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FIN 10-23
Report to Executive Committee Report Number: FIN 10-23 Date: May 1, 2023 From: Stan Karwowski Director, Finance & Treasurer Subject: 2022 Year End Audit (Interim) File: F-3300-001 Recommendation: 1. That the Audit Service Plan as submitted by Deloitte LLP, set out in Attachment 1 to this report, be received for information. 2. That the Chief Administrative Officer and the Director, Finance & Treasurer be authorized to sign the Master Services Agreement, set out in Attachment 2 to this report, on behalf of the City. Executive Summary: In accordance with generally accepted auditing standards, the Audit Service 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 $91,100. Sufficient provision was available in the 2022 Budget. Discussion: In the Committee’s role as the body responsible for oversight of the financial reporting process, it must review the Audit Service Plan for the 2022 year end audit. The Audit Service 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 March 27, 2023, Resolution #119/23, reappointed Deloitte LLP as the City’s external auditors for a period of three years from and including the audits for 2022 to 2024. 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 10-23 May 1, 2023 Subject: 2022 Year End Audit (Interim) Page 2 Attachment: 1. 2022 Audit Service Plan 2. Master Services Agreement Prepared By: Approved/Endorsed By: Original Signed By: Original Signed By: Kristine Senior, CPA, CA Stan Karwowski, MBA, CPA, CMA Manager, Accounting Services Director, Finance & Treasurer Recommended for the consideration of Pickering City Council Original Signed By: Marisa Carpino, M.A. Chief Administrative Officer 00 The Corporation of the City of Pickering 2022 Audit service plan For the year ended December 31, 2022 Attachment #1 to Report FIN 10-23 Dear Executive Committee Members: We are pleased to provide you with our audit service plan for The Corporation of the City of Pickering (the “City”), for the year ended December 31, 2022. This document describes the key features of our plan including our audit scope and approach, our planned communications with you, and our team. Our audits will include: ● An audit of the City of Pickering’s consolidated financial statements (the “Financial Statements”) for the year ended December 31, 2022 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 ended December 31, 2022 prepared in accordance with Canadian PSAS, and ● An audit of the Trust Funds of the City of Pickering’s financial statements for the year ended December 31, 2022 prepared in accordance with Canadian Accounting Standards for Not-for-Profit Organizations. Our commitment to you is straightforward: we will provide you with outstanding professional services delivered by an experienced and dedicated team of professionals. Our professionals will continue providing you with best practices and insights to face the increasingly complex array of issues and challenges encountered by the City. This report has been provided 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. We look forward to discussing our audit service plan with you and answering any questions you may have. Yours truly, Chartered Professional Accountants Licensed Public Accountants Deloitte LLP Bay Adelaide East 8 Adelaide Street West Suite 200 Toronto ON M5H 0A9 Canada Tel: 416-601-6150 Fax: 416-601-6610 www.deloitte.ca April 13, 2023 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 2022 Audit service plan The Corporation of the City of Pickering | Table of contents i © Deloitte LLP and affiliated entities Table of contents Executive summary 1 Audit risks 3 Appendix 1 – Audit approach 5 Appendix 2 – Communication requirements 9 Appendix 3 – New and Revised Public Sector Accounting Standards 11 Appendix 4 – Deloitte resources a click away 12 The Corporation of the City of Pickering | Executive summary 1 © Deloitte LLP and affiliated entities Executive summary 1 Revenue recognition 2 Management override of controls 3 Management judgments and accounting estimates 4 Implementation of PS 3280 Asset Retirement Obligations and PS 3450 Financial instruments accounting standards 5% of materiality We are responsible for providing reasonable assurance that your financial statements as a whole are free from material misstatement. Materiality (for consolidated City audit) 3% of expenses Preliminary materiality Clearly trivial threshold Audit scope and terms of engagement We have been engaged to perform an audit of the City, Library and Trust Funds’ Financial Statements, as at, and for the year ended, December 31, 2022 (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 audit will be conducted in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). The terms and conditions of our engagement are described in the Master Services Agreement for Professional Services dated April 16, 2023, which is to be signed on behalf of the Committee and management. Audit risks Our materiality levels are based on professional judgment and will be determined using total expenses or fund balances as a reference point for the ultimate determination of materiality as follows: Consolidated financial statements for the City – approximately 3% of expenses City of Pickering Public Library Board – approximately 3% of expenses, and City of Pickering Trust Funds – approximately 3% of fund balances We will inform the Executive Committee of all uncorrected misstatements greater than a clearly trivial amount (5% 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. The Corporation of the City of Pickering | Executive summary 2 © Deloitte LLP and affiliated entities Fraud risk We will develop our audit strategy to address the assessed risks of material misstatement due to fraud. Determining this strategy will involve: 1. Enquiry of those involved in the financial reporting process about inappropriate or unusual activity. 