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HomeMy WebLinkAboutFIN 19-19Report to Executive Committee DICKERING Report Number: FIN 19-19 Date: November 4, 2019 From: Stan Karwowski Director, Finance & Treasurer Subject: 2019 Year End Audit Recommendation: 1. That the Audit Service Plan as submitted by Deloitte LLP, included in this report, be received for information; and 2. That the Chief Administrative Officer and the Director, Finance & Treasurer be authorized to sign the Master Services Agreement on behalf of the City. Executive Summary: In accordance with generally accepted auditing standards, the Audit Plan is prepared to communicate the auditor's approach and reporting responsibilities to the Executive Committee, who has oversight responsibility for the financial reporting process. This plan is submitted at the commencement of the year end audit. Financial Implications: The base audit fee for City and Library is estimated at $70,000. This is the same fee as in the previous year. Sufficient provision is available in the 2019 Budget. Discussion: In the Committee's role as the body responsible for oversight of the financial reporting process, it must review the Audit Plan for the 2019 year end audit. The Audit Plan includes the scope of the audit services to be provided, the auditor's reporting responsibilities and an outline of the audit approach. It is included as Attachment 1 to this report. At the Council meeting of June 24, 2019, Resolution 108119 reappointed Deloitte LLP as the City's external auditors for a period of 3 years from and including 2019 to 2021. Deloitte LLP requires a Master Services Agreement (MSA) to be executed at the start of the audit which summarizes the services they will provide, their responsibilities, management's responsibilities, and the estimate of the audit fees. The MSA is included as Attachment 2 to this report. FIN 19-19 Subject: 2019 Year End Audit Attachments: 1. 2019 Audit Service Plan 2. Master Services Agreement Prepared By: "` °� {� Kristine Senior, CPA, CA Manager, Accounting Services Recommended for the consideration of Pickering City Council 6" "�J Tony Prevedel, P.Eng. Chief Administrative Officer November 4, 2019 Approved/Endorsed By: Stan Karwowski, MBA, CPA, CMA Director, Finance & Treasurer Page 2 Deloitte Attachment #1 to Report #FIN 1919 The Corporation of the City of Pickering 2019 Audit Service Plan For the year ending December 31, 2019 To be presented to the Executive Committee November 4, 2019 Deloitte October 17, 2019 Private and Confidential To the Members of the Executive Committee of The Corporation of the City of Pickering 1 The Esplanade Pickering ON L1V 6K7 2019 Audit Service Plan Dear Executive Committee members: Deloitte LLP 400 Applewood Crescent Suite 500 Vaughan ON L4K OC3 Canada Tel: 416-601-6150 Fax: 416-601-6151 www.deloitte.ca We are pleased to present our 2019 Audit Service Plan for The Corporation of the City of Pickering (the "City"), which describes our audit scope and strategy, our audit approach and our planned communications with you. Our audits will include: An audit of the City of Pickering's consolidated financial statements (the "Financial Statements") for the year ending December 31, 2019 prepared in accordance with Canadian Public Sector Accounting Standards ("PSAS") An audit of the City of Pickering Public Library Board's financial statements for the year ending December 31, 2019 prepared in accordance with Canadian PSAS, and An audit of the Trust Funds of the City of Pickering's financial statements for the year ending December 31, 2019 prepared in accordance with Canadian Accounting Standards for Not--for--Profit Organizations. We are providing this Audit Service Plan to the Executive Committee ("the Committee") on a confidential basis. It is intended solely for the use of the Committee to assist you in discharging your responsibilities with respect to the various financial statement audits enumerated above and is not intended for any other purpose. Accordingly, we disclaim any responsibility to any other party who may rely on it. We look forward to discussing our Audit Service Plan with you and to answering any questions that you may have. Yours truly, oLLtL L LP Chartered Professional Accountants Licensed Public Accountants The Corporation of the City of Pickering I Table of contents Table of contents Our audit explained 1 Audit risks 3 Appendix 1 -Audit approach 5 Appendix 2 - Communication requirements 8 Appendix 3 - New and revised Public Sector Accounting Standards 10 © Deloitte LLP and affiliated entities The Corporation of the City of Pickering I Our audit explained Our audit explained Group audit When designing our audit strategy, we consider • The financial significance or relative importance of the consolidated entities as well as government business enterprises accounted for on a modified equity basis • The complexity and nature of the operations, internal control and accounting issues of each consolidated entity and the government business enterprise, and • The degree of centralization or decentralization of processes and controls. On April 1, 2019, Veridian Corporation amalgamated with Whitby Hydro Energy Corporation to form Elexicon Corporation, in which the City owns a 27.88% interest. We intend to use the work of the external auditor of Elexicon Corporation as part of our audit of the City's Financial Statements. We will complete the required communications with the component auditor, ensure the accounting for the City's share of Elexicon is appropriate and ensure the disclosures in the Financial Statements are adequate. Audit scope and terms of engagement We have been engaged to perform the audits of the City, Library, and Trust Funds' Financial Statements as at, and for the year ending, December 31, 2019 (the "Financial Statements") prepared in accordance with Canadian Public Sector Accounting Standards ("PSAS") for the City and the Library Board and Canadian Accounting Standards for Not -For -Profit Organizations for the Trust Funds. Our audits will be conducted in accordance with Generally Accepted Auditing Standards ("GAAS"). The terms and conditions of our engagement are described in the Master Services Agreement for Professional Services dated October 17, 2019, to be signed on behalf of management and the Executive' Committee. We have scheduled the interim audit the week of November 4, 2019 and the year-end fieldwork commencing the week of March 16 for the Library Board and Trust Funds audits, and week of March 23, 2020 for the City audit. Materiality Audit risks We are responsible for providing reasonable assurance that Through our preliminary risk assessment your Financial Statements as a whole are free from material process, we have identified the audit risks. misstatement. These risks of material misstatement and Our materiality levels are based on professional judgment and related audit responses are described in the will be determined using total expenses or fund balances as a Audit risks section of this report. reference point for the ultimate determination of materiality as follows: • Consolidated Financial Statements for the City — 2.5 — 3.D11/0 of expenses • City of Pickering Public Library Board — approximately 3.09/0 of expenses, and • City of Pickering Trust Funds — approximately 3.0% of fund balances. We will inform the Executive Committee of all uncorrected misstatements greater than a clearly trivial amount (511/o of materiality) and any misstatements that are, in our judgment, qualitatively material. In accordance with Canadian GAAS, we will ask that any misstatements be corrected. © Deloitte LLP and affiliated entities The Corporation of the City of Pickering I Our audit explained Fraud risk Complete engagement reporting We will develop our audit strategy to address the assessed risks of _ Under Canadian GARS, we are material misstatement due to fraud. Determining this strategy will required to communicate certain involve: matters to the Executive Committee. 1. Enquiry of those involved in the financial reporting process about The primary reports and formal inappropriate or unusual activity at the City and/or related communications through which we will entities. address these matters are: 2. Testing a sample of journal entries throughout the fiscal year as • This Audit Service Plan well as adjustments made at the end of the fiscal year. . Year End Communication, and 3. Identifying and obtaining an understanding of the business • Our Auditor's Reports on the rationale for significant or unusual transactions that are outside Financial Statements. the normal course of business. Further details on our communication 4. Evaluating whether the City's accounting policies may be requirements are included in indicative of fraudulent financial reporting resulting from Appendix 2. management's effort to manage financial results. 