Toronto hires forensic accountant to probe 'improperly altered' charges from contractor

The City of Toronto is trying to find out how much it was overcharged by a general contractor working on several multi-million dollar projects, a confidential document obtained by CBC Toronto shows.

The city has hired KPMG's forensic accounting unit to look into the matter, which could cost taxpayers up to $120,000, according to a March 6 letter from KPMG to the city, also obtained by CBC Toronto. 

For now, neither the city nor the contractor – Duron Ontario Ltd. – has filed a lawsuit in connection with the matter, according to the document. However, the city's legal team is part of an investigation, the document shows.

In a statement issued Monday, a spokesperson said, "The City takes any potential instance of the misuse of funds very seriously."

CBC Toronto contacted Duron Ontario Ltd. on Tuesday and has yet to receive a response.This story will be updated if the company provides comment.

Head of the city's audit committee, Coun. Stephen Holyday, said councillors still have few details about the investigation. But it comes at a time when Toronto is grappling with a $1.5-billion budget shortfall.

"Every single penny counts around city hall because the city has no money," Holyday said. "And most importantly, maintaining the confidence in the government by citizens is paramount. That's why audits matter."

Meanwhile, the mayor's office said in a statement Olivia Chow is looking forward to seeing the result of the investigation. 

Chow "believes the city must use taxpayer funds wisely and knows the importance of maintaining public confidence in city services," the statement said.

Company alleges former employee to blame: document

The KPMG letter outlines what allegedly transpired between the two sides.

The city hired Duron Ontario Ltd., a Mississauga-based company that specializes in everything from building rehabilitation to waterproofing to pothole repairs, for at least six major projects in recent years, the document says.

CBC Toronto tracked down a number of projects worth over $37 million contracted to Duron and approved by the city, dating back to 2018.

City documents show Duron is renovating TTC stations and other city-owned buildings to make them accessible and has previously worked on major projects like the renovations at Union Station. 

What hasn't been made public are the "change orders" that the company and various subcontractors and suppliers that work for it have filed with the city. 

Duron submitted some 400 change orders – costs the company is seeking above and beyond what was initially contracted – and the city is concerned those orders were "improperly altered," according to KMPG's letter.

The city alerted Duron to the issue last August, the document says. The company blamed what happened on a single unnamed employee, who it said was terminated.

KPMG has been asked to look over the change orders to figure out the extent of the alleged overbilling. 

"We understand that the city has identified a number of instances where Duron submitted change orders involving work by subcontractors or suppliers to Duron, and it was identified that subcontractor/supplier prepared documents had been altered to overstate the cost paid by Duron," the document said.

City consultant spotted inconsistencies

The city said inconsistencies in the change orders were identified by a consultant for the Toronto Accessibility Upgrades (TAU) program. Along with managing the design, program management and contract administration, the TAU consultant  is responsible for reviewing all invoices and change orders of suppliers. 

"It is a normal business practice to review change orders to ensure the orders are in accordance with the contract and to report any inconsistencies to the city," the city said in a statement.

Holyday said with hundreds of millions in ongoing capital work every year, Toronto must vigorously manage contracts. When questions arise about those contracts, experts need to dig in, as they have in this instance, he said.

"Just like many audits, you pull on a little piece of thread and if more unravels, you take a deeper look," he said. 

"Hopefully, we will learn more soon and realize if a little bit more of that thread needs to be pulled," Holyday added.

Coun. James Pasternak said the results of the audit are expected later this summer.

"We must do everything we can to protect public funds and the public interest," he said. "If public funds were misused or lost we will vigorously work through our legal department to recover such funds." 

A spokesperson for the city's auditor general said they could not comment on the matter. 

"The City of Toronto Act requires the auditor general to uphold confidentiality in her work. So the auditor general cannot confirm if her office is involved in investigating this, or any other, complaint," a spokesperson said in a statement. 

The statement added the auditor general could only comment if a public report is issued to the audit committee or to city council.