HomeMy WebLinkAboutJuly 3, 1996 osOOFp10
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Audit Committee Meeting
Minutes
Subject to Adoption
Present: Councillor Maurice Brenner- Chair
Councillor Enrico Pistritto
Councillor Doug Dickerson
C.M. Timothy Sheffield, Town Manager
Warren Hurren, Hurren,Flett, Sinclair, Chartered Accountants
A meeting of the Audit Committee was held on July 3, 1996 at 3:30 p.m. in Meeting
Room 1 of the Pickering Civic Complex. The following matters were discussed:
1. Recommendations of the External Auditors
Pertaining to Financial Controls
a) The Management Letter prepared by Hurren, Flett, Sinclair was discussed. The
following corrective measures will be implemented:
i) The Legal Departments Petty Cash Float - A corporate account, with three
signing officers, will be opened.
ii) Standard Expense Form for Council Members - A standard expense form will
be prepared and submitted to the Audit Committee prior to the August 6th
Council Meeting.
iii) Reserve Accounts and Reserve Funds - Communication between Treasury and
Council to improve with regular reporting to Council Members.
Tim will forward to Members of Council copies of previous Management Letters for
their review.
b) The Executive Summary prepared by Hurren, Flett, Sinclair, which outlined four
recommendations, was discussed. The following remarks were noted:
i) A vision statement has been developed by Council. Department Heads also
developed a mission statement at their two day retreat.
ii) Guidelines should be established with respect to presentation of the budget to
Council.
iii) The Financial Information System which will be implemented by Information
Services was discussed.
iv) It was recommended that a two day session be held in September with respect
to the Budget process.
The Executive Summary, Management Letter and Report from the Audit Committee
will be forwarded to Council at the August 6th Council Meeting.
2. Review of the Novacor Report
A discussion took place concerning the overpayment to Novacor. A summary will be
prepared by Hurren, Flett, Sinclair, which shall be forwarded to Council, of suggested
corrective measures to be implemented in an attempt to prevent this situation from
occurring in the future.
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3. Tender No. T - 9 -96
Concensus of the Committee was received to approve Tender No. T-9-96, Tender for
Installation of Compressor, Electrical Refrigeration Control Centre (Don Beer Arena)
and Evaporative Condenser(Pickering Recreation Complex).
The meeting adjourned at 5:15 p.m.
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REPORTTO`AUDIT COMMITTEE
FROM: Bruce Taylor,AMCT, CMM DATE: 02 July 1996
Town Clerk
SUBJECT:
Tender No. T- 9 - 96
Tender for Installation of Compressor, Electrical Refrigeration Control Centre (Don Beer Arena)
and Evaporative Condenser(Pickering Recreation Complex)
RECOMMENDATION:
That Tender No. T- 9- 96 submitted by Cimco Refrigeration, Division of Toromont Industries,
for Installation of Compressor, Electrical Refrigeration Control Centre (Don Beer Arena) •
and Evaporative Condenser(Pickering Recreation Complex) in the amount of$109,240.58 be
approved.
ORIGIN: Requisition Nos. 60365, 60368, 60416- Dept of Parks& Facilities
AUTHORITY: 1996 Budget
FINANCIAL IMPLICATIONS:
A. Current Year: 1996 Budget Provision:
Total Budget Provision $130,900.00
Total Tender $109,240.58
B. Future Years - n/a
C. Source of Funds: (a) 2715/6178
(b) 2735/6178
• Page 2
4 Report to Audit Committee
• Tender No.T-9-96
BACKGROUND:
Please be advised the following tenders for this project were opened on 26 June 1996. Four (4) companies
were invited to participate of which one (1) picked up a tender set for a non-refundable fee of $25.00 and
attended the mandatory site visit. A copy of the Record of Tenders Opened and Checked used at the tender
opening is attached.
An advertisement was placed in the Daily Commercial News and the Community Page.
Contract Description:
Don Beer Arena
The Contractor will remove the existing 50HP compressor and supply all labour, materials, machinery, tools,
equipment and appliances for the installation of a current model year Mycom Model N6WA ammonia
compressor complete with 50HP high efficiency motor in accordance with conditions and specifications.
Don Beer Arena
The Contractor will supply all labour, materials, machinery, tools, equipment and appliances for the installation
of a new electrical refrigeration control centre and up to date controls in accordance with conditions and
specifications.
Pickering Recreation Complex
The Contractor will supply all labour, materials, machinery, tools, equipment and appliances for the installation
of a new Cimco evaporative condenser Model #LSCA225 complete in accordance with conditions and
specifications.
Purchasing Policies and Procedures Item 9.22(h) provides that where there are incorrect extensions or
misplaced decimals, the bid may be corrected. Unit prices shall be used to correct extensions.
Summary
PST included, GST included
Bidder Total Tendered After Calculation
Amount $ • Check $
Cimco Refrigeration, 109,241.00 109,240.58
Division of Toromont Industries
Highland Refrigeration Unable to Bid
Budget
Description Amount
2715/6178, Compressor Replacement $32,000.00
2715/6178, Electrical Panel $17,250.00
2735/6178, Condenser Replacement $81,650.00
Total $130,900.00
Expenditures
Description Amount
Tender No. T- 9 - 96 $109,240.58
Condenser Platform Construction Quotation Q-10-96 $ 15,857.40
Consultant Fees and Inspection $ 2,735.00
Total $127,832.98 ;»
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Page 3
r � Report to Audit Committee
Tender No.T-9-96
BACKGROUND (continued):
A portion of the Goods and Services Tax is eligible for rebate.
Past work experience with Cimco Refrigeration has been excellent. Ice plant machinery service and
maintenance has been provided by Cimco during 1995 and will be during 1996.
The following documentation submitted by Cimco Refrigeration has been reviewed and is satisfactory. This
requirement is pursuant to Information to Bidders Item 21.
(a) a copy of the Health and Safety policy to be used on this project; and
(b) a copy of the Experience Rating Form issued by Worker's Compensation Board.
:Attachments:
Parks& Facilities Correspondence dated 28 June 1996
❖ Treasurer's Confirmation of Funding Provision
• Record of Tenders Opened and Checked
Condenser installation for the Pickering Recreation Complex cannot commence until its platform is in place.
Compressor and electrical installation for Don Beer Arena must be complete and tested prior to ice start up in
late August, therefore, can begin right away.
Upon careful examination of all tenders submitted by the Complex Facility Superintendent, I recommend the
low bidlof Cimco Refrigeration in the amount of$109,240.58 be approved.
I\
1
Vera A. Felgemacher Jeffrey, CPPO, C.P.P., CMM I
Manager of Supply and Servi e
ruce J. Taylor, AMCT, CMM
Town Clerk
.
J _ • r
, TOWN OF PICKERING
' RECEI�JED
DEPARTMENT OF PARKS AND FACILITIES TOWN OF PICKERINC'
JUL - 2 1996
INTER OFFICE MEMORANDUM
DEPARTMENT OF
TO: Vera Felgemacher-Jeffrey DATE: June 28, 1996 SUPPLY AND SERVICES
Manager, Supply & Services
FROM: Jim Walker
Complex Facility Superintendent
CC: Everett Buntsma
Director of Parks and Facilities
RE: Tender No. T - 9 - 96
Pursuant to your memorandum on the above, please find itemized our
report pertaining to same.