5. Evaluating whether the judgements and decisions related to management estimates indicate a possible bias. 6. Incorporating an element of unpredictability in selecting our audit procedures. We will also ask the Executive Committee for their views about the risk of fraud, whether they know of any actual or suspected fraud affecting the City and their role in the oversight of management's antifraud programs. If we suspect fraud involving management, we will immediately inform the Executive Committee of our suspicions and discuss the nature, timing, and extent of audit procedures necessary to complete the audit. Reliance on service organization The City employs the following third party service organization in an outsourcing arrangement that impacts financial reporting information: . ADP Canada (payroll) We intend to rely on the service auditor's report issued for this third party service organization. If our assessment does not provide us with sufficient appropriate audit evidence, we will need to perform additional audit procedures to address the risks of material misstatements in the Financial Statements. Use of specialists We also intend to use the work of the City's independent actuary in their determination of the City's post -employment and worker's compensation benefits. We will review and test any data and assumptions used, ensure the disclosure in the Financial Statements is adequate, obtain confirmation from the actuary, and confirm that the actuary is in good standing with the Canadian Institute of Actuaries. © Deloitte LLP and affiliated entities The Corporation of the City of Pickering I Audit risks Audit risks The following tables set out the audit risks that we identified during our preliminary planning activities, including our proposed response to each risk. Our planned audit response is based on our assessment of the likelihood of a risk's occurrence, the significance should a misstatement occur, our determination of materiality and our prior knowledge of the City. Revenue recognition* Audit risk Canadian GAAS includes the presumption of a fraud risk involving improper revenue recognition. (Revenue/deferred revenue) Management override of controls* Audit risk Under Canadian GAAS, it is the responsibility of the management, with the oversight of those charged with governance, to place a strong emphasis on fraud prevention and detection. Oversight by those charged with governance includes considering the potential for override of controls or other inappropriate influence over the financial reporting process. Management override of controls is present in all entities. It is a risk of material misstatement resulting from fraud and therefore is considered as a significant risk. Our proposed audit response • Certain revenue streams are presumed areas of significant audit risk. We will test the design and implementation of controls in significant revenue streams and perform substantive analytic procedures and/or detailed testing in these areas, and • Substantive testing to determine if restricted contributions (i.e. development charges), and government transfers/grants have been recognized appropriately. (Revenue vs. deferred revenue). Our proposed audit response • Engage in periodic fraud discussions with certain members of senior management and others • Consider the potential for bias in judgments and estimates, including performing retrospective analysis of significant accounting estimates • Evaluate the business rationale for any significant unusual transactions • Evaluate the City's fraud risk assessment and consider entity -level internal controls and internal controls over the closing and reporting process • Test journal entries that exhibit characteristics of possible management override of controls, identified using manual techniques. © Deloitte LLP and affiliated entities The Corporation of the City of Pickering I Audit risks Merger of Veridian Corporation and Whitby Hydro Energy Corporation during fiscal 2019 and the City's interest in Elexicon Corporation as at December 31, 2019 Audit risk Our proposed audit response On April 1, 2019, Veridian Corporation and Whitby Hydro Energy Corporation amalgamated to form Elexicon Corporation, in which the City owns a 27.88% interest. There is a risk that the amalgamation transaction, including the City's investment in Elexicon Corporation and any promissory notes outstanding associated with this investment, have not been properly accounted for or disclosed in the financial statements for the fiscal year ending December 31, 2019. implementation of new financial system Audit risk The City is in the process of implementing a new financial system, SAP, which is expected to go live during fiscal 2020. Given the complexity associated with such a significant undertaking and the impact on numerous City departments, proper planning is critical to ensure implementation success and the proper conversion and migration of financial data. • Review merger agreements to understand the structure of the transaction, and assess the impact on the accounting in the City's consolidated Financial Statements. • Review legacy promissory notes previously issued to Veridian Corporation (that were transferred into Elexicon Corporation on formation), and ensure they have been properly accounted for. • Ensure that the City's interest in Elexicon Corporation has been properly disclosed in the financial statements. Our proposed audit response • Although the go live date is scheduled for fiscal 2020, as part of the 2019 audit, we will obtain an understanding of the project scope for the systems implementation through discussion with Finance and IT management to assess the implications on our audit strategy. • We will obtain an understanding of the City's data conversion and migration plans from the current to the new system to assess the impact on the extent of testing required. • We will also discuss with management to ensure that key considerations and audit trail as part of a typical systems integration have been factored into the project plan. • Based on the discussions above, we will formulate our preliminary systems. and data conversion testing plan for the 2020 audit. *Significant audit risks, as required by Canadian Auditing Standards As we perform our audit procedures, we will inform you of any significant changes to the audit risks discussed above and the reasons for those changes. Deloitte LLP and affiliated entities The Corporation of the City of Pickering I Appendix 1 — Audit approach Appendix 1 - Audit approach Deloitte's audit approach is a systematic methodology that enables us to tailor our audit scope and plan to address the unique issues facing the City. The following steps are not necessarily sequential nor are they mutually exclusive. For example, once we have developed our audit plan and the audit is being performed, we may become aware of a risk that was not identified during the planning phase. Based on that new information, we would reassess our planning activities and adjust the audit plan accordingly. 1. Initial planning The Deloitte audit approach begins with an extensive planning process that includes: • Assessing your current business and operating conditions • Understanding the composition and structure of your business and organization • Understanding your accounting processes and internal controls • Understanding your information technology systems • Identifying potential engagement risks • Planning the scope and timing of internal control and substantive testing that take into account the specific identified engagement risks 2. Assessing and responding to engagement risk Our audit approach combines an ongoing identification of risks with the flexibility to adjust our approach when additional risks are identified. Since these risks may impact our audit objectives, we consider materiality in our planning to focus on those risks that could be significant to your financial reporting. Consideration of the risk of fraud When we identify a misstatement or control deficiency, we consider whether it may be indicative of fraud and what the implications of fraud and significant error are in relation to other aspects of the audit, particularly the reliability of management representations. In determining our audit strategy to address the assessed risks of material misstatement due to fraud, we will: • Assign and supervise personnel, taking into account the knowledge, skill and ability of individuals with significant engagement responsibilities and our assessment of the risks of material misstatement due to fraud for the engagement. • Evaluate whether the City's selection and application