2. Testing a sample of journal entries throughout the period as well as adjustments made at the end of the reporting period. 3. Identifying and obtaining an understanding of the business rationale for significant or unusual transactions that are outside the normal course of business. 4. Evaluating whether your accounting policies may be indicative of fraudulent financial reporting resulting from management’s effort to manage earnings. 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 ask the 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 Committee of our suspicions and discuss the nature, timing, and extent of audit procedures necessary to complete the audit. Use of the work of specialists We intend to rely on the work of the following expert during our audit: Deloitte Risk Advisory We intend to use our own IT specialists to assess the design and implementation of general computer controls. 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. The Corporation of the City of Pickering | Audit risks 3 © Deloitte LLP and affiliated entities 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* Significant Audit risk Our proposed audit response Under Canadian GAAS, we are required to evaluate the risk of fraud in revenue recognition. For municipalities, there is a risk around the occurrence, completeness and accuracy of revenue, deferred revenue, and classification of recognition related to government transfer/grants. 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 (including testing of manual journal entries). We will perform substantive testing to determine if restricted contribtions (i.e. development charges), and government transfers/grants have been recognized appropriately (revenue vs. deferred revenue). Management override of controls* Significant Audit risk Our proposed audit response Under Canadian Auditing Standards, 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 audit tests the appropriateness of journal entries recorded in the general ledger and other adjustments made in the preparation of financial statements We obtain an understanding of the business rationale for significant transactions that we become aware of that are outside of the normal course of business, or that otherwise appear to be unusual given our understanding of the City and its environment We review accounting estimates for bias and evaluate whether the circumstances producing the bias, if any, represent a risk of material misstatement In addition, experienced Deloitte personnel are assigned to the testing and review of journal entries and areas of estimates, and Professional skepticism will be maintained throughout the audit. *Area of Significant risk The Corporation of the City of Pickering | Audit risks 4 © Deloitte LLP and affiliated entities Areas of Special Audit Consideration During our risk assessment, we identified some areas of audit risk that will require special audit consideration. These areas of risk, together with our planned responses, are described below: Management judgments and accounting estimates Implementation of PS 3280 Asset Retirement Obligations and PS 3450 Financial instruments accounting standards Audit risk Our proposed audit response In fiscal 2023, two new significant accounting standards, PS 3280 Asset retirement obligations, and PS 3450 Financial instruments, will come in effect. Both standards will require early preparation by the City, including development of accounting policies, information gathering with various City departments, engagement of external consultants to assist with valuation, and development of go-forward processes for policy maintenance. We will discuss with management their implementation plan for the new standards. Obtain an understanding from management of the approach to ARO identification, including procedures undertaken to ensure completeness of identification of such obligations. Obtain management’s calculation of ARO and opening balance adjustment, and any assumptions and estimates used. Perform detailed testing on the inputs to the calculation, including assessing the reasonableness of assumptions and recalculation of the ARO liability, amortization and accretion expense. Review management’s assessment of the applicability of PS 3450. Audit risk Our proposed audit response Management judgments and accounting estimates may be subject to estimation uncertainty. Significant judgements and estimates Accounts involving significant estimates include allowance for doubtful accounts, certain accrued liabilities, post-employment benefits liability, WSIB liabilities, estimates relating to the useful lives of tangible capital assets, and estimates relating to asset retirement obligations. Understand how management makes the accounting estimates and the underlying data on which those estimates are based. Review support for significant assumptions made by management. (i.e., third party source data). Evaluate whether the significant assumptions made by management provide a reasonable basis for the accounting estimate, whether and how management considered alternative assumptions or outcomes, and why they have rejected them. Review transactions and events occurring subsequent to year-end to determine the reasonableness of estimates made at year-end. Review the consistency of assumptions made by management. The Corporation of the City of Pickering | Appendix – Audit approach 5 © Deloitte LLP and affiliated entities 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. Focus