Combination of factors caused $2.1M Brockville tunnel deficit

The Brockville Railway Tunnel on Friday, July 20, 2018. An auditor has determined that a communication breakdown and changes mid-construction led to a deficit of nearly $2.1 million in the Brockville Railway Tunnel project. (Newswatch Group/Bill Kingston)

BROCKVILLE – Communication breakdown, reporting structure and a series of changes mid-construction led to a deficit of nearly $2.1 million in the Brockville Railway Tunnel project.

Those findings were presented last night (Tuesday) to city council as part of a special audit by KPMG.

The firm’s spokesman, Pascale Jolicoeur, told council it was a combination of factors – $1.3 million in actual construction “expenses (that) were being approved but the fundraising didn’t go at the same pace” and around $673,000 in pledges that never materialized into real money.

“Throughout this review we found there was a lack of communication,” Jolicoeur concluded.

With a community committee running the fundraising, there was a disconnect between the group and the city’s finance department. The auditor’s report shows that fundraising started off very well but the costs eclipsed the money collected around April 2017 – about a year into the project.

Donations went almost flat in June 2017 after the fundraising coordinator left the committee, which was a “significant change which did contribute” to the problem, KPMG determined.

“There were terms of reference (for the committee)…but they weren’t robust enough to the point that they would reflect the unique challenges of the project and they didn’t set out specific controls relating to the reporting, the financial risk, that went along with having such an asset being managed by a community committee,” Jolicoeur said.

He added that there was also problems with project management and that “different parties” ended up approving changes mid-stream – at the city level, the committee level and by contractors.

The $2.1 million deficit didn’t show up – and couldn’t have been calculated by the finance department – until November 2017 – three months after the tunnel opened because various parties held the funding and expense paperwork, Jolicoeur explained.

“What didn’t occur in this scenario is reconciliation of how many of those pledges have materialized into actual cash donations,” he said.

The change in scope of the project was also approved at the committee level “without council’s involvement.”

“The thought process at the time by the committee was this was a continuation of the work, there was a sense of urgency to open in time and there was a belief that they could fund raise that additional amount of expenditure for the south entrance,” Jolicoeur explained.

The firm has made a number of recommendations to the city should it take on another project of this magnitude. Those include have “clear” terms of reference defining roles of parties, involving the finance department in larger projects, a better reporting structure for projects involving pledges and better risk management.

As for covering for the $2.1 deficit, Brockville taxpayers will be picking up that tab, possibly over the next 20 years. Council has authorized the finance department to go loan shopping. The yearly payments would be about $146,883.