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Wednesday, July 18, 2012

Auditor general slams Trade Centre Limited management of Metro Centre

Larry Munroe's report looks at the unauthorized takeover of ticket sales, among other issues.

Posted By on Wed, Jul 18, 2012 at 4:11 PM

Trade Centre Limited’s management of the Metro Centre is fundamentally flawed and is costing the city plenty of money, auditor general Larry Munroe told the city’s audit committee Wednesday morning. How much money? That remains to be seen.

Last year, in Munroe’s extensive report on the concert scandal, he noted that that scandal had its roots in 2006. That year, Fred MacGillivray, who was then the president of Trade Centre Limited, a provincial crown corporation, simply took the operation of the city-owned Metro Centre box office and made it a part of a new TCL operation called Ticket Atlantic. MacGillivray did not have the approval of either the TCL board of directors or of city council to make the move, and when meekly questioned about it later by former city CAO Dan English, MacGillivray brushed English aside.

Because the takeover of the box office was never vetted by auditors or financial staff, it left the city-owned bank account for ticket sales in the hands of TCL. It was that bank account that would later become the conduit for $5.4 million in improper loans to concert promoter Harold MacKay, the last $359,550 of which was never repaid.

In a report published this afternoon, Munroe examines the tortured management of the Metro Centre. In 1982, the city signed a vague contract authorizing TCL to manage the Metro Centre but, notes Munroe, there were no specific financial arrangements laid out, no benchmarks, no performance reviews, no lines of authority spelled out. To this day, says Munroe, the city has no idea if the Metro Centre’s concessions or box seat sales or other rentals are bringing in the best possible return, and no one thinks to pursue the matter.

As for ticket sales, in the late 1990s and early 2000s, the Metro Centre was using a ticket system called "Select a seat." As Munroe explains (pages3-5; "OAG" is Office of the Auditor General):

In 2000, Trade Centre Limited (as manager of the Halifax Metro Centre) began investigating possible replacement systems, as the current system was reaching the end of its useful life. As a result of this research, Trade Centre Limited contracted for a replacement system which became operational in July 2005.

In November 2005, box office operations were rebranded from “Metro Centre Box Office” to “Ticket Atlantic”. Subsequently, during the 2006/07 fiscal year, this business line was transferred (retroactive to April 1, 2006) from Halifax Metro Centre to become a business line of Trade Centre Limited. Trade Centre Limited’s current management advised the item had been discussed with the then CAO of HRM and had been discussed by the Trade Centre Limited’s Board of Directors on various occasions, which included four members of Regional Council, although there is no documentation available to confirm or deny these assertions. The transfer happened apparently unbeknownst to HRM business unit staff.

[...]

When the OAG initiated its review of this transfer, neither Trade Centre Limited nor HRM was able to provide written documentation regarding the authority under which the transfer took place, approval by HRM for the transfer or substantive analysis to support the decision process. In fact, the financial information provided by Trade Centre Limited as support for why the transfer was needed is inconsistent with financial information previously provided by Trade Centre Limited.

[...]

The formally documented minutes of Trade Centre Limited’s Board discussions show no reference to approval by the Board of the purchase of the ticketing software or transfer of Ticket Atlantic to Trade Centre Limited, although documentation does demonstrate management presented Trade Centre Limited’s preferred vendor for ticket sales software to the Board in May 2004.

Remarkably, notes Munroe (page 21), TCL had "issued a request for proposal titled 'Request for Proposal (RFP) for The Provision of Ticketing Software and Hardware at Halifax Metro Centre a division of Trade Centre Limited.' It is concerning to note the title lists the Halifax Metro Centre as a division of Trade Centre Limited. Neither the Halifax Metro Centre, nor its ticketing operations were a division of Trade Centre Limited at that time."

A firm called Paciolan won the tender, and continues to supply software to TCL to this day. I hope to have more on that part of the issue with a later post. Note that Munroe does not name the company in his report, referring to it as "Vendor X."

After TCL took over the ticket operation, MacGillivray decided, apparently on his own, that the city would receive a 40-cent commission for each ticket sold to a Metro Centre event, except for group sales, season tickets and complimentary tickets.

Since TCL took over the box office, TCL has reported $1,206,024 in profit through ticket sales, plus an additional $597,187 that went to the city, representing a 40-cent per ticket commission. Munroe documents the amount going to the city, both before and after the take-over, with this chart:

munroe_chart.jpg

Whether 40 cents is appropriate or not is an open question, but also Munro notes that the city did not receive even that money for many tickets sold for Metro Centre events. Moreover, those figures represent profit, and TCL was charging costs to the city as well, including a percentage of management salaries for operation of the Metro Centre, with no clear documentation for how those percentages were arrived at. Oh, and Munroe says there was at least one instance, and possibly more, of TCL double billing the city for a single expense.

Munroe says the ticket arrangement started when TCL bought new software for ticket sales. I’ve been told that besides the software, TCL also took over control of computer hardware from the city, a suggestion that Munroe had not considered.

Councillors on the committee were clearly angry. Sue Uteck said she thinks the city was inappropriately billed $1 million for a Metro Centre scoreboard, and that the police forensic accounting unit should be called in to investigate. Linda Mosher says she was opposed to a bonus pension awarded to MacGillivray, but was reprimanded for stating her opinion publicly. Barry Dalrymple suggested that the city boot TCL out of the Metro Centre and run it itself.

Today's events are just the beginning of this stage of the story. In coming days we'll hear more from city councillors, Trade Centre staff and reaction from other observers, and we'll certainly learn more details as reporters drill down into the information and as city staff brings forward unreleased information. Expect at least several more posts from me in the coming days.

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