(a) Past work experience with CIMCO has been excellent in the past and
presently are doing our regular maintenance.
(b) The following items are charged to the following accounts:
(i) Compressor replacement 2715-6178
(ii) Electrical panel 2715-6178
(iii) Condenser replacement 2735-6178
Tender submitted: $109,240.58
add: condenser platform construction $ 17,00 i5,Si21 A°
add: consultant fees and inspection $ 2,735.00
Total cost of project: S129,0'18.58 12 7, -`1 c ,+
(c) Budget amounts as requested:
(i) Compressor replacement S 32,000
(ii) Electrical panel $ 17,250
(iii) Condenser replacement S 81,650
Total Budget $ 130,900
(d) Treasurer's confirmation of funding has been requested by e-mail.
(e) Department approvals have been issued as a result of original
requesting issued, but will get further approval from other sources.
(f) We can see no apparent reason why not to award contract to
lowest bidder, CIMCO Manufacturing.
(e) Please note: Condenser installation cannot commence until
platform it sits on is built.
Compressor and Electrical installation for Don Beer can begin
right away. Must be done and tested prior to ice start up in late
August. Co-ordination of work: Don Beer - Mike Campbell,
Recreation Complex Jim Walker or Bob H ter.
411 / ...-Ir ?
1
d:?fi r::tion of funding:: Jim Walls, Treasurer
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A;ifiricert, Ott, trinda is D
DAWN M. FLETT, B.B.A.,C.A.
WARREN C. HURREN,C.A.
(/ tet .Ac�u/2�2 NEIL SINCLAIR, B.B.A.,C.A.
June 18, 1996
Ministry of Municipal Affairs and Housing
47 Sheppard Avenue East, Suite 207
Willowdale, Ontario
M2N 2Z8
•
Ladies and Gentlemen:
Re: The Corporation of the Town of Pickering
1995 Management Letter
Please find enclosed a copy of our management letter for the above-noted
municipality.
Very truly yours,
HURREN, FLETT, SINCLAIR CHARTERED ACCOUNTANTS
h //ttikk_.)
Warren C. Hurren, C.A.
NS:dm
Enclosure
cc: The Corporation of the Town of Pickering
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P.O. BOX 458 PICKERING,ONTARIO L1V 2R7 TEL:(905)683-8856 FAX: (905)683-3428
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Mit/cfte/?/, giett, fin,C%LCGCfL
DAWN M. FLETT, B.B.A.• C.A.
WARREN C. HURREN,C.A.
aar �� aztant� NEIL SI NCLAI R, B B A., C A.
June 18, 1996
PERSONAL AND CONFIDENTIAL
The Corporation of the Town of Pickering
Pickering Civic Complex
One The Esplanade
Pickering, Ontario
L1V 6K7
Attention: Audit Committee
Ladies and Gentlemen:
We have recently completed our audit of the financial statements of the Town of Pickering. In
conjunction with the completion of these financial statements, we wish to present the following
comments for your review and consideration.
1. Legal Services Petty Cash Float
We have noted that the legal services petty cash float is held in a bank account in the name
of the legal services clerk and not that of the Town. We feel that this is an inappropriate
control procedure. We would suggest that the account be set up under the name of the
Town. The signing authorities for this account should be such that the Legal Services
Department has flexibility while control is maintained. We would further suggest that the
Internal Auditor review the remaining petty cash floats to ensure that no similar situations
exist.
2. Submission of Councillors' Expenses For Reimbursements
During our audit, we observed that a standard formal expense report is not used by
councillors when submitting expenses for reimbursement. We recommend the use of a
standard expense report form for councillors. The form would clearly summarize the nature
of expenses incurred and would eliminate confusion as to amounts payable.
.../2
P.O. BOX 458 PICKERING, ONTARIO L1V 2R7 TEL: (905)683-8856 FAX: (905)683-3428
•
The Corporation of the Town of Pickering
Page 2
June 18, 1996
3. Reserve Accounts and Reserve Funds
We have noted that there is a lack of understanding by Council as to the composition of
reserve accounts and reasons for the fluctuations in reserve funds. We suggest that Treasury
review the changes to reserve funds with Council on a more frequent basis so that there is
better understanding of these accounts.
We would ask that the contents of this letter be placed on the agenda of the next Audit
Committee meeting.
Very truly yours,
HURREN, FLETT, SINCLAIR CHARTERED ACCOUNTANTS
r kl\--tUAL
Warren urren, C.A.
NS:dm
cc: Ministry of Municipal Affairs and Housing
% , . . . .
.... ..
1
Deloitte &
Touche
/\ Deloitte&Touche
Chartered Accountants
Bank of Commerce Building Telephone: (905) 579-8202
2 Simcoe Street South Toronto Area: (905)686-8249
P.O. Box 800 Facsimile: (905) 579-3388
Oshawa, Ontario L1 H 7N1
July 5, 1995
y Private and Confidential
C. M. Timothy Sheffield, BA, LLB
47 Town Manager
Corporation of Town of Pickering
Municipal Offices
One The Esplanade
Pickering, Ontario L IV 6K7
Dear Sir:
We have recently completed our examination of the financial statements of the Corporation of the Town
of Pickering and related Boards for the year ended December 31, 1994.
During the normal course of our examination, we found the Town of Pickering to have, overall, a very
good system of internal control and accounting procedures. We note in our attached report the following
matters which we feel should he brought to your attention.
We would like to take this opportunity to thank Mr. Walls, Treasurer, and his staff, particularly
Mr. Tomlinson and Mrs. Berrey, for their assistance and co-operation during the course of our audit.
Should you have any questions or desire our assistance regarding any of the foregoing matters, please do
not hesitate to contact us.
Yours very truly,
(Signed) DELOITTE & TOUCHE
Attachment
cc: Ministry of Municipal Affairs (To be attached to AAQ)
Regional Operations Office
47 Sheppard Avenue East, Suite 207 •
Willowdale, Ontario M2N 2Z8
DeloitteTouche
Tohmatsu
International
e
CORPORATION OF THE TOWN OF PICKERING
Constructive Services Letter
Year Ended December 31, 1994
Accounts Payable Subledger
During our year-end audit, we noted the accounts payable subledger had not been prepared since the Town
converted to the new Hewlett Packard computer system. We did not receive the subledger until after our
regular final audit visit was completed. It is our understanding the subledger program was not converted
from the Wang system.
We also noted the accounts payable subledger had not been reconciled to the accounts payable control
account on a monthly basis. This should be completed in order to help ensure the completeness of the
general ledger accounts payable control account. Had this procedure been completed, staff would have
been aware that the accounts payable subledger had not been converted.
Performance Bond Review
-.445
During our examination of the Town's letters of credit and performance bonds, we noted one bond which
- w..a G'1'7°1 ' was no longer valid.
• C. It is our understanding that this bond had been transferred to another company upon the dissolution of the
-'-original bonding company. Discussions with the new bonding company revealed that the bond is no
longer valid.
We suggest all outstanding performance bonds and letters of credit be reviewed regularly to determine
whether or not they are valid and enforceable.
Workers'Compensation Board Penalty
We noted the Town had been charged by the Workers' Compensation Board with a $250 penalty for the
late filing of an accident report. We understand that the accident was not reported by the employee to his
or her supervisor on a timely basis resulting in the late filing of the report.