of accounting policies, particularly those related to subjective measurements and complex transactions, may be indicative of fraudulent financial reporting resulting from management's effort to manage results. • Incorporate an element of unpredictability when selecting the nature, timing and extent of our audit procedures. © Deloitte LLP and affiliated entities The Corporation of the City of Pickering I Appendix 1 - Audit approach We will inquire directly of the Executive Committee regarding: Its views about the risk of fraud Whether it has knowledge of any actual or suspected fraud affecting the City, and The role it exercises in the oversight of fraud risk assessment and the establishment of mitigating controls. We will also inquire if the Executive Committee is aware of tips or complaints regarding the City's financial reporting and, if so, the Executive Committee's responses to such tips and complaints and whether it is aware of matters relevant to the audit, including, but not limited to, violations or possible violations of laws or regulations. If we suspect fraud involving management, we will communicate these suspicions to the Executive Committee and discuss the nature, timing, and extent of audit procedures necessary to complete the audit. Information technology An important part of our audit planning process involves gaining an understanding of: 1. The importance of the computer environment relative to the risks to financial reporting 2. The way in which that environment supports the control procedures we intend to rely on when conducting our audit, and 3. The computer-based information that supports our substantive procedures. The objective of our review of computer controls is to identify potential areas of risk and assess the relevance, reliability, accuracy and completeness of the data produced by the systems. We also assess the design and implementation of the computer environment and determine the reliability of the financial information used to generate the financial statements. To accomplish this, we gain an up-to-date understanding of your organization's computer processing environment and our understanding of the relevant general computer controls. 3. Developing and executing the audit plan The performance of an audit includes evaluating the design and determining the implementation of internal controls relevant to the audit, testing the operational effectiveness of the controls we intend to rely on, and performing substantive audit procedures. Audit procedures The timing of our audit procedures is dependent upon a number of factors including the need to coordinate with management for the provision of supporting analysis and other documentation. Generally, we perform our audit procedures to allow us sufficient time to identify significant issues early, thereby allowing more time for analysis and resolution. Tests of controls As part of our audit, we will review and evaluate certain aspects of the systems of internal control over financial reporting to the extent we consider necessary in accordance with Canadian GAAS. The main objective of our review is to enable us to determine the nature, extent and timing of our audit tests and establish the degree of reliance that we can place on selected controls. An audit of the financial statements is not designed to determine whether internal controls were adequate for management's purposes or to provide assurance on the design or operational effectiveness of internal control over financial reporting. © Deloitte LLP and affiliated entities The Corporation of the City of Pickering I Appendix 1 - Audit approach The extent to which deficiencies in internal control may be identified through an audit of financial statements is influenced by a variety of factors including our assessment of materiality, our preliminary assessment of the risks of material misstatement, our audit approach, and the nature, timing and extent of the auditing procedures that we conduct. Accordingly, we gain only a limited understanding of controls as a result of the procedures that we conduct during an audit of financial statements. We will inform the Executive Committee and management of any significant deficiencies that are identified in the course of conducting the audit. Substantive audit procedures Our substantive audit procedures consist of a tailored combination of analytical procedures and detailed tests of transactions and balances. These procedures take into account the results of our controls tests and are designed to enable us to obtain reasonable assurance that the financial statements are free from material misstatements. To obtain this assurance, misstatements that we identify while performing substantive auditing, procedures will be considered in relation to the financial statements as a whole. Any misstatements that we identify, other than those that are clearly trivial (the clearly trivial threshold has been set at 5% of materiality), will be reported to management and the Executive Committee. In accordance with Canadian GAAS, we will request that misstatements be corrected. Use of the work of specialists The Deloitte audit is distinguished by the use of industry and functional specialists who are integral to the audit team and carry a deeper understanding of specific topics. These specialists augment the core engagement audit team in understanding business processes and related risks, and help the audit engagement team apply an appropriate level of professional skepticism to challenge significant management assumptions. For the audit, we will use Deloitte computer assurance specialists to assist us in performing our audit procedures to test the design and implementation of general computer controls. Our specialists are actively involved in the planning and risk assessment process, and will be available to the audit team and the City management year-round to discuss ongoing risk assessments, industry developments and other matters of interest. 4. Reporting and assessing performance Perform post -engagement activities We will analyze the results of the audit procedures performed throughout the year and, prior to rendering our report, we will conclude whether: • The scope of the audits was sufficient to support our opinion, and • The misstatements identified during the audits do not result in the financial statements being materially misstated. Independence We have developed important safeguards and procedures to protect our independence and objectivity. If, during the year, we identify a breach of independence, we will communicate it to you in writing. Our communication will describe the significance of the breach, including its nature and duration, the action taken or proposed to be taken, and our conclusion as to whether or not the action will satisfactorily address the consequences of the breach and have any impact on our ability to serve as independent auditor to the City. We are independent of the City and we will reconfirm our independence in our final report to the Executive Committee. © Deloitte LLP and affiliated entities The Corporation of the City of Pickering I Appendix 2 - Communication requirements Appendix 2 - Communication requirements Required communication Reference Audit Service Plan 1. Our responsibilities under Canadian GAAS, including forming and expressing an opinion CAS1 260.14 on the financial statements 2. An overview of the overall audit strategy, addressing: CAS 260.15 a. Timing of the audits b. Significant risks, including fraud risks, and c. Planned responsibilities of other independent public accounting firms or others that perform audit procedures in the audits 3. Significant transactions outside of the normal course of business, including related party CAS 260 App. 2, transactions CAS 550.27 governanceEnquiries of those charged with 4. How those charged with governance exercise oversight over management's process for CAS 240.20 identifying and responding to the risk of fraud and the internal control that management has established to mitigate these risks 5. Any known suspected or alleged fraud affecting the City CAS 240,21 6. Whether the City is in compliance with laws and regulations CAS 250.14 Year-end communication 7. Fraud or possible fraud identified through the audit process CAS 240.40-.42 8. Significant accounting policies, practices, unusual transactions, and our related CAS 260.16 a. conclusions 9. Alternative treatments for accounting policies and practices that have been discussed CAS 260.16 a. with management during the current audit period 10. Matters related to going concern CAS 570.25 11. Management judgments and accounting estimates CAS 260.16 a. 12. Significant difficulties, if any, encountered during the audits CAS 260.16 b. 13. Material written