Renfrew – When Renfrew town council received the final report regarding the costs and failures of the Ma-te-Way Activity Centre expansion project, the news was not good and the underlying messages they heard loud and clear were a complete lack of leadership and oversight from the council-of-the-day that led to an astounding 115 per cent budget over-run.
That over-run resulted in a $38.7 million bill for a project that had an original budget of $18.9 million.
What remains to be determined is whether any fraudulent activity contributed to the runaway costs and whether or not criminal or civil action will be taken to try and recoup some of the money spent on the 96,000 square addition that included a second ice pad, a walking track, gymnasium, fitness centre and a First Nations cultural centre.
The Ma-te-Way Activity Centre Expansion Project – Third-Party Review was presented by Tammy Carruthers and John Skorobohacz of WSCS Consulting. They were originally commissioned to complete a full accounting of the Ma-te-Way construction project in May 2023. They delivered a draft report to council last March 19 and much of this final report contained similar information, but it also provided greater detail and documented evidence of the paper trail that ultimately led to last week’s final report.
What is known is that the project cost overruns will need to be financed with debentures and taxes, the only two choices the town has at this juncture. There are no additional grants, fundraising or sufficient reserves to cover the costs. The report hinted the debenture route will be a 30-year payment plan that will cost taxpayers between $50 and $55 million.
To make matters worse, the building will eventually have to undergo expensive mechanical replacements as part of maintaining a proper asset management plan. That is in addition to spending an estimated $925,000 annually just for basic operating costs such as hydro, ice-making equipment, staffing, landscaping, snow removal and other daily functions.
In the 2024 budget, an overage of $100,632 from the previous year represents a one-percent increase on the levy. Using that model beginning next year, if the annual operating cost at the myFM Centre, the new name of the complex, is $925,000 that would result in an immediate 9.2 per cent levy increase before any other town expense is reviewed.
Poor Governance/Oversight
The third-party review exposed many weaknesses in the town’s former governance structure that led to many inappropriate practices and ill-informed decisions resulting in significant cost overruns and numerous delays in construction.
The lack of leadership and oversight by the previous council (Mayor Don Eady, Reeve Peter Emon, Councillors Tom Sidney, Sandi Heins, Arlene Jamieson, Mike Coulas and Andrew Evans) and the former Ma-te-Way Ad Hoc Committee (Don Eady, Peter Emon, Tom Sidney and Kevin Hill), led to a series of errors and miscalculations which doomed the project from the beginning.
During the pre-construction phase it was discovered standard procurement procedures were ignored by the former recreation director, Mr. Hill, after he was delegated by council to run the multi-million construction project. Ms. Carruthers said RFPs (Requests for Proposals) and tender results did not follow an open public procurement process.
“The tender/RFP evaluation criteria usually involves two or three stakeholders working together using an agreed upon grading system based on industry standards,” Ms. Carruthers stated. “Usual practice also includes publication of the successful bidders who were awarded a contract and it is standard to publish all results within the competition. The town had procurement and tendering policies in place, but they were generally ignored.”
The report stated the majority of these issues were avoidable if council had done its due diligence, asked the right questions and hired professional project managers to oversee the project. These failures have not occurred in other large town projects (O’Brien Road reconstruction, water treatment plant, etc.) and therefore it is clear the issues could have been avoided.
“It is clear the town did not use proper public procurement and we believe that because of the multitude of tendering processes that were undertaken that competition was not what it could have been,” she said. “If the town had gone through proper bidding as required by the International Trade Agreements, the town would have ended up with more bidders and therefore more competition.
“This may have benefitted the town with lower prices. The entire procurement process did not follow public procurement requirements and we believe that had a significant impact on the final costs.”
Ms. Carruthers added the entire procurement process, tendering and awarding of contracts were not managed and because the council of the day opted to put the former rec director in charge of the project—an assignment to which he had none of the experience required for a project of this magnitude, instead of hiring a qualified, professional project manager, the project was on the wrong trajectory from the beginning.
“We believe that decision had a significant impact in terms of not only the financial impact, but on the delays in the project,” she added. “Council placed an unreasonable and ill-informed amount of confidence in the former Director of Parks and Recreation without understanding the implications at a time of organizational restructuring. “Consequently, council allowed the director to make decisions with respect to design, scope, partnerships and construction tenders without approval or oversight. Weak internal controls allowed for inappropriate transactions to be approved, conflict of interest and town policies, code of conduct and by-laws violated,
CAO Model
During the 2018-2022 term of council, the town had a “Senior Management Team” form of governance without one central reporting authority. Each director (property and development, finance, parks and recreation, etc.) reported to individual committees through monthly reports and were only answerable to council. There was no policy in place that demanded accountability by the directors or staff in terms of governance.
In the summer of 2022, the town hired Robert Tremblay as the first Chief Administrative Officer (CAO) with the responsibility of carrying out the policies authorized by council and that includes receiving written reports from each department head and implementing any required changes necessary to reflect the will of council.
His appointment has resulted in many of the recommendations contained within the report to be implemented. Among those that have been implemented are the complete overhaul of tendering and RFP processes to adhere to acceptable municipal standards; timely and accurate written reports delivered to council in advance of scheduled meetings and several other of the more than 60 recommendations introduced in the draft report presented last March.