We suggest all existing and new employees be made aware of their responsibility to report such accidents
immediately to their supervisors.
Taxes Receivable
We would like to take this opportunity to commend the Treasury Department on its prompt collection of
outstanding taxes.
Although the Town's assessment base has been growing over the last number of years, the current
outstanding taxes receivable of$5,222,570 is over $625,000 less than the 1992 balance of$5,847,633.
July 5, 1995 Page 1 of 3
CORPORATION OF THE TOWN OF PICKERING
Constructive Services Letter
Year Ended December 31, 1994
Investments
Included in accounts receivable is an amount of$195,590 representing an investment in an entity which
is currently in receivership. As the ultimate collection of any of this amount is doubtful, we suggest it
he written down to a nominal amount.
Although we do not have any concerns regarding the quality of investments held by the Town at
December 31, 1994, we suggest that the current investment policy be reviewed to ensure that all of the
Town's investments comply with the requirements under various sections of the Municipal Act and the
Trustee Act. You may wish to solicit the advice of your legal department in this review process and in
the interpretation of those sections of the Acts dealing with permitted investments.'
Payroll
During our review of payroll we noted one occasion where the documentation for an employee's leave
of absence was not received by the Payroll Department on a timely basis. This resulted in the employee
receiving a week's salary while on leave. It is, however, our understanding that the overpayment was
subsequently collected.
We suggest all department heads and supervisors ensure payroll and human resources are made aware of
any changes to an employee's status on a timely basis to help ensure similar incidence do not reoccur.
Taxable Benefits
Canadian income tax law stipulates rules with respect to the taxation of "benefits" enjoyed by employees.
These rules address in particular:
• group health and welfare packages;
• automobiles;
• club dues;
• vacation properties and conventions.
Although the tax payable on any such benefits is the employee's responsibility, the Municipality is
responsible to report the correct amounts. A reassessment can directly affect the Municipality by way of
increased Workers' Compensation, Employee Health Tax and Canada Pension Plan levies.
July 5, 1995 Page 2 of 3
CORPORATION OF THE TOWN OF PICKERING
Constructive Services Letter
Year Ended December 31, 1994
Taxable Benefits (CONTINUED)
Revenue Canada has shown increased interest in assessing taxable benefits. Therefore we recommend the
Municipality review this area of compensation to help ensure compliance. Automobile benefits have been
a particularly favourite target. We have attached in the Appendix an excerpt from CCH detailing the
nature and reporting requirements of employee use of automobiles.
Taxes Receivable System
During our review we noted the response time of the taxes receivable system has greatly improved since
the conversion to the Hewlett Packard system. This is a positive step toward better service to the
ratepayers of Pickering.
We also noted that since the conversion the system has, on occasion, locked up for periods lasting as long
as thirty minutes. In some instances, data has been lost as a result. To date the cause of this problem has
not been identified.
In order to avoid further loss of data, we suggest the above problem be resolved as soon as possible.
Financial Software
It has come to our attention that the Town may be considering the replacement of the existing financial
system.
The Deloitte & Touche microcomputer consulting practice has extensive experience in defining clients'
system needs and in the evaluation of the software alternatives.
We would he pleased to meet and discuss any possible assistance Deloitte & Touche could provide.
GST Issues
During our year-end examination of the Town's GST procedures we noted:
1. The Town's staff does not currently claim Input Tax Credits (ITC's) on real property purchased or
constructed which is used in a commercial activity. We suggest the required systems he put in place
to help ensure all ITC's are claimed.
2. Currently the Town's staff does not separate exempt activities and commercial activities with respect
to employee allowances/reimbursements for meals and entertainment. All reimbursements are
considered used in exempt municipal activities and therefore a rebate of 57.145% is claimed.
If the reimbursements related to commercial activities are significant, it may be cost advantageous to
account for these amounts separately. You should be aware that only 50% of these expenses related
to commercial activities are eligible for claiming ITC's.
July 5, 1995 Page 3 of 3
CORPORATION OF THE TOWN OF PICKERING APPENDIX
Constructive Services Letter Page 1 of 3
Year Ended December 31, 1994
(a)an____=
(b)a miter reticle amnion pronadly far us as a aai;
(e)a bus used in a nines of nampoatmg psseogat
(d)a hens used in tie Dooms at.or a motor vehicle used
C � �EXPENSES
for the purpose of naoapeeung pamanput to the moms
oL a bums:of smog=or mane=Unmask and
Tiers an a number of amnions in the lamas Tee 41a (d a motor reties union to be sold,teased or hard m
which easy stank in a dislowaoos of moony booked arum the a busman of edlt�t zt i or
to panduservehitia and tier use General*spaiatai
ties sores as minded to disallow that prmpaemen ants lea Note that technical ammdmeas gublionsd Junta 13.1990.
Dos of a pmanger uncle that repeatsa the trph l Dos of
made some snow= now telCCEPIXIMed the ear m emu of S2a000. and that ptopotnon of tie the In ties eigh-
ths of a pureneed ear that renemeats to n=cis dsfan used W for bosoms: of
apiw oust m awn of 5211000.UM 520 000 annum is to be used in a mtaepatattoa burEeat and unseatanon vendee
Masan to 524.000 for urns lensed or acquired sherds:gust31. used in a funned bmames
1989.Thu as oho psmrmoos to Meadow canon us Les
amomobiim allounate paid to employees to the caret tins In the dice on below mimeo=to amtomobiles,ears at
albwaaots aimed a set amount per Woman Any of them ate to W uncial dinned to be mijea to the deduction rector
motiaoas sauy mot an Addison of book deductions m floor
schedule nS(1).Note tint in addition to the mown=on
ddnaaoa of con=aaneass dcetabed here.rims as ehbo- ►Reniotbte Ammons Serb b Ciampi
stem take remain tie aspiai Deal alowsoea on purchase When the deduction limitations dimmed here and the
vehicles sea wan the traunai daasifintioa and terminal loin
most allowance in iati ns at 11412 was mttmaaaed m
sides Ines sdgmatmans will!low thsougi aehedrtia rzst8k seta 1987.the Minister of Fauna amt an t nL...I Og that the
11412 appeoprianness of the dollar imitate=wand be :emend
'!bets as also anon=toles gmvern®g the amounts tar two yeas:and amnion was roads to adTat the amounts
obis to anioyees m respect of aoomobiie provided for their by le��'Sinus a then.�have been made to to limm-
uss or annum loaned io aspen of their use of their eta rim amounts effective September 1. 1989. and to acme amounts susomndes.'ibis e�ioyes tales as typically part of the bona is m� blow. 1. 1991.A able of elfeetire hmia-
tam®mttoa and p mod fulcma tather thm mmoms maw
taboo.The empbyse tails as dimmed in the book PllEk= S.rails Of l7 ealsokd Ammo
Ybnm OUR Mout TAX MUM.a cos name ar'n� T' e foilowini lira anion amounts have been ptesathed for
� s leased or aunized a m sof ar e affe r the toon of the em minds indicated (Inept that limedaons oa d isoln d i
annoys.allowances took esrea only m 1988k
•WhiduAm timatiee Srtblaet to Remlemstt ltame
Tbs aetomoble amuse uesomoos spay only to rends Ala Mg*
warn after iume 17.1987.and to ntm®obiies leased tinder
a has said itma cumin or mewed after June 17.1987. Colt Emit =WOO suaoo Stigaa+PST/t3ST
Anomobiies aogtotsd aalve Just 17.1987.as unturned ham 14512 Made t000/iS) S73 tZ9 322233 024003 + PS AX11 + AS
the opeama of ties min if they ware acquired mum a a kkolotr INS tea S foe 3 no Me+PSV T
maim*ram=coated ham befo a June 18.19S7.The typal ►toms tails Zeros too 3 Zap
of motor reisiriss subject to thels min sus as per dderawe
INIC(a)motor visaing angned or adapted primWly to usy t m if des— 27/21 71/23 31rts
iadivlaosh
IN thetpesanel num and which has a YeteNMWT . . 31/23 3129 33129
man n away of not mom than the driver and eight Note that Remus Canada takes the
D and lemi=purposes the anal hats dams used mna�
(b)motorraidass whim: toms.**MD=ES&or Moist limitaaans do not and new did tends poundal tales tai
. vehicles However vans and pitl hell will not be masa (PST).goods and semen at(tan.and nuns=amouns
to the mice ieameoug deekomoas provided they either shown sepmsery as an addition to teasing us.This means that
CO hew in gars a dam espsary for not more than the there is effectively a doable cannon of the at ammo=which
dews and me pesemea,and aim as used p Tonnes the=non ghee hushes for 1991 and later dams
ha.moos than 50%)for the"--ranee of goods or flfiTaub=Eh,tell a.+eme owl Air.dArm r!QM&orb•
ammo=its the come of a business or for the peas me.[.nil
p
ne ofd Exams.or Iii!is the year of sogmsitiso ►10es s an AroaweobBe Imam 90%)foetie mmmoe of tpods. this Whsus a=Met mma pat=of the'Mann leasing
sattgea m the toms of gtiWtg or peodmdog nom, chimes"for an smomonde dandy or indhsaly.and is other.