communications between management and us, including management CAS 260.16 c. representation letters 14. Other matters that are significant to the oversight of the financial reporting process CAS 260.16e. 15. Modifications to our opinions CAS 260.A21 16. Our views of significant accounting or auditing matters for which management consulted CAS 260.A22 with other accountants and about which we have concerns 17. Significant matters discussed with management CAS 260.A22 1 CAS: Canadian Auditing Standards - CAS are issued by the Auditing and Assurance Standards Board of CPA Canada 8 © Deloitte LLP and affiliated entities The Corporation of the City of Pickering I Appendix 2 — Communication requirements Required communication Reference 18. Matters involving non-compliance with laws and regulations that come to our attention CAS 250.23 19. Significant deficiencies in internal control, if any, identified by us in the conduct of the CAS 265 audits of the financial statements 20. Uncorrected misstatements and disclosure items CAS 450.12-13 21. Any significant matters arising during the audits in connection with the City's related CAS 550.27 parties © Deloitte LLP and affiliated entities The Corporation of the City of Pickering I Appendix 3 — New and revised Public Sector Accounting Standards Appendix 3 -New and revised Public Sector Accounting Standards The following is a summary of certain new and revised Canadian Public Sector Accounting Standards that will became effective in 2019 and beyond, To review all recent amendments that will impact your organization in the foreseeable future, we invite you to review our Standard-setting Activities Digest, included in our Centre for Financial Reporting (www.cfr.deloitte,ca). Title Description Effective date Section PS 3430 — This Section establishes standards on This Section applies to restructuring Restructuring how to account for and report transactions occurring in fiscal years transactions restructuring transactions by both beginning on or after April 1, 2018. Earlier transferors and recipients of assets adoption is permitted. and/or liabilities, together with related This is applicable for the City's December program or operating responsibilities. 31, 2019 year end; however, we are not aware of any restructuring transactions impacting the City. Section PS 2601 — This section establishes standards on This Section is effective for: (i) Foreign currency how to account and report transactions Government organizations — fiscal years that are denominated in a foreign beginning on or after April 1, 2012, and currency. (ii) Governments — fiscal years beginning on or after April 1, 2021. Earlier adoption is permitted. Section PS 3450 — This Section establishes standards on This Section is effective for: (i) Financial instruments how to account for and report all types Government organizations — fiscal years of financial instruments including beginning on or after April 1, 2012, and derivatives. (ii) Governments — fiscal years beginning on or after April 1, 2021. Earlier adoption is permitted. Section PS 1201 — This Section establishes general This Section is effective for: (i) Financial statement reporting principles and standards for government organizations for fiscal years presentation the disclosure of information in beginning on or after April 1, 2012, and government financial statements. (ii) governments for fiscal years beginning on or after April 1, 2021. Earlier adoption is permitted. Section PS 3041- This Section establishes standards on This Section applies in the period Financial Portfolio Investments how to account for portfolio Statement Presentation PS 1201, Foreign investments. Currency Translation PS 2601 and Financial Instruments PS 3450 are adopted. 10 © Deloitte LLP and affiliated entities The Corporation of the City of Pickering I Appendix 3 — New and revised Public Sector Accounting Standards Title Description Effective date Section PS 3280 — Asset This Section establishes standards for This Section is effective for fiscal years retirement obligations reporting legal obligations associated beginning on or after April 1, 2021. Earlier with the retirement of long lived adoption is permitted. tangible capital assets currently in productive use, Section PS 3400 - This Section establishes standards that This Section is effective for fiscal years Revenue apply to revenues of governments and beginning on or after April 1, 2022. Earlier government organizations other than adoption is permitted. government transfers and tax revenue. This standard addresses recognition, measurement and presentation. 11 © Deloitte LLP and affiliated entities Deloitte'.-'.., October 17, 2019 Private and confidential Tony Prevedel Chief Administrative Officer The Corporation of the City of Pickering 1 The Esplanade Pickering ON L1V 6K7 Stan Karwowski Director, Finance and Treasurer The Corporation of the City of Pickering 1 The Esplanade Pickering ON L1V 6K7 Re: Master Services Agreement for Professional Services Dear Mr. Prevedel and Mr. Karwowski: Attachment #2 to Report #FIN 19-19 Deloitte LLP 400 Applewood Crescent Suite 500 Vaughan ON L4K OC3 Canada Tel: 416-601-6150 Fax: 416-601-61S1 www.deloitte.ca Deloitte LLP ("Deloitte") is privileged to be your professional services provider. The purpose of this letter is to serve as a master services agreement or MSA to describe (a) the services that we will provide to you from time to time, including a description of the scope of our services, and (b) the general business terms related to such services. Services and fees Appendix A to this MSA contains a description of the following service: • Appendix A — Financial statement audit ("Audit") Should we during the term of this MSA, provide any of the service referenced in Appendix A, the scope, including assumptions, qualifications and limitations, as set out in Appendix A will apply. As of the date of this MSA, the chart below sets out the entities and the services we will provide to them in respect of their year ends. The chart also sets out an estimate of our professional fees, exclusive of consulting fees (see further below) and applicable taxes. Scope of services chart Entity name Year-end Services Fees The Corporation of the City of Pickering December 31 Audit $64,250 The Corporation of the City of Pickering Trust Funds December 31 Audit Included in City of Pickering fee Pickering Public Library Board December 31 Audit $5,750 Total $70,000 For purposes of this MSA and the appendix, "Financial Statements" shall refer to the statements issued by each entity in the context of the services outlined above. Unless otherwise noted in the appendices, "City" shall refer to the entities to which that service is being provided, as outlined above. Ms. Pina Colavecchia will be responsible for the services that we perform. The Corporation of the City of Pickering October 17, 2019 Page 2 Should the nature of our services change in the future from what is set out in the chart above or if there are changes to the entities we serve, we will provide you with a letter confirming the changes. The description of our services as set out in Appendix A in this MSA will continue to apply to any changes set out in a confirmation letter. Also, we may from time to time provide you with updates (including by way of a letter delivered to you in hard copy or electronically via e-mail, by way of a link to our website or otherwise) to the description of the services set out in Appendix A based on changes in applicable professional standards and changes in our practices. Any updates to Appendix A in this MSA provided to you shall form part of this MSA and shall be binding on you. Any changes in fees for subsequent years will be confirmed separately. Also, we would be pleased to provide you with other services, such as consulting and financial advisory services, subject to our professional rules. The scope and fees for such services would be contained in a separate letter and, unless otherwise agreed, the general business terms that are contained in this MSA will apply. Term Our mutual intention is that this MSA applies to all services Deloitte provides to you over time, including for the year ends referred to above and all other work in the future. In accordance with section 2 of the general business terms, this MSA can be terminated on 30 days' written notice. Our responsibilities Our responsibilities will depend on the services we provide. Specific conditions may apply and if this is the case, we will bring them to your attention ih the attached appendices. We are committed to client service, Here are our client service standards: • Making and meeting our commitmehts,to,you; • Working with you to understand your business and what is important to you; • Providing