Both Ms. Carruthers and Mr. Skorobohacz acknowledged the efforts of the CAO and current council members to implement many of the recommendations ahead of last week’s meeting. However, the report also highlighted the numerous shortcomings of the previous governance model.
Senior Staff Shut Out
After Ms. Carruthers completed her report, Mayor Sidney opened the floor to questions and Councillor John McDonald directed his line of questioning to the actions of former senior town staff.
“Where was the former treasurer during this time?” he asked. “This should be a natural process where he is absolutely engaged, yet the lack of oversight by council on this project as well as the director led to a flawed financial analysis.
“This is the largest project the town has undertaken and I don’t see too much input from the financial officer at that time. I understand council did not do their job at the time but why did the treasurer not step up and provide necessary information?”
Ms. Carruthers said the former treasurer (Keray O’Reilly) was asked on one occasion to provide some analysis, but the problems stemmed much further.
“From what we could see, this wasn’t even brought to the finance committee,” she said. “I found it interesting that the largest project the town ever had, that it did not go to the finance committee. It should have been the natural progression that it eventually went to the finance committee.”
She added the treasurer was also responsible for overseeing the procurement policy, and although it was quite weak at the time and did not meet accepted international guidelines, the policy was written at the time that the treasurer be involved during every step of the process.
The issue of the SMT model and the silo mentality of each department likely made it very difficult for the treasurer, or any other director to intervene or become directly involved unless Mr. Hill or members of council specifically requested the treasurer’s involvement.
“There were indications that it (treasurer involvement) was not necessarily welcomed,” she said. “Not just from the treasurer, but also the director of Development and Works who had some professional experience that would have helped, as well as the clerk.”
She said her training and work experience as a treasurer in the municipal sector would have prompted her to become involved in such a project, whether or not it was welcomed by council and staff.
Mr. Skorobohacz was less subtle in his comments on the role of council and senior staff for not including any professional financial analysis.
“For whatever reason, any efforts to bring the matter to the finance committee were scuttled,” he said. “It was concerning to see that the roles and responsibilities as set out to the various standing committees of council, that council itself was not holding itself accountable to the responsibilities they had delegated to the various standing committees.
“As a result, the treasurer never had the opportunity to make presentations or be asked questions by the finance committee relative to this particular project. As a result of this, the oversight simply was not there.”
Coun. McDonald asked Ms. Carruthers to explain one of the findings that read, “Both council and senior staff are at risk of being held legally and professionally responsible for errors that take place in the name of the Town of Renfrew”.
Wasted Opportunities To Slow Down
She referred to the fact the budget had several and unnecessary cost overruns and the delay in the project sends up red flags that could have been avoided.
“If the town had taken the opportunity to step back, and should have in 2021 when the grant was announced, the town had an opportunity to step back and say ‘whoa’,” she said. “The town should have stepped back and made sure they had final drawings and when they received the grant, they should have realized the project was going to cost much more than $16 million ($11.6 million federal and provincial grant + $4.2 million from the town).”
She reminded council that every single tender that had come in up to that point, the town insisted that every contractor resubmit a quote many times that the town did not accept as being true and she said everyone involved in the grant, from town staff to council to the contractors themselves knew the total bill would be far in excess of $16 million.
“At that time they had an opportunity and they should have said ‘let’s make sure we submit a realistic budget’,” she said. “If the town had put it (grant application) in for $25 million, I would be very surprised if the province or the feds would have thought that it was too much. They had every single tender come in at that amount so they didn’t do due diligence at the time.
“I have no idea why the town would have wanted it to appear to be less when reality was that every tender was coming in at around $25 million way back in 2019. That was a turning point and it is unfortunate the town did not stop to ensure they had the right numbers.”
She said another missed opportunity to ensure financial stability took place when a contractor was hired to provide an estimate for the cost of the Bonnechere First Nations Cultural Centre. The contractor presented the town with an estimate of $327 per sq. ft. for construction whereas the entire expansion was costed out at $200 per sq. ft. She said the estimate provided by the contractor was much more in line with the tenders submitted by the contractors bidding on the project, a number the town refused to accept. She said it was one of many examples of the council and senior staff failing to exercise due diligence.
The report highlights several other examples of a failure of due diligence and perhaps the greatest failure was council’s lack of understanding of the different types of construction contracts. Instead of entering into a standard construction contract, the town entered into a CCDC 5B Contract that puts the majority of risks and costs on the town and not the contractors. The report states:
“It was clear that there was limited knowledge on the part of the Director, Treasurer and Council on this type of contract and if they did, it was not adequately explained nor analyzed with respect to risks.”
Ms. Carruthers stated this aspect of the report that was commissioned by the town in April 2023 is now complete. More than 200 interviews were conducted in addition to reviewing more than 160,000 documents, some of them recently found in unmarked boxes of the former recreation department. She stated a final contract was never found and many discussions and meetings were not properly documented as per municipal requirements, but she did commend the CAO and current council for implementing many of the recommendations. She added the council is on the right track to one day regaining the trust of Renfrew residents.
Ms. Carruthers will return to a full financial audit of the materials to assist in any civil or criminal proceedings. Some material she uncovered was not contained in the report as the Ontario Provincial Police are involved to determine if any criminal charges will be brought forward.
The report can be found on the town’s official website.
