Toronto's auditor general has recommended changes to improve fare collection after the TTC lost an estimated $61 million in passenger revenue in 2018 due to fare evasion — a loss of 5.4 per cent of total revenue.

The report, which was released on Thursday, shows an additional $3.4 million in revenue loss for 2018 due to malfunctioning Metrolinx equipment.

"The total estimated annual revenue loss of $64 million is probably understated, as we were not able to quantify the loss due to the malfunction of TTC's subway fare gate equipment and the use of crash gates at subway stations," Auditor General Beverly Romeo-Beehler's report reads.

TTC's total conventional passenger revenue — excluding Wheel Trans — for 2018 was $1.16 billion, down $1 million from 2017. Passenger revenue represented 95 per cent of TTC's total operating revenue for both years.

The report shows losses amounting to $30.1 million on buses; followed by the subway with $18.4 million; and streetcars, $12.2 million. However, based on the weighted average, streetcars accounted for the lion's share of losses, 15.2 per cent; followed by buses, 5.1 per cent; and the subway 3.7 per cent.

A breakdown of the TTC's revenue losses for 2018. (Auditor General's report)

TTC's basic adult fare was $3 in 2017 and 2018 — for tokens and Presto, cash $3.25 — up by 10 cents from the $2.90 fare in 2016.

The auditor general found that there is significant risk of fraudulent use of the Child Presto card. Under the current fare policy, children 12 years of age and under can ride TTC for free.

"During our six weeks of audit observation work on all three modes of transit covering many different times of the day on TTC, we did not come across any children aged 12 and under who were using the Child Presto cards," the report said.

"TTC Fare Inspectors identified 56 subway riders and 22 bus riders who were fraudulently using a Child Presto card during our audit observation period."

The report said there are numerous serious control weaknesses with the issuance and monitoring of Presto cards. It says the children's card looks identical to the adult card, there's no display available to help bus and streetcar drivers to determine if the rider is using a child card, and uncertainty in the deactivation of cards found to be used fraudulently.

Report lists 27 recommendations

The report lists 27 recommendations to decrease fare evasion rates and boost passenger revenue.

"It will also improve the effectiveness and efficiency of TTC's fare inspection program," the report said.

The recommendations include:

Raising customer awareness and understanding of the importance of paying the appropriate fare, as well as the Presto card payment process, Proof-of-Payment system, and consequences if they're found evading fares.

Expanding the fare inspection program to include buses and develop effective fare inspection methods for buses.

Ensuring that bus operators and streetcar operators are instructed and trained to press the fare dispute key whenever the appropriate fare is not paid.

Reviewing current TTC fare gate functionality issues, and develop and implement short and long-term strategies to improve fare gate functionality to reduce revenue loss.

Exploring ways to provide a child Presto card that is visually different from an adult card, including further negotiation with Metrolinx to issue visually different cards for adults and children aged 12 and under.

'Fare evasion is absolutely unacceptable,' mayor says

"Fare evasion is absolutely unacceptable," Mayor John Tory said Thursday in response to the report.

"It is theft that hurts our transit system and it is unfair to the vast majority of TTC riders who are honest and pay the fare," Tory added.

TTC Chair Jaye Robinson said fare evasion is a critical issue that has gone on far too long without being accurately quantified. (Mike Wise/CBC)

Meanwhile, TTC Chair Jaye Robinson said fare evasion is a critical issue that has gone on far too long without being accurately quantified.

"As a regular transit user, I know how frustrating fare evasion is for the residents of Toronto who consistently pay to travel on the TTC," Robinson said.

"Fare evasion has a significant impact on the TTC's operating revenue and transit service."

Robinson said the recommendations included in the report will guide the TTC's action plan as it approaches full transition to the Presto card system.