their past contributions to the BIA, it is our professional opinion that such expenses are inappropriate and not aligned with the MBIA’s mandate.
It is important to have a comprehensive expenditure management policy that defines acceptable types of expenses, dollar limits, and documentation requirements. Keeping detailed records ensures that adequate supporting documentation is available for an approver to assess that expenditures are appropriate, reasonable and directly related to MBIA business prior to being submitted to the City for payment.”
A follow up report is expected in the weeks to come.