Moser rsitcke es darted to include W ammodw niacin was eamdxd to deduct some amount E remote[of these pryr
dWSO.d or adapted to be used on highways bur to emcbeds msaa. the "ac usl tuning tmseges" al which the amount
nten6 tisttra foliating and.velliciss winds vain on Mom p� would no�aiiy be aicahtd Mau for aoemple.
to rr:mcaoa as at r- y er;htded from s unun )m=W bm®m tams)aura eased the
ddoeaag:moments sspssse (a)5600(5650 for lams Sat awed home on or Mier S .
timber 1.1989 5650 pis apedable pwmtindal aloe tat
(PSI)and goods and serum us((3i)on 5650 for
Mum entered mm on orafterniz a y 1.1991)toms
umber of mamas dining lank the auto was laassd in
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CORPORATION OF THE TOWN OF PICKERING APPENDIX
Constructive Services Letter Page 2 of 3
Year Ended December 31, 1994
I
the year or a priming year.less amounts deducted in that the person paying the esimbueaemeaa is considered an
prior years in respect of the lease.and indirect teases and trust go through the enure limitation calat-
(b)the actual lease charges for the year times 320.000 Whin independently.
(124.000 for leases first entered into on or after Sep- Finall%note that limitation(b)of the fouris genetellY
temba l. 1989.324.000 plus applicable PST and GST speaking. disallows annual lease cons ptuposooasUY to the
on 124.000 for leases entered into on or after January I. axon the car being leased costa more than 120.000 or the
1991)divided by 85%of the greater of 323.529(528253 applicable threshold amount assuming the lessor obtains a
for leases tint entered into on or after September 1. din:own of 1596 from manufacturer's suggested list pna.Lima
1989. 100/85 multiplied by the sum of 524.000 pins cation(a)is cumulative over the period of the lease.and effee'
sppliable PST and GST on 324.000 for leases omen lively Limits lease costs to 57.200 per year(57.800 for leases fiat
Oro on or after January 1, 1991)and MSLP entered into on or after September 1.1989.S7.800 plus apple
minus. where the lease requires a refundable deposit the • cable GST/PST on 57.800 for leases entered into on or after
notional interest in access of 11.000 calculated by multiplying January 1.1991),prorated on a monthly basis whets the car is
that depict by a prescribed interest rata and minus any reim- not leased throughout the year. Where an initial lump-sum
bum:menu receivable by the taxpayer m respect of the lease. payment is made to reduce subsequent lease costs.it appears
that=Amnon Clearly,several atisnanons of this fommia are required. and may result an aLidisallowance payment enn though the ar�
First Revenue Canada is understood to take the position considerably less than 520.000(524.0001 Howevee this will be
that"actual lease charges"do not include provincial sales tax reversed in future years since the limitation is calculated on a
(PSI)or GST(or indeed insurance costs)either before or after lifeof-the-lease and not an annual baaia.
Jaanary 1. 1 991.where these items are shown separately from 110 Raotatons on interest on Purchased Can
leaning charges in the lease contract This rather dubious inter
pseauen at least worm to the benefit of the taxpayer.since it Where money has been borrowed to purchase an automo-
laves GST to the workings of the input tax credit mechanism bile,the interest otherwise deductible may not exceed S300 per
and PST deductible (unless eligible for provincial rebate or month for money borrowed on or after September 1. 1989
credit)without reference to the leasing limitation.Lease cancer (1250 if borrowed from June 18.1987 to August 31.19891 The
lation payments are also excluded from actual leasing costs =finical rule is that the deduction may not aroma the lesser of
• The dining of GST input tax credit may present a problem, the actual amount paid or payable for a period and 1300(or
although the normal solution is to assume the credit will offset $250 where applicable)times the number of days in the penod
the GST and ignore it in determining the prescribed number in respect of which the interest is paid or payable divided by 30.
Where there is an individual with a rebate. the problem is Retroactive technical amendments announced July 13. 1990.
beyond the scope of this book,although it will be dealt with in ensure that cash basis taxpayers can deduct an amount payable
the companion book PRFPA i G YOUR LeCOME TAX RETURNS for a period even if made in a different period As the rule
for individuals. originally read a cash basis taxpayer who made a late payment
Second.the reference to the number of months is techni- in Year 2 in respect of Year I would have been unreasonably
ally the number of days in the entire period from the cone- limited by the rules
mencement of the lease(in whatever=anon year)to the ear- ►lobo Ownereta of Vehicles
lier of the end of the current year or the end of the lease period In order to prevent circumvention of the above toes
divided by 30. through shared ownership of vehicles the rules provide that
Third.the"actual lease charges"referred to in(b)are costs where a vehicle is jointly owned or leased.the=um=deduc-
on a ash or accruai bass,depending on the method regularly don available to each participant in respect of capital cost
followed by the taxpayer.A reuoac uve change here ensures that allowance. interest. or leasing costs is the proportion of the
a cash basis taxpayer who makes a current year payment fora amount otherwise deductible that the fair market value of the
preceding year is not put offside.as could happen under the participant's interest is of the collective fair matioet value of the
rule as one++"4y fotmtilated Employees and farmers are likely interns s of all participants
to be cash basis taxpayers ►Disallowance to Employer of Employee Allowances
Fore notional MSLP is the manufacturer's would list pace for the vehicle In addition to the limitations on businesses which purchase
plus the notional sales tax that would have been paid by a or lease automobiles there are rules restricting the deductibility
purchaser if the venucle had been purchased at that price at the of amounts paid or payable as an allowance for the use(after
time the first lease of the vehicle was entered into in the;nor of 1987)by an individual of an automobile except where
inoe in which the t with was angel ed for the greatest part of the amount is required to be included in computing the indi-
theyear the neat with the changes involving the introduction vidnal's income.The restrictions are codified in draft regulation
of GST.the notional sales tax component into on of MSLP will no 7305,which provides that allowances in awes of 27 cents per
longer be included for leases entered into on or after January 1, • kilometre for the first 5.000 kilometres of use dating a taxation
1990. year by the individual in the course of earning income and 21
Ms.the prescribed ate of interest is the same as other cents per kilometre for any additional such use in the year will
peestabed rates that is.the guaranty rate shown in the table not be deductible to the payor.An additional 4 cents per kilo-
immediately pteiag Chapter I.Prescribed interest is multi- metre will be allowed for each kilometre travelled in the Yukon
plied by any refundable deposit.and$1.000 is subtracted from and the Northwest Territories As discussed above.the 27/21
the product of that multiplication, to arrive at the amount cent general rate is to be increased to 31/25 cents per kilometre
subtracted in this respect from the lesser of(a)and(b). for mileage incurred on and after September 1.1989;the Tixth. its are typically amounts paid by an cent Yukon/NWT rate is increased to 35/29.1t appears that the
employee to an employer in respect of personal use of a eons- smPloyer is to calculate the disallowance aemeding to the
piny can However.any reimbursements from any source:educe employee's mileage incurred in the employer's taxation year.