area Risk based audit • Deliver a customized risk assessment, focusing our attention and resources on the audit areas that are most relevant to the City. Confidential Information • Protecting the privacy and confidentiality of our clients and the firm is a cornerstone of the professional standards every Deloitte partner and practitioner commits to upholding every day. • Deloitte employs technical, physical, and procedural safeguards, including our Confidential Information Program, to appropriately safeguard your data before, during, and after the course of the engagement. Professional skepticism • Obtain a thorough understanding of the relevant facts and information, analyze reasonable alternatives, apply a questioning mindset and challenge management’s assumptions. • Perform a more rigorous review of potential contradictory evidence. Consultations • Involve additional resource or consult with technical resources concerning the significant or unusual events. Understanding your current business and its structure Understanding your accounting processes and internal controls Understanding your IT systems Identifying potential engagement risks and planning control testing and substantive procedures directly related to the risks Consideration of the risk of fraud Inquiring directly of the Committee about fraud risk Assessing risks and controls relating to information technology Incorporate an element of unpredictability when selecting the nature, timing and extent of our audit procedures. Evaluating the design and determining the implementation of internal controls relevant to the audit Performing substantive audit procedures Prior to rendering our report, we will conclude whether: o The scope of the audit was sufficient to support our opinion, and o The misstatements identified during the audit do not result in the financial statements being materially misstated. Reconfirming our independence Delivering professional excellence Assesssing and responding to engagement risk Developing and executing the audit plan Reporting and assessing performance Initial Planning The Corporation of the City of Pickering | Appendix – Audit approach 6 © Deloitte LLP and affiliated entities When general IT controls (GITCs) may be relevant? For example: A billing system that performs many functions (such as processing orders, generating invoices, and tracking financial balances) and it processes and houses data. The entity relies on the functionality and the data processed by the system. Additionally, the volume and complexity of transactions processed by system is considered high. Therefore, the billing system is relevant to the audit. Factor #1 Data For example: •3-way match of the purchase order, goods receipt and invoice prior to payment •The calculation of depreciation expense •Access is restricted to update inventory quantity Factor #2 Automated Controls For example, a system- generated A/R aging report from the financial reporting application is used to determine the allowance for doubtful accounts. Factor #3: System Generated Reports For example, a telecommunications company uses its application system to create a log of the services provided to its customers, to initiate and process its billings for the services, and to automatically record such amounts in the general ledger. It is a highly automated environment and therefore most of the audit evidence is maintained in the application system itself. The team has concluded that substantive procedures alone would not be sufficient to address certain risks of material misstatements. Therefore, the application system is relevant for the audit. Factor #4: Highly automated environment where substantive procedures alone are insufficient The determination of which IT system aspects are relevant to our audit is based on the four factors. The Corporation of the City of Pickering | Appendix – Audit approach 7 © Deloitte LLP and affiliated entities Focus area Audit technology • Deloitte Connect – Use Deloitte’s secure, online collaboration site to facilitate a two-way dialogue between the Deloitte team and the City team to effectively manage engagement coordination and provide greater transparency allowing both management and auditor visibility over client request status. • Deloitte Spotlight - Gather data and test journal entries, identify risks and anomalies more quickly, and generate meaningful insights through data visualization. • Argus – Use Deloitte’s artificial intelligence tool to analyze the population of contracts or other documents to identify variations, potential risks and hone in on items of interest. Innovating our audit approach Use of Innovation Audit Analytics Argus Excel analytics Deloitte Spotlight Deloitte Signal Deloitte Connect Deloitte Signal delivers a comprehensive, customized, and flexible data analysis using trends, metrics, and ratios from coordinated external and internal resources. Deloitte’s artificial intelligence tool that extracts analytics across an entire population of documents and highlights variations that can help us identify risks. Deloitte’s proprietary tool, focuses testing on high-risk transactions and streamline common audit test procedures. We are leveraging specialists and technology-powered solutions in our audit delivery model to transform the way we plan and execute our audits. Deloitte Spotlight mines journal entry data to test 100 percent of select populations in a matter of minutes, identifies risks and anomalies more quickly, and generates meaningful insights through data visualization. Deloitte’s secure, online collaboration site that facilitates a two-way dialogue between the Deloitte team and client team to effectively manage engagement