value and,building trust through technical competence and consistent results; • Demonstrating professionalism through effective interaction and communication; and • Providing a no surprises experience. Your responsibilities Our expectations of you can simply be summarized as follows: • Cooperation and honesty from you and those who work for you; • Your clear articulation of your expectations of us and your clarification when needed, so we can be sure that you receive the professional services you need; • If we are providing audit, review or notice to reader services, we want you to know that these are not forensic audits or special services that would more likely identify a fraud or wrongdoing. We are relying on your controls, your honesty and good faith and that of management and the people who work for you; • You will make all management decisions; and • Prompt payment of our invoices, Also, our work product is prepared for you. Our services will not be planned or conducted in contemplation of reliance by third parties. Our agreement is with you and no one else. The Corporation of the City of Pickering October 17, 2019 Page 3 General business terms The general business terms attached to this letter apply to the services we provide to you from time to time. We know how busy you are and we promise to keep our correspondence to you as direct and simple as we can. But if at any time you have questions, please do not hesitate to ask. If this MSA, including the appendices and the general business terms, are acceptable and the services described are in accordance with your understanding, please sign the copy of this MSA in the space provided below and return it to us to indicate your agreement. Yours truly, Chartered Professional Accountants Licensed Public Accountants Enclosure The Corporation of the City of Pickering October 17, 2019 Page 4 The services and terms set forth in and incorporated into this letter are accepted and agreed to by The Corporation of the City of Pickering; Signature Title Date Signature General business terms The Corporation of the City of Pickering October 17, 2019 The following general business terms (the "GBTs") apply to all services that are performed under this MSA and any separate confirmation.letters (the "Confirmation Letters") that further amend or describe services issued under this MSA (the "Services") between Deloitte LLP, a limited liability partnership organized under the laws of Ontario ("Deloitte") and you, the company or othe.r.entity that is a party to this MSA (the "Client"). The GBTs, the MSA, (including the appendices to.,the MSA), as such MSA and appendices may be updated and amended from time to time, and the Confirmation Letters are together the "Agreement". 1. Timely performance - Deloitte will not be liable for'failures,or delays in performance that arise from causes beyond Deloitte's control, including the untimely "p"erformance by the Client of its obligations. 2. Termination - This Agreement and any Services.may be terminated by either party at any time, with or without cause, by giving prior written notice to the other party 30 days before the effective date of termination, provided that in the event of a termination for cause, the breaching party shall have the right to cure the breach within such.30 day period. Deloitte may terminate this Agreement with immediate effect upon written notiw-to Client if Deloitte determines that its performance of any part of the Agreement would be illegal or in conflict.with ;independence or professional rules. The Client will pay for time and expenses incurred. by Deloitte up: to the termination date together with reasonable time and expenses incurred to bring the Services to a close in a prompt and orderly manner. 3. Fees - In the event that Deloitte has provided any fee estimate, the estimate takes into account the agreed-upon level of preparation and assistance from the Client and Client personnel. Deloitte will advise the Client on a timely basis should this preparation and assistance not be provided or should any other circumstances arise which cause actual time to exceed that estimate. 4. Billing - All invoices shall be due and payable when rendered. Interest shall be calculated at a simple daily rate of 0.0493% (equivalent to 18% per annum). Interest shall be charged and payable at this rate on any part of an invoice which remains unpaid from 30 days after the invoice date to the date on which the outstanding invoice is paid. To the extent that as part of the Services to be performed by Deloitte as described in the Agreement, Deloitte personnel are required to perform the Services in the United States of America ("U.S. Business"), the Client and Deloitte agree to assign performance of the U.S. Business to Deloitte Canada LLP, an affiliate of Deloitte. All Services performed by Deloitte Canada LLP shall be performed under the direction of Deloitte which shall remain responsible to the Client for such Services. Deloitte Canada LLP shall invoice the Client with respect to the U.S. Business and Deloitte will invoice for Services performed in Canada ("Canadian Business"). Payment for U,S. Business and/or Canadian Business can be settled with one payment to Deloitte. 5. Governing law - The Agreement will be governed by the laws of the Province where Deloitte's principal office performing the Services is located and all disputes related to the Agreement and Services shall be subject to the exclusive jurisdiction of the courts of such Province. General business terms The Corporation of the City of Pickering October 17, 2019 Page 2 6. Working papers — All working papers, files and other internal materials created or produced by Deloitte related to the Services are the property of Deloitte. In the event that Deloitte is requested by the Client or required by legal or regulatory process to produce its files related to the Services in proceedings to which Deloitte is not a party, the Client will reimburse Deloitte for its professional time and expenses, including legal fees, incurred in dealing with such matters. 7. Third parties — Deloitte's Services are not planned or conducted in contemplation of, or for the purpose of, reliance by any third party (other than the Client and any party to whom Deloitte's report is addressed) or with respect to any specific transaction. Therefore, items of possible interest to a third party will not be addressed and matters may exist that would be assessed differently by a third party, possibly in connection with a specific transaction. The Client shall use the advice, opinions, reports or other work product of Deloitte solely for the purposes specified in -this Agreement and, in particular, shall not, without the prior written consent of Deloitte, use any advice, opinion, report or other work product of Deloitte in connection with business decisions of any'third party or for advertisement purposes. All Services are only intended for the benefit of the Client and any party to whom Deloitte's report is addressed. The mere receipt of any advice, opinions, reports or other work product by any other persons is not intended to create any duty of care, professional relationship or any present or future liability between those persons and Deloitte. As a consequence, if copies of any advice, opinions, reports or other work product (or any information derived therefrom) are provided to others under the above exclusions, it is on the basis that Deloitte owes no duty of care or liability to them, or any other persons who subsequently receive the same. Nothing in this section shall be construed as limiting or restricting disclosure of the tax treatment or tax structure of the transaction as described in Rule 3501(c)(i) of PCAOB Release 2005-014 or Internal Revenue Code sections 6011. and 61.11 and related Internal Revenue Service guidance; 8. Privacy — Deloitte and the Client agree thati in connection with the engagement, Deloitte may collect, use, disclose and otherwise process personal information about identifiable individuals ("Personal Information"). Deloitte's.-S'e'rvices are provided on the basis that the Client has obtained any required consents under applicable privacy legislation for collection, use, disclosure and processing to Deloitte of Personal Information. 