the pubic deduction calculated as the lesser of(a)and(b). Although phrased in very general tetma. the rules disal-
Teehnial amts announced on July 13. 1990.attempt losing deduction of payments to individuals in respect of auto-
to etrstae that reimbursement payments made are subject to the mobile menses are essentially aimed at automobile
same deduction limitations to the person paying the reimburse-se- a anc s paid by employer.In gmeal,the mies eoatemp)ate
mem as to the direct lessee.The ptacaal result seems to be two litoanons in respect of automobile allowances
1
. . . • • . , .
CORPORATION OF THE TOWN OF PICKERING APPENDIX
Constructive Services Letter Page 3 of 3
Year Ended December 31, 1994
(1)The employer may pay an allowance to the employee warn above.Revenue Canada bas not yet tried to separate out
which is not a triable benefit to the employee. Employees element
engaged in the negomatine of commas or the selling of plop- that Revenue Canada indicated.is Interpretation Sul-
treadling for the employer may receive reasonable allowances for Nots
treadling of tuft and other employees may receive ktin f I=522.pars.46.that because of the changes to the auto-
reasonable allowances nom the employer for the use of a motor mode rules in 1988.it was prepared to accept for 1988 taa-
vehicle in the peefonuance of their employment In either case. don rats only a receso arc ion of rniipgr based on a
under the 1988 rules the whole amount of an Comma cannot itopnable test period in determining the validity of a tax-free
be tax-free(a)where the measurement of the use of the vehicle allowance and employees deduction.
foe allowances purposes is not based solely on business idlome- (2)The employer may pay an automobile allowance to the
oea,or(b)where the employee both receives an allowance and employee and.provided 1t does not maonsanca ly quaiiy as a
is reimbursed in whole or in part for expenses in respect of the rest4dornie allowance under (1) above. report it as taxable
same use.Technical amendments dated July 13. 1990.permit income of the employee.In this case,the employer may deduct
an employee to remove automobile cost reimbursements in the allowance in full.The employee should be able to deduct
respect of supplementary business insurance.pa ring.and toll aotam amounts is respect of operation and depieranon of the
or ferry charges'without rendenag the allowance taxable.so eat prorated for business use of the car provided the employer
long as the allowance has been determined without reference to certifies(on form T2200)that the employee meets the statutory
these Utz This appears to mean that the requirements for such a deduction.Essentially.the employee's
employee's allowance is not rendered taxable so long as it is not demons will be based on his actual costs subject to the
intended to cover these special reimbursemens,in which case imams cost interest and depreciation limitations.prorated for
the employee would in effect be reimbursed twice.Where all business use.
employees receive the same mileage allowance.and these ape- Them is a third possibility not contemplated in the Act
vial items are reimbursed as incurred.it would seem clear that namely,that the employee is reimbursed for specific e peadi-
they should not render the allowance taxable.This change is ones incurred on behalf of the employer.The calculation of
reaoactive to 1988.except that an individual may choose not to • this reimbtmsement may be contested by Revenue f''nikri•,but
have it apply by notifying the Minister in writing by April 30, it is certainly arguable that a reimbursement is not an allowance
1991.The purpose of the change is to allow these common and therefore not subject to these rules.This posiuoa is sup-
reimbursements.The purpose of allowing the taxpayer to elect ported in case law by the Federal Court of Appeal in The Queen
out for prior yes=is that the taxpayer may have deliberately a Pascoe.(F.CA)75 DTC 5427 at 5428.the Supreme Court of
accepted such reimbursements to make the allowance taxable. Canada in Gagnon v.The Queen.(S.C.C.)86 DTC 6179.and the
This typically would have been done if the automobile allow, Tax Court of Canada inAtkla cud Craig knee t M.N.L.(T.C.Ci.
aaoe war lea than the automobile expenses which could be 89 DTC 12.The issue will then shift to the measurement an:
deducted by the employee.so that the employee was better off reasonableness of the actual expanse incurred.To quell& as a
with a triable allowance and a deductible expense.As part of 070100r303121:10. one might expect that the employee must
the 1990 r•"gam,an employee will be allowed for 1990 and mamma metiailous records of annual peritilomeme acts and
later yeas to add an inadequate allowance to income and bill for precise recovery of business mileage.although the Yorke
deduct the expenses pemnvtd: perviously only comm>mon erne suggests that the test may be lea onerous.To the extern
salesmen could do this that a payment to an employee may be characterized as a
Note that the amount of the allowance does not enter into reimbursement of specific expenses incurred by the employee
the issue of taxability to the employes the amount must be on behalf of the employer rather than an allowance,it should
(i) reasonable.(ii) measured by idlomeues.and(iii)not sup- be fully deductible to the employer and not taxable to the
ported by additional reimbursements other than those specified employee.
above.Once an allowance becomes taxable by failing to meet ■Standby Charges and Operating Cost Bauder
even one of these eatena,the whole allowance(and not merely Standby Charges are taxable benefits which must be
the unreasonable pomoa) becomes taxable and is dealt with reported on behalf of employees who use employer-provided
under(2)below.It should thus be possible to easily disqualify automobiles for personal use.It is a payroll function of the
an allowance if this is desirable.although sate the employee employer to identify and report these benefits.These are indr
now has the option of neattag the allowance as income when it pendent of the employees limitations on deducting the lease or
is in his or her interest.it will rarely be desirable in future to deraciating the cost of automobiles
resort to this strategy.
an allowance for the use of an Employers must also account for operating costs borne by
Where the employer pays employer on account of the employee's personal use of
automobile by the employee which need not be reported as a either the employer's or employee's automobile.Again.this is a
taxable benefit to the employee under the above rules the pumll function.