coordination. The Corporation of the City of Pickering | Appendix – Audit approach 8 © Deloitte LLP and affiliated entities Focus area Processes • Project management - Enhance project management oversight and effective communications between the audit team and management. The Corporation of the City of Pickering | Appendix – Communication requirements 9 © Deloitte LLP and affiliated entities Appendix 2 – Communication requirements Required communication Reference Audit Service Plan 1. Our responsibilities under Canadian GAAS, including forming and expressing an opinion on the financial statements CAS1 260.14 2. An overview of the overall audit strategy, addressing: a. Timing of the audit b. Significant risks, including fraud risks CAS 260.15 3. Significant transactions outside of the normal course of business, including related party transactions CAS 260 App. 2, CAS 550.27 Enquiries of those charged with governance 4. How those charged with governance exercise oversight over management’s process for identifying and responding to the risk of fraud and the internal control that management has established to mitigate these risks CAS 240.21 5. Any known suspected or alleged fraud affecting the City CAS 240.22 6. Whether the City is in compliance with laws and regulations CAS 250.15 Year-end communication 7. Modification to our audit plan and strategy CAS 260.A26 8. Fraud or possible fraud identified through the audit process CAS 240.40-.42 9. Significant accounting policies, practices, unusual transactions, and our related conclusions CAS 260.16 a. 10. Alternative treatments for accounting policies and practices that have been discussed with management during the current audit period CAS 260.16 a. 11. Matters related to going concern CAS 570.25 12. Management judgments and accounting estimates CAS 260.16 a. 13. Significant difficulties, if any, encountered during the audit CAS 260.16 b. 14. Material written communications between management and us, including management representation letters CAS 260.16 c. 15. Circumstances that affect the form and the content of the auditor’s report CAS 260.16d. 16. Modifications to our opinion CAS 260.A21 17. Our views of significant accounting or auditing matters for which management consulted with other accountants and about which we have concerns CAS 260.A22 18. Significant matters discussed with management CAS 260.A.22 1 CAS: Canadian Auditing Standards – CAS are issued by the Auditing and Assurance Standards Board of CPA Canada The Corporation of the City of Pickering | Appendix – Communication requirements 10 © Deloitte LLP and affiliated entities 19. Matters involving non-compliance with laws and regulations that come to our attention, unless prohibited by law or regulation, including illegal or possibly illegal acts that come to our attention CAS 250.23 20. Significant deficiencies in internal control, if any, identified by us in the conduct of the audit of the financial statements CAS 265 21. Uncorrected misstatements and disclosure items CAS 450.12-13, 22. Any significant matters arising during the audit in connection with the City’s related parties CAS 550.27 The Corporation of the City of Pickering | Appendix – New and Revised Public Sector Accounting Standards 11 © Deloitte LLP and affiliated entities Appendix 3 – New and Revised Public Sector Accounting Standards The following is a summary of certain new or revised Canadian Public Sector Accounting Standards that will become effective in 2022 and beyond. Public Sector Accounting Standards Title Description Effective Date Section PS 3280 - Asset retirement obligations This Section establishes standards on how to account for and report on the legal obligations associated with the retirement of tangible capital assets. Effective April 1, 2022. Earlier adoption is permitted. Section PS 3450 - Financial instruments This Section establishes standards on how to account for and report all types of financial instruments including derivatives. Effective April 1, 2022, earlier adoption is permitted. Section PS 3400 - Revenue This Section establishes standards on how to account for and report on revenue. Specifically, it differentiates between revenue arising from transactions that include performance obligations and transactions that do not have performance obligations. Effective for fiscal years beginning on or after April 1, 2023. Earlier adoption is permitted. This Section may be applied retroactively or prospectively. The Corporation of the City of Pickering | Appendix – Deloitte resources a click away 12 © Deloitte LLP and affiliated entities Appendix 4 – Deloitte resources a click away At Deloitte, we are devoted to excellence in the provision of professional services and advice, always focused on client service. We have developed a series of resources, which contain relevant and timely information. See links below to receive practical insights, invitations to Deloitte events/webcasts, and newsletters via email and other electronic channels. You will be able to select business topics and industries that align with your interests. Canada’s Best Managed Companies (www.bestmanagedcompanies.ca) Target audience Directors and CEO/CFO The Canada's Best Managed Companies designation symbolizes Canadian corporate success: companies focused on their core vision, creating stakeholder value and excelling in the global economy. Deloitte Viewpoints (https://www.iasplus.com/en-ca/tag- types/deloitte-viewpoints) Target audience CFO Controller and Financial reporting team Electronic communications that helps you to stay on top of standard-setting initiatives impacting financial reporting in Canada. CFO's corner (https://www.iasplus.com/en-ca/cfos-corner) Target