9. Confidentiality — To the extent that Deloitte collects or is provided with Personal Information or any proprietary or confidential information of the Client (collectively, "Confidential Information"), Deloitte will not disclose such information to any third party without the Client's consent, except as may be required or permitted by law, regulation, legal authority or professional obligations, or as otherwise permitted by this Agreement. Confidential Information may be disclosed by Deloitte to its affiliates and to member firms of Deloitte Touche Tohmatsu Limited and their respective subsidiaries and affiliates ("Deloitte Entities"), component auditors and third parties that provide services to Deloitte. Confidential Information collected by or provided to Deloitte in connection with the Services may be used, processed, disclosed and stored outside Canada by Deloitte, Deloitte Entities, component auditors or third party service providers to Deloitte. Deloitte is responsible to the Client for causing any such Deloitte Entities, component auditors and third party service providers to comply with the obligations of confidentiality set out in this section of the Agreement. Confidential Information may be subject to disclosure in accordance with laws applicable in the jurisdiction in which the information is used, processed or stored. The Client also agrees that Deloitte and such third party service providers to Deloitte may aggregate Confidential Information and use and disclose that information as part of research and advice, including, benchmarking services, provided that all such information will be rendered anonymous and not subject to association with the Client. General business terms The Corporation of the City of Pickering October 17, 2019 Page 3 Except as instructed otherwise in writing, each party consents to the transmission by fax, email and voicemail, both confidential and other types of documents, correspondence and any other information relating to the execution of this Agreement. It is recognized that the parties will use the internet and that the internet may be insecure. Each party will be responsible for protecting its own systems and interests and, to the fullest extent permitted by law, will not be responsible to the other on any basis (contract, tort or otherwise) for any loss, damage or omission in any way arising from the use of the internet by either party or its personnel, including any Deloitte Entity and subcontractor personnel, to access the networks, applications, electronic data or other systems of the other party. 10. Limitation on liability — The Client and Deloitte agree to the following with respect to Deloitte's liability to the Client: a. The Client agrees that Deloitte shall not be liable to the Client for any claims, liabilities, or expenses relating to this Agreement and any Services for-an'aggregate amount in excess of three times the fees paid by the Client to Deloitte in the twelve.months preceding the incident giving rise to the claim. b. In no event shall Deloitte be liable for consequential; special, indirect,'incidental, punitive or exemplary loss, damage, or expense relating to this Agreement or any Services for any loss of revenue or profit, loss of opportunity, loss„of data, or`any other commercial or economic loss or failure to realize expected savings. c. In any action, claim, loss or damage arising out of this, Agreement and any Services, the Client agrees that Deloitte's liability will be severaf and not joint and several and the Client may only claim payment from Deloitte of.Deloitte's propbrtionate share of the total liability based on the degree of fault of Deloitte. The provisions of this section shall apply to..the fullest extent of the law, whether in contract, statute, tort (such as negligence), or otherwise. This section shall survive termination or expiry of the Agreement. The provisions -'of this section and any other limitations of liability contained in this Agreement shall not..a`p'ply to any liability which by the governing law of the Agreement is unlawful to limit or exclude. In furtherance of the foregoing, from time to time, Deloitte may have individual partners and employees performing .the Services within the Province of Quebec who are members of the Ordre des comptables professionnels agrees du Quebec. The limitations outlined in this section as well any limitations of liability contained in this Agreement shall not apply to limit the personal civil liability of members of the Ordre des comptables professionnels agrees du Quebec performing professional Services hereunder (and with respect to such members, such limitations shall be deemed not to be included in this Agreement). For purposes of this section, "Deloitte” shall mean Deloitte LLP and its directors, officers, partners, professional corporations, employees, subsidiaries and affiliates and to the extent providing Services, any Deloitte Entities and all of their partners, principals, members, owners, directors, staff and agents; and in all cases any successor or assignee. The Client agrees that any claims that may arise out of this Agreement or any Services will be brought solely against Deloitte as the contracting party and not against any other Deloitte Entities. 11. Assignment — Except as provided herein, no party may assign, transfer, or delegate any of its rights or obligations relating to the Agreement without the prior written consent of the other party. Deloitte may assign its rights and obligations under this Agreement to any affiliate or successor in interest to all or substantially all the assets or business of the relevant Deloitte practice. 12. Deloitte Entities and subcontractors — Deloitte may use the services of any Deloitte Entities, component auditors, or other subcontractors (including those operating outside Canada) to assist Deloitte. Deloitte remains responsible to the Client for Services performed by Deloitte Entities and subcontractors. General business terms The Corporation of the City of Pickering October 17, 2019 Page 4 13. Software Tools — In connection with the Services, Deloitte may use data analytics technology which may require Deloitte to install and use one or more data extraction tools ("Extractors") on the Client's computing systems. The Client hereby consents to such access and the installation and use of such Extractors, and where applicable, Deloitte hereby grants the Client a limited, revocable, non-exclusive, non -assignable, non-sublicensable right to install and use those Extractors solely in connection with Deloitte's performance of the Services. Deloitte recommends that the Client perform adequate security and other appropriate testing on the Extractors before installation. All Extractors are protected by copyright and other laws of various countries, and Deloitte and its licensors reserve all rights not expressly granted in the Agreement. The Client is not allowed to reverse engineer, disassemble, decompile, or otherwise attempt to derive the Extractors' source code, nor assist, directly or indirectly, in any efforts to do so, nor adapt, modify or create derivative works based on the Extractors. The license granted above will terminate upon completion or termination of the Services. When the license terminates, the Client must, where applicable, stop using the.. Extractors and delete any and all installed Extractors from the Client's computing systems, unless Deloitte and the Client have entered into a subsequent agreement that allows for the Client's. continued use. Although Deloitte takes commercially reasonable steps to make the Extractorsuseful and secure, Deloitte does not have any obligation to ensure they are so, or to maintain, update, upgrade or otherwise modify or support the Extractors. The Extractors are provided "as is" and "as available", without warranty of any kind, and Deloitte expressly disclaims all implied warranties, including that the Extractors will be secure and error -free, or will meet any other criteria of performance or quality. 14. Survival = Any clause that is meant to continue to apply after termination of the Agreement will do so. 15. Entire Agreement — The Agreement forms the entire agreement between the parties in relation to the Services and supersedes all other oral and written representations, understandings or agreements related to the Services. 16. Severability — If a court or regulator with proper jurisdiction determines that a provision of this Agreement is invalid; then that provision will be interpreted in a way that is valid under applicable law or regulation. If any provision is invalid, the rest of the Agreement will remain in effect. 17. Qualifications — Notwithstanding 'anything herein to the contrary, Deloitte may use the name of the Client, refer to this Agreement and the performance of Services in marketing, publicity materials and other material, as an indication of its experience, and in internal data systems. 