employer may riot deduct the allowance paid for automobile Ore dank s(iX&(a),41(lob ts(1Xe 67.21 us 67.46 24*ib aria
use in excess of the 31/25 cent(or other applicable)per kilo- me 7306 7307,rrs22f
metre limitations.It is instant how the employer computes
the automobile allowance:the deduction must be supported by 1724 GOVERNMENT GRANTS
reference to the employee's business use of an automobile.If Whets the grant is related to an income deficiency or to
the employer chooses to pay a higher allowance which other- specific expenses.it is added to income or deducted from the
wise complies with the tax-free rules. the coo= is still not specific menses inarn d. However. in the past where the
table to the employee(if it is'reasonable,but is not deduct- groat or subsidy was both:
Ile to the employer. (a)not fated by reference to an income
• The Act appease to distinguish between allowances for the dile ,and deficiency or ape
use of an automobile and allowances for the operation of an (b) to promote some event or activity desired by the govern-
aunmobile.The hitter are tastable benefits regardless of the meet
rules above (except for the reimbursements for puking.eta it was not regarded as income or an expense ieduutioa This
diseased above)arid accordingly fy am not caught by the 31/25 pip would seem.at least in most business situations to be
am a limitation.e As a practical matter where the employer pays mused by the rules at 1728 for payments after May 22.1985,• only a per ldlomere amount for use which ors is face man the subject to the=anal rules at 1728.
•
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/óeloitte &
Touche
Deloitte&Touche
/\ Chartered Accountants
Bank of Commerce Building Telephone: (905) 579-8202
2 Simcoe Street South Toronto Area:(905)686-8249
P.O. Box 800 Facsimile: (905) 579-3388
Oshawa, Ontario L1H 7N1
Private and Confidential
Mr. C. M. Timothy Sheffield July 15, 1994
Town Manager
Corporation of Town of Pickerinz
Municipal Offices
One The Esplanade
Pickering, Ontario L1V 6K7
Dear Sir:
We have recently completed our examination of the financial statements of the Corporation of
the Town of Pickering and related Boards for the year ended December 31, 1993.
During the normal course of our examination, we found the Town of Pickering to have,
- overall, a very good system of internal control and accounting procedures. We note the
following matters which we feel should be brought to your attention.
'fit 7,C o ACCOUNTS PAYABLE CONTROL ACCOUNT I
r,/L a
As at December 31, 1993 the detail accounts payable listing did not agree to the control , S�e�
.c account.
•'� Vic• 17 err_ c r c • y 1: � 'U •r,
t�
," We suggest the accounts payable subledger be reconciled to the control account � `S
r count on a ,,
monthly basis.
ACCOUNTS PAYABLE
• During our audit of accounts payable, we noted a double payment made to a Iocal supplier.
This double payment was a result of improper matching of the purchase order to the related
� "' invoice and failing to have the invoice stamped and properly authorized.
Although the Town was reimbursed for the duplicate payment, we suggest in the future all
invoices be properly reviewed, matched to their proper purchase order and authorized prior
to the preparation and issuance of a cheque.
DeloitteTouche
Tohmatsu
International
C. M. Timothy Sheffield, Town Manager
Corporation of the Town of Pickering July 15, 1994 Page 2 of 4
SIGNING OFFICERS
The previous Town Manager was not removed as a signing officer until the new year. -
We advise that the bank be notified as soon as possible of any changes to the list of signing
officers.
BUDGET OVEREXPENDITURES
We noted during our review, expenditures pertaining to the existing and proposed land fill
operations exceeded budget. Council approval was obtained for a portion of the
overexpenditure, however, as at December 31, 1993, approximately $50,000 was yet to be
reviewed and approved by Council.
We suggest all significant overexpenditures be approved by Council resolution as soon as
they become evident.
MANAGEMENT INFORMATION SYSTEM
During the year-end audit we noted the following issues regarding the Town's management
information system ("MIS").
1. Currently no documented disaster recovery plan exists for the new HP9000 and its
application systems.
2. The Recreation Department's system (Info 2000 Inc.) no longer functions as required by
the Department and the system experienced some lost data during the year resulting in an
alternate method of calculating deferred revenue for programs and memberships.
3. The MIS Department lost, effective October 1, 1993, the System Analyst II who handled
the financial applications and assisted with the Novell network.
4. Processing speed on the system, particularly the tax and general ledger applications, is
very slow (ie: to the point where screen changes can take three minutes). Tax inquiries
can be done more quickly manually than on the system. Employee productivity and
customer service should be improved with the proposed transfer of all financial
applications to the HP9000.
Considering the recent and contemplated changes within this department, it may be an
opportune time to establish the MIS goals and service objectives on a municipal-wide basis
and provide a framework for the Department's operations. We suggest the development of
such a strategy be considered.
•
t;,
;_ . : C. M. Timothy Sheffield, Town Manager •
Corporation of the Town of Pickering July 15, 1994 Page 3 of 4
REPORTING OF DEVELOPMENT CHARGES PAID
TO HYDRO COMMISSIONS
•
The 1993 Financial Report ("FR")of the Town of Pickering did not disclose Development
Charges paid to the Hydro Commission.
The following paragraphs outlin a suggested method of reporting such funds.
Reporting of Development Charges in the FR:
s Hydro Deveiopmeiii Charges collected should be reported on the Consolidated Statement
of Operations as revenue "Contributions from Developers".
• Funds turned over to the Hydro Commission should be reported on the Consolidated
Statement of Operations as "Development Charges Transferred to Hydro Commission"
and shown as a separate line immediately following "Net Appropriations to Reserves and
Reserve Funds".
• A note should also be included in the FR cross-referenced to the above-noted line,
disclosing the nature of the transfer.
• Example wording
"Pursuant to Development Charges By-Law No. , the Town of Pickering collects Development
Charges on behalf of the Pickering Hydro-Electric Commission which are to be used to finance
future growth-related capital expenditures. These funds are maintained in a Reserve Fund by the
Municipality until required to fund the above-noted expenditures. During the year the Municipality
collected Development Charges, in the amount of$ ,on behalf of the Pickering Hydro-
- Electric Hydro Commission and remitted $ to it to finance growth-related expenditures
incurred. The balance in the related Reserve Fund at December 31, 19_was $ (19_- $_)
and is reported on the Consolidated Balance Sheet."
We suggest, due to the amount of funds collected and remitted to the Hydro-Electric
Commission (in excess of$400,000 in 1993), the above reporting format be adopted. We
also suggest a legal opinion be obtained regarding the legality of turning the Development
Charges collected over to the Hydro-Electric Commission prior to the related growth-related
expenditures being incurred.
* * * * * * * *
C. M. Timothy Sheffield, Town Manager
~' Corporation of the Town of Pickering July 15, 1994 Page 4 of 4
We would like to take this opportunity to thank Mr. Walls, Treasurer, and his staff,
particularly Mr. Tomlinson and Mrs. Berrey, for their assistance and co-operation during the
course of our audit.
Should you have any questions or desire our assistance regarding any of the foregoing matters,
please do not hesitate to contact us.
Yours very truly,
(Signed) DELO11"1E & TOUCHE
cc: Ministry of Municipal Affairs (To be attached to AAQ)
47 Sheppard Avenue East, Suite 207
Willowdale, Ontario M2N 2Z8
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Deloitte &
Touche
/‘ Deloitte&Touche
Chartered Accountants
Bank of Commerce Building Telephone: (416) 579-8202
2 Simcoe Street South Toronto area: (416)686-8249
P.O. Box 800 Telecopier: (416) 579-3388
Oshawa, Ontario
L1H 7N1
Private and Confidential
Mr. N. Marshall May 19, 1993
Town Manager
Town of Pickering
Municipal Offices
One The Esplanade
Pickering, Ontario L1V 6K7
Dear Sir:
We have recently completed our examination of the financial statements of the
Corporation of the Town of Pickering and related Boards for the year ended
December 31, 1992.