audience CFO and VP Finance Controller and Financial reporting team Editorial providing insights into key trends, developments, issues and challenges executives face, with a Deloitte point of view. Deloitte Dbriefs (https://www.iasplus.com/en- ca/dbriefs/webcasts) Targeted audience CFO and VP Finance Controller and Financial reporting team Learning webcasts offered throughout the year featuring our professionals discussing critical issues that affect your business. Recent publications ESG (November 2022) Proposed PS 3251 – Employee benefits (September 2021) PSAB’s government NPO strategy (April 2021) Centre for Financial Reporting - PSAS (https://www.iasplus.com/en- ca/standards/psas/public-sector-accounting- standards) Target audience CFO and VP Finance Controller and Financial reporting team Web site designed by Deloitte to provide the most comprehensive information on the web about financial reporting frameworks used in Canada. Summaries of each standard that forms part of the Public Sector Accounting Standards can be found on our Deloitte Centre for Financial Reporting. April 16, 2023 Private and confidential Marisa Carpino 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 Ms. Carpino and Mr. Karwowski: 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 Appendices A to this MSA contain a description of the following services: ●Appendix A – Financial statement audit (“Audit”) Should we during the term of this MSA, provide any of the services 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 fees for these services will be based on our standard hourly rates, which may change from time to time. The chart also sets out an estimate of our professional fees, exclusive of consulting fees (see further below). Deloitte LLP 8 Adelaide Street West Suite 200 Toronto ON M5H 0A9 Tel: 416‐601‐6150 Fax: 416‐601‐6610 www.deloitte.ca Attachment #2 to Report FIN 10-23 General business terms The Corporation of the City of Pickering April 16, 2023 Page 2 Scope of services chart Entity name Year end Reporting period(s) (“Fiscal Year”) 2022 Audit 2023 Audit 2024 Audit The Corporation of the City of Pickering December 31 Current period only $83,500 2022 fee plus inflation 2023 fee plus inflation The Corporation of the City of Pickering Trust Funds December 31 Current period only Included in City audit fee Pickering Public Library Board December 31 Current period only $7,600 2022 fee plus inflation 2023 fee plus inflation Payment of Invoices and Fees Invoices shall be due upon receipt. Based on the anticipated timing of the work, our fees will be billed approximately as follows for the current year. Fees for subsequent years will be billed according to the same approximate schedule. Deloitte reserves the right to adjust the fee amount as required and agreed to in writing by the parties. Invoice Date Amount Upon signing of engagement letter $25,000 Upon completion of fieldwork $55,000 Upon issuance of final financial statements $11,100 We anticipate sending invoices according to the above schedule. Our continued service on this engagement is dependent upon payment of our invoices in accordance with these terms. In the event the total invoiced amounts are greater than the total cost of the services or in the event the engagement cannot be completed, the difference will be returned to you within 30 days of Deloitte’s conclusion of the services. General business terms The Corporation of the City of Pickering April 16, 2023 Page 3 For purposes of this MSA and the appendices, “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. Lilian Cheung will be responsible for the services that we perform. 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 in the attached appendices. We are committed to client service. Here are our client service standards: ● Making and meeting our commitments 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; General business terms The Corporation of the City of Pickering April 16, 2023 Page 4 ● 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 compilation 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. 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 General business terms The Corporation of the City of Pickering April 16, 2023 Page 5 The services and terms set forth in and incorporated into this letter are acknowledged and approved by the Corporation of the City of Pickering: _________________________________ Signature _________________________________ Title _________________________________ Date _________________________________ Signature _________________________________ Title _________________________________ Date General business terms The Corporation of the City of Pickering April 16, 2023 Page 6 General business terms The Corporation of the City of Pickering April 16, 2023 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 City or other 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 performance 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 notice 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 – Any fee estimates take 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 April 16, 2023 Page 7 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 or with respect to any specific transaction and are only intended for the benefit of the Client. The Client shall use the advice, opinions, reports or other work product of Deloitte (the “Work Product”) solely for the purposes specified in this Agreement and, in particular, shall not, without the prior written consent of Deloitte, use the Work Product in connection with business decisions of any third party or for advertisement purposes. The Client shall indemnify and hold harmless Deloitte and the Deloitte Entities