18. Tax services and review by tax authorities — The Client shall cooperate with Deloitte in the performance by Deloitte of tax related Services, including, without limitation, providing Deloitte with reasonable facilities and timely access to data, information and personnel of the Client. Client shall be responsible for the performance of its personnel and agents, for the timeliness, accuracy and completeness of all data and information (including all financial information and statements) provided to Deloitte by or on behalf of the Client and for the implementation of any advice, opinions, reports or other work product in any form provided as part of the Services. Deloitte may use and rely on information and data furnished by the Client or others without verification. Deloitte's performance shall be dependent upon the timely performance of the Client's responsibilities hereunder and timely decisions and approvals of the Client in connection with the Services, Deloitte shall be entitled to rely on all decisions and approvals of the Client. To the extent the Client requests tax related Services, Deloitte will use professional judgment in resolving questions affecting the Client relating to the tax Services to be provided by Deloitte. Where there are alternative filing positions or tax transactions, Deloitte will undertake to describe the benefits and risks of each so that the Client can make an informed decision. All returns are subject to General business terms The Corporation of the City of Pickering October 17, 2019 Page 5 examination by taxation authorities and the Client's returns may be audited and challenged by Canadian and other tax authorities. The Client understands that Deloitte's tax advice or opinions are not binding on tax authorities or the courts and should never be considered a representation, warranty, or guarantee that the tax authorities or the courts will concur with Deloitte's advice or opinion. Any tax assistance provided by Deloitte will be based upon the law, regulations, cases, rulings, and other tax authority in effect at the time the specific tax assistance is provided. Deloitte may provide the Client with draft copies of returns or tax advice. Where any drafts are finalized and provided to the Client in final form, such previous drafts should not be relied upon. Nothing in this Agreement shall be construed as limiting or restricting disclosure of the tax treatment or tax structure of any transaction as described in the rules of any taxation authority, including Canada Revenue Agency and the Internal Revenue Service. 19. Electronic messaging — In accordance with Canadian anti -spam legislation, the Client consents to Deloitte contacting the Client and its personnel through electronic' messages relating to Deloitte's Services, products and other matters of interest to the Client'after the completion of this Agreement. The Client may withdraw any such consent by contacting Deloitte at unsubscribeCcodeloitte.ca. 20. Language -- The parties have requested that this Agreement and all communications and documents relating hereto be expressed in the English language. Les, parties ont exige que la presente convention ainsi que tous les documents s'y rattachant sofent rediges dans la langue anglaise. Appendix A Financial statement audit The Corporation of the City of Pickering October 17, 2019 Our audit services and audit scope The financial statements We may be requested by you from time to time to audit the financial statements of the City. These financial statements comprise the consolidated statement of financial position as at the fiscal year end of the City ("Fiscal Year"), the consolidated statements of operations, change in net financial assets and cash flows for the Fiscal Year, and a summary of significant accounting policies and other explanatory information. The financial statements subject to audit are those of the City, prepared by management, with oversight from those charged with governance ("Executive Committee"), The objective of our audit is to express an opinion on whether the Financial Statements are fairly presented, in all material respects, in accordance with Canadian Public Sector Accounting Standards ("PSAS"). We plan and perform the audit to obtain reasonable assurance that the Financial Statements as a whole are free from material misstatement, whether due to fraud or error. Our audit report On completion of our audit procedures, we expect to issue an audit report in the draft form set out in Appendix A(i). The final form'of our audit report may differ based on our audit findings in which case, we will provide you with an updated draft form before it is issued. If we are unable to issue or decline to issue an audit report, we will discuss the reasons with you and the Executive Committee. Our responsibilities Performance of the audit We will conduct our audit in accordance with Canadian generally accepted auditing standards ("Canadian GAAS"). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Financial Statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Financial Statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. Because of the inherent limitations of an audit, together with the inherent limitations of internal control, there is an unavoidable risk that some material misstatements may not be detected, even though the audit is properly planned and performed in accordance with Canadian GAAS. Appendix A I Financial statement audit The Corporation of the City of Pickering October 17, 2019 Page 2 Information on internal controls We do not consider internal controls in order to express any opinion to you on their effectiveness. We consider internal controls relevant to the City's preparation and fair presentation of the Financial Statements in making our risk assessments and in order to design appropriate audit procedures. We will, however, communicate to you in writing concerning any significant deficiencies in internal control relevant to the audit of the Financial Statements that come to our attention during the course of our engagement. Reporting considerations Going concern If, based on the audit evidence obtained, we conclude that a material uncertainty exists related to events or conditions that may cast significant doubt on the City's ability to continue as a going concern, we are required to draw attention in our audit report to the related disclosures''in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusiohi will be based on the audit evidence obtained up to the date of our audit report. Other information Where the City issues other information (for example, a Financial ,Statement Discussion and Analysis or a Glossy annual report), we are required to read the other information and, in doing so, consider whether the other information is materially inconsistent with the FinancialStatements or our knowledge obtained in the audit or otherwise appears to be materially misstated. We will report on the results of our procedures appropriately based on the revised CAS 720, The Auditors Responsibilities Relating to Other Information. Communication with the Executive, Committee The Executive Committee is responsible' for the; oversight of the financial reporting process and our work as auditors. We are required to communicate with the Executive Committee about certain matters that may arise during our audit and that may be;significant to their role. These matters may include, but are not limited, to: • the planned scope and.aiming of the audit;-' • our views about significant qualitative aspects of the City's accounting practices, including accounting policies, accounting estimates and financial statement disclosures; • any significant matters arising from the audit in connection with the City's related parties; • any events or conditions identified that may cast significant doubt on the City's ability to continue as a going concern, including whether the events or conditions constitute a material uncertainty; • any significant difficulties encountered during the audit; • any significant matters that were discussed or subject to correspondence with management; • written representations we are requesting; • where CAS 720 applies, any uncorrected material inconsistencies between the other information and the Financial Statements or our knowledge obtained in the audit, and any uncorrected material misstatements of the other information we identify from reading the financial and non-financial information included in the City's annual report containing or accompanying the Financial Statements and our audit report; and • any other matters that in our professional judgment are significant to the oversight of the financial reporting process. Appendix A I Financial statement audit The Corporation of the City of Pickering October 17, 2019 Page 3 Fraud and illegal acts An audit designed and executed in accordance with Canadian GAAS may not detect fraud or illegal acts. However, it is possible that actual and potential fraud or illegal acts may be discovered during the course of our