During the normal course of our examination, we found the Town of Pickering to have,
overall, a very good system of internal control and accounting procedures. We have
noted the following matters which we feel should be brought to your attention.
Payroll Master File Integrity
Currently all updates to the payroll master file are completed by the Payroll Clerk;
using approved payroll change advices from human resources.
The existence of the approved payroll change advice does not prevent the Payroll
Clerk or any other employee (if they can get access to the system) from making any
unauthorized changes to the payroll master file (i.e. adding a new employee or
changing a pay scale).
As part of the paper flow for the new on-line system with.the CIBC a "transaction file
report" is produced which details all changes made and saved on the payroll master
file.
DelaitteTouche
Tahmatsu
International
•
.
Mr. N. Marshall, Town Manager Page 2 of 3
Town of Pickering May 19, 1993
Payroll Master File Integrity (con ' u d)
V
We suggest the "transaction file report" be obtained by the Manager of Accounting and
Payroll Services after each pay is transmitted and review it for unauthorized changes
by comparing it to the payroll change notices which she now currently reviews and
initials.
On-Line Transmittal of Payroll Data rti c 75s:
We understand the line being used for payroll data transmission to the CIBC is a
normal voice dial-up line which is unsecured.
Due to the possibility of a person being able to "tap" into this line or pass a virus along
this line, we suggest a secured data line be installed.
Prepaid Insurance
/
During the course of our audit it was noted the Town was not setting up the prepaid
portion of its insurance expense. Although this prepaid expense has not been recorded
- in the past, we recommend in the future the Town set up the prepaid portion based on
the number of days covered by the insurance policy which relate to the following year.
Outstanding Deposits
Currently account 4466 (Miscellaneous Deposit&rcontains deposits which are greater
than 10 years old. r/
We suggest this account be reviewed and any deposits no longer sufficient in relation
to current deposit rates be renegotiated and those no longer applicable be returned or
recognized as income as appropriate.
Employee Deductions Liabilities _
We noted a number of the employee deduction liability accounts did not reflect the
actual liability owing to the Receiver General at December 31, 1992.
We suggest these accounts be reviewed in detail and the appropriate adjustments be
made in order to reflect the correct account balances.
Deloitte&
Touche
0
A 7
•
Mr. N. Marshall, Town Manager Page 3 of 3
Town of Pickering May 19, 1993
Receiving Reports
During our year-end audit we noted a receiving report dated in January 1993 for a
capital item that was expensed in 1992. The capital item had indeed been received in
1992 but the receiving report not filled out until January 1993.
Due to the importance of year-end cutoff regarding large budget items, we suggest all
receiving reports be prepared on a timely basis and properly reflect the date goods
were received.
Municipal Contribution to the Library
As part of our review of the Town of Pickering's budget, we noted the actual
municipal contribution to the Library had been reduced in order to eliminate the
expected Library surplus.
Since the Library operates as a separate board, we suggest the Town pass a specific
resolution to reduce the committed municipal contribution.
Vacation Pav Accrual
The Town does not accrue vacation pay for full-time staff.
We suggest that the Town consider accruing for vacation pay of full-time staff in order
/ to comply with Section 3001 of the Municipal Financial Reporting Handbook
We would like to take this opportunity to thank Mr. Walls, Treasurer, and his staff,
rSsc -7,7 particularly Mr. Tomlinson and Mrs. Berrey, for their assistance and co-operation during
the course of our audit.
f z�
• Should you have any questions or desire our assistance regarding any of the foregoing
G'c.c, C matters, please do not hesitate to contact us.
Yours very truly,
/-10e.44;z.
•
cc: Ministry of Municipal Affairs (To be attached to AAQ)
Deloitte&
Touche
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CONPUTE .
anil 403,.3ha'w-ll'agOSn et'o Li., .2-.Jg
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1 016) 433-7033 Toronto Line 686-5762 1 .1
1 CONPUTE is a Division of Conaby's Ltd. 1:'-.. fiNVOOCE
04010tCE DATE I 'INVOICE NO. I PACiE.N.\
10/29/91 000041 I
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Ilfe TOWN. OF PICKERING SHIP
TO: TOWN OF PICKERING
1 THE ESPLANADE Attn: KR. 1. STORMS
PICKERING ON L1V SK7 I TNE ESPLANADE
PICKERING ONT
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ACCOUNT NO. tiWiEZI3r, . PIATOI-IASE 0111:15 .NO.,.;' ..;•:•.• ::•••61.4IPYIA ... • ''. •DATE SHIPRED,-: •.• ...:,•1SAMS ORDER NO .
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29704 4H Pick UP Net 15 Days•
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1 HP32371A00 • JETDIRECT ETHERNET 108/T CARD 599.00 $5900
1 MEHC2O66AO 8MB RAH FOR 650C PLOTTER 699.00 *619.00
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Signing Officers
The auditors' comments have been noted.
Budget Overexpenditures
The overexpenditure problems of the Purchased Services account have been
resolved as all 1994 invoices relating to existing and proposed landfill operations are
now being appi u:eu by Council on a monthly or bi-wunthiy basis.
Management Information System
The auditors' suggestions on this subject should be forwarded to the
Information Services Department for comments.
Reporting of Development Charges Paid to Hydro Commissions
Although the auditors are correct in their interpretation of the Development
Charges Act as it relates to the Charges collected by the Town on behalf of the
Pickering Hydro Commission, to us, they are no different from the Charges we
collect for the Region of Durham.
Both are paid over by the Town on the 25th of each month; and both report
their Development Charges activity in their own year end Financial Siateiueuts.
In our opinion, it is not up to the Town to certify that their monies are being
applied correctly; and that opinion is shared by Pickering Hydro's General
Manager, John Wiersma, who wants a of the Commission's Charges paid over to
them on a monthly basis.
J.Walls
Treasurer-Collector
JW/jt
f' u bt.)
Or
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INTERDEPARTMENTAL MEMORANDUM
TREASURY SERVICES
TO: MR. C.M.T. SHEFFIELD August 17, 1994
TOWN MANAGER/SOLICITOR
FROM: MR. J. WALLS
TREASURER-COLLECTOR
As requested, we comment on the Management Letter from our auditors,
Deloitte &Touche dated July 15, 1994:
Accounts Payable Control Account
The Subledger of the above account from which the auditors call for a
"payables listing" every year end has not been used by the Town for several years;
and has never"balanced" for the auditors.
That Sub account was originally to be used to produce a "cheque run" from
an accumulation of batches of invoices that had been approved for payment.
However, for years now, each batch automatically produces a cheque run
and the Control Account is, therefore, always balanced and correct regardless of
any Subledger activity.
It is not our intention to reconcile the Subledger as it would be a meaningless
exercise,in our opinion.
Accounts Payable
From the attached documentation,you will see that the "duplicate" payment
mentioned by the auditors was not necessarily a Treasury problem as we received
two different numbered invoices for different amounts, supported by two different
dated receiving reports on which were listed two different packing slip numbers.