audit. We will communicate actual or potential fraud or illegal acts identified during the audit to, in our sole judgement, the appropriate level of management and/or the Executive Committee depending on the type and significance of the issue. Your responsibilities Financial statements and internal control The audit of the Financial Statements does not relieve management or the Executive Committee of their responsibilities. You are responsible for the preparation and fair presentation of the Financial Statements in accordance with PSAS. You are also responsible for establishing internal control necessary for the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error. You must determine what internal control is required, including how it is designed, implemented and maintained. You will advise us of any deficiencies identified and any changes in internal control over financial reporting. Access to information and personnel You are responsible for providing us with access to all information that is relevant to your preparation of the Financial Statements and any additional information that we may request for the purpose of the audit. You will also provide unrestricted access to persons in the City or others from whom we determine we need to obtain evidence for our audit. Prevention of fraud and error You are responsible for designing and. implementing programs and controls to prevent and detect fraud, illegal acts and error. You will inform us about all known or suspected fraud, illegal acts or errors affecting the City. You will further inform us of any allegations of fraud, illegal acts or potential errors received in communications (written or oral) from employees, former employees or any other parties external to the City. Compliance with laws and regulations You are responsible for identifying and ensuring that the City complies with the laws and regulations applicable to its activities. You will inform us of any known or possible violations of these laws or regulations. Related parties You will identify the City's related parties and whether the City entered into any transactions with these related parties in the time period under audit. Subsequent events You will advise us of whether any events have occurred between the date of the balance sheet and the date our audit report is released, that may affect the Financial Statements. Correction of material errors You are responsible for adjusting the Financial Statements to correct material misstatements identified during the course of our audit engagement, Appendix A I Financial statement audit The Corporation of the City of Pickering October 17, 2019 Page 4 Representation letter As part of our engagement procedures, you will provide written confirmation of representations made to us in connection with the audit. Disclosure of report We are engaged solely by the City to perform an audit engagement the purpose of which is to provide an opinion as to whether the Financial Statements are free from material misstatement. You will not, without obtaining our prior written consent: • publish or reproduce our report in any document that contains the Financial Statements; • make reference to our firm in a document which contains other information in addition to the Financial Statements; or • place our report on an electronic site. In order for us to consider granting such written consent,, you must: provide adequate notice of your request as well as provide any draft document which is proposedto contain/refer to our report. If written consent is provided by us, you are solely responsible for the accurate and complete reproduction of our report and the financial statements on which we reported. Other information You acknowledge your responsibility for the other information, as applicable, and to provide us with the other information prior to the date of our, audit,report`where possible. To the extent the other information is expected to be available after the •date of our audit report, you agree to provide us with such other information when available, and prior to being -issued by the City, so that we are able to fulfill our responsibilities under CAS 720., Independence For purposes of the following three paragraphs, "Deloitte" shall mean Deloitte LLP and Deloitte Touche Tohmatsu Limited, includingrelated member firms and affiliates. Independence matters as a result of restrictions on providing certain services In connection with our engagement, Deloitte, management, and the Executive Committee will assume certain roles and responsibilities in an effort to assist Deloitte in maintaining independence and ensuring compliance with applicable independence rules. It is your responsibility to have policies and procedures in place to confirm that the City (together with its subsidiaries and other related entities) does not engage us or accept services from us that may impair our independence under applicable professional rules. All potential services are to be discussed with Ms. Pina Colavecchia. In connection with the foregoing, the City agrees to furnish to Deloitte and keep Deloitte updated with respect to a corporate tree that identifies the legal names of the City's affiliates (e.g., parents, subsidiaries, investors or investees, variable interest entities or special purpose entities (as applicable)), together with the ownership relationship among such entities. Deloitte intends to capture this information in systems that may be accessed and used by its affiliates in order to assist Deloitte in meeting its independence obligations. Deloitte will not be requesting nor accepting any personal information for this purpose. Deloitte agrees to discuss any concerns raised regarding privacy or confidentiality with the City. Appendix A I Financial statement audit The Corporation of the City of Pickering October 17, 2019 Page 5 Independence matters relating to hiring In order to assist us in maintaining independence, you will also notify us of any substantive employment conversations that have occurred with current or former Deloitte personnel. Executive Committee's responsibilities The Executive Committee is responsible for the oversight of the financial reporting process, including management's preparation of the Financial Statements and monitoring of the City's internal controls related to financial reporting and oversight of our work. Appendix A(i) Expected form of report The Corporation of the City of Pickering October 17, 2019 We will provide you with our report on the Financial Statements, which is -expected to be in the following form. However, the final form will reflect the results of our audit. If there are any changes to the expected form of report in future years, we will provide you with an updated; draft form before it is issued. Independent Auditor's Report To the Members of Council of The Corporation of the City of Pickering Opinion We have audited the consolidated financial state ments,of,The Corporation of the City of Pickering (the "City"), which comprise the consolidat6d statement of financial position as at December 31, 20XX, and the consolidated statements of operations,, change in net financial assets and cash flows for the year then ended, and notes to the financial `statements, _.including a summary of significant accounting policies (collectively referred to as the "financial statements"). In our opinion, the accompanying 'financial statements present fairly, in all material respects, the financial position of the City as at:December 31, 20XX and the results of its operations, changes in net financial assets, and its cash flows..for the year then ended in accordance with Canadian public sector accounting standards. Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards ("Canadian GAAS"), Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the City in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Appendix A(i) I Expected form of report The Corporation of the City of Pickering October 17, 2019 Page 2 In preparing the financial statements, management is responsible for assessing the City's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the City or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the City's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide,a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the City's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the City to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the City to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. Appendix A(i) I Expected form of report The Corporation of the City of Pickering October 17, 2.019 Page 3 We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. (To be signed Deloitte LLP) Chartered Professional Accountants Licensed Public Accountants Date of the auditor's report