We,too, hope that this never happens again.
Deloitte &
Touche
/\ Deloitte&Touche
Chartered Accountants
Bank of Commerce Building Telephone: (416) 579-8202
•
2 Simcoe Street South Toronto area: (416)686-8249
P.O. Box 800 Telecopier: (416) 579-3388
Oshawa, Ontario
L1H 7N1 •
Private and Confidential
Mr. N. Marshall May 19, 1993
Town Manager
Town of Pickering
Municipal Offices
One The Esplanade
Pickering, Ontario L1V 6K7
Dear Sir:
We have recently completed our examination of the financial statements of the
Corporation of the Town of Pickering and related Boards for the year ended
December 31, 1992.
During the normal course of our examination, we found the Town of Pickering to have,
overall, a very good system of internal control and accounting procedures. We have
noted the following matters which we feel should be brought to your attention.
Payroll Master File Integrity /
Currently all updates to the payroll master file are completed by the Payroll Clerk/
using approved payroll change advices from human resources.
The existence of the approved payroll change advice does not prevent the Payroll
Clerk or any other employee (if they can get access to the system) from malting any
unauthorized changes to the payroll master file (i.e. adding a new employee or
changing a pay scale).
As part of the paper flow for the new on-line system with.the CIBC a "transaction file
report" is produced which details all changes made and saved on the payroll master
file.
DeloitteTouche
Tohmatsu
International
f
Mr. N. Marshall, Town Manager Page 2 of 3
Town of Pickering May 19, 1993
Payroll Master File Integrity (con ' u d)
V
We suggest the "transaction file report" be obtained by the Manager of Accounting and
Payroll Services after each pay is transmitted and review it for unauthorized changes
by comparing it to the payroll change notices which she now currently reviews and
initials.
On-Line Transmittal of Payroll Data
We understand the line being used for payroll data transmission to the CIBC is a
normal voice dial-up line which is unsecured.
Due to the possibility of a person being able to "tap" into this line or pass a virus along
this line, we suggest a secured data line be installed.
Prepaid Insurance
During the course of our audit it was noted the Town was not setting up the prepaid
portion of its insurance expense. Although this prepaid expense has not been recorded
in the past, we recommend in the future the Town set up the prepaid portion based on
the number of days covered by the insurance policy which relate to the following year.
Outstanding Deposits.
Currently account 4466 (Miscellaneous Deposits-"contains deposits which are greater
than 10 years old. 1 /
We suggest this account be reviewed and any deposits no longer sufficient in relation
to current deposit rates be renegotiated and those no longer applicable be returned or
recognized as income as appropriate.
Employee Deductions Liabilities _
?.. �.i 1��,'(1i ;. .l < 1.
< e y
We noted a number of the employee deduction liability accounts did not reflect the
actual liability owing to the Receiver General at December 31, 1992.
We suggest these accounts be reviewed in detail and the appropriate adjustments be
made in order to reflect the correct account balances.
Deloitte&
Touche
7
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Mr. N. Marshall, Town Manager Page 3 of 3
Town of Pickering May 19, 1993
Receiving Reports
During our year-end audit we noted a receiving report dated in January 1993 for a
capital item that was expensed in 1992. The capital item had indeed been received in
1992 but the receiving report not filled out until January 1993.
Due to the importance of year-end cutoff regarding large budget items, we suggest all
receiving reports be prepared on a timely basis and properly reflect the date goods
were received.
Municipal Contribution to the Library
As part of our review of the Town of Pickering's budget, we noted the actual
municipal contribution to the Library had been reduced in order to eliminate the
expected Library surplus.
•1,- " Since the Library operates as a separate board, we suggest the Town pass a specific
resolution to reduce the committed municipal contribution.
Vacation Pay Accrual
The Town does not accrue vacation pay for full-time staff.
We suggest that the Town consider accruing for vacation pay of full-time staff in order
/ to comply with Section 3001 of the Municipal Financial Reporting Handbook.
We would like to take this opportunity to thank Mr. Walls, Treasurer, and his staff,
Ssc ,,� particularly Mr. Tomlinson and Mrs. Berrey, for their assistance and co-operation during
z
the course of our audit.
Vi `
Should you have any questions or desire our assistance regarding any of the foregoing
6r-,G,ce C matters, please do not hesitate to contact us.
Yours very truly,
•
cc: Ministry of Municipal Affairs (To be attached to AAQ)
Deloitte&
Touche
0
COPYJi-f•W
INTERDEPARTMENTAL MEMORANDUM
TREASURY SERVICES
TO: MR. N. C. MARSHALL June 21 , 1993
TOWN MANAGER
FROM: Mr. J. Walls
Re: 1992 Year-End Management Letter
As requested, we comment on the Management letter dated May
19, 1993 from Deloitte & Touche:
1 ) PAYROLL MASTER FILE INTEGRITY
This is an excellent suggestion from our Auditors and has now
been implemented to ensure that no unauthorized changes are
made to our payroll master file.
2) ON-LINE TRANSMITTAL OF PAYROLL DATA
We will not be incurring the cost of a secured data line, as
suggested, because all transmitted Payroll information is
sent back to us for confirmation before being used in a
Payroll run.
We, therefore, see no benefit; and our opinion has been
confirmed by Information Services who also state that even
secured lines can be tampered with if the desire is there.
3) PREPAID INSURANCE
This 'accounting' function will be implemented in 1993 on all
expenditure classifications except TRANSIT, which has subsidy
implications.
There will be a one-time-only reduction in expenditure in
1993 of around $75,000.
4) OUTSTANDING DEPOSITS
All deposits are now being reviewed by YEAR at Department •
Head meetings and all should be brought into current status
by year end.
5) EMPLOYEE DEDUCTION LIABILITY
This again is an 'accounting' interpretation of when a
'year-end' is for such things as the Employee Health Tax. We
will be following the Auditors' suggestion at the 1993 year
end and there will be a one-time-only cost of around $77,000.
6) RECEIVING REPORTS
The receiving report in question was incorrectly dated and
the Auditors year-end close off problems relating to this
incorrect date has been brought to the attention of all
Department Heads to ensure that it does not happen again.
4 •
_2
7) MUNICIPAL CONTRIBUTION TO LIBRARY
Library services became a 'Departmental ' operation from an
accounting point of view in 1992 and as such, their operating
or 'municipal contribution' budget did not contain dollar
amounts to cover many functions such as accounts payable,
banking, printing, payroll , insurance, self-insurance and
budget control reporting.
As these functions are not costed and charged to them or to
any other Department of -the municipality, the Library's
'municipal contribution' amount can no longer be interpreted
as an amount from which a surplus or deficit can be
determined.
8) VACATION PAY ACCRUAL
This is an 'accounting profession' ruling on the proper
allocation of accrued costs and it has been part of the
Municipal Financial Reporting Handbook for many years.
We have resisted setting up the accrual as we do not
necessarily agree with it but it is now being widely
implemented in municipal financial statements and we do not
appear to have any option.
The one-time-only cost for 1993 will be around $430,000.
You will note that the Auditors main area of,concern in their
Management Letter this year is 'year-end' accounting and, to comply,
we will be facing a net one-time-only cost of around $432,000.
This amount will be incorporated into an estimated source of
surplus/deficit report which will be prepared later in the year.
•
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J. Walls
Treasurer-Collector
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JW/bc
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