from and against all claims, liabilities, losses, damages, costs or expenses attributable to claims of third parties relating to the use of or reliance on any of the Services (including, without limitation, the Work Product) by any person or entity other than Client, except to the extent finally judicially determined to have resulted primarily from the bad faith or intentional misconduct of Deloitte or a Deloitte Entity. The provisions of this section shall apply regardless of the form of action, damage, claim, liability, cost, expense, whether in contract (including fundamental breach), statute, tort (including negligence) or otherwise. The mere receipt of any advice, opinions, reports or other work product by any third party is not intended to create any duty of care, professional relationship or any present or future liability between such third party and Deloitte. As a consequence, if copies of any Work Product (or any information derived therefrom) are provided to a third party pursuant to Deloitte’s prior written consent, it is on the basis that Deloitte owes no duty of care or liability to them, or any other third party who subsequently receive the same. 8. Privacy Deloitte and the Client agree that, in connection with the engagement, Deloitte may collect, use, disclose and otherwise process personal information about identifiable individuals (“Personal Information”). Deloitte’s Services 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, affiliates, subcontractors and personnel (“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, General business terms The Corporation of the City of Pickering April 16, 2023 Page 8 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. 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 several and not joint and several and the Client may only claim payment from Deloitte of Deloitte’s proportionate 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 apply 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 agréés du Québec. 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 agréés du Québec 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 Agreement, “Deloitte” shall mean Deloitte LLP and its directors, officers, partners, professional corporations, employees, subsidiaries, affiliates and subcontractors 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. General business terms The Corporation of the City of Pickering April 16, 2023 Page 9 When Deloitte is performing audit, review or attest/assurance services that are subject to the US Public Company Accounting Oversight Board (“PCAOB”) and/or US Securities and Exchange Commission (“SEC”) rules or professional standards, any clauses that result in a limitation of Deloitte’s liability do not apply. 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. 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 Extractors useful 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. Where analytics have been provided to you during the course of the audit, such analytics and the information contained therein are for general information only and Deloitte is not, by means of these analytics, rendering accounting, business, financial, investment, legal, tax, or other professional advice. The Client shall be solely responsible for the accuracy and completeness of all data and information provided to Deloitte for purposes of such analytics. The Client acknowledges and agrees that such analytics were prepared based on information provided by the Client, which was taken “as is” and not validated or confirmed by Deloitte in any way. 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. General business terms The Corporation of the City of Pickering April 16, 2023 Page 10 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 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 unsubscribe@deloitte.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 exigé que la présente convention ainsi que tous les documents s’y rattachant soient rédigés dans la langue anglaise. 21. Publicity – The Client shall not issue any press release or make any statements to the media pertaining to Deloitte, refer the media to Deloitte or ask Deloitte to act as media spokesperson on behalf of the Client, make any public statement relating to this Agreement, the Services, the Deliverables (where applicable) or the parties’ business relationship without the prior written consent of Deloitte, nor shall the Client disclose the existence or contents of this Engagement Letter, except as required by law. General business terms The Corporation of the City of Pickering April 16, 2023 Page 11 22. Force Majeure – No party shall be deemed to be in breach of the engagement as a result of any delays or non‐performance directly or indirectly resulting from circumstances or causes beyond its reasonable control, including, without limitation, fire, epidemic or other casualty, act of God, strike or labor dispute, war or other violence, any law, order or requirement of any governmental agency or authority, or pandemics (including, without limitation, COVID‐19 and any such restrictions or conditions on working practices in response to such a threat). For greater certainty, Deloitte shall have no liability for any failure or delay to perform its obligations related to the Services, to the extent caused and/or contributed to by the spread of COVID‐19 and its associated impacts. Appendix A Financial statement audit The Corporation of the City of Pickering April 16, 2023 Our audit services and audit scope The consolidated financial statements We may be requested by you from time to time to audit the consolidated financial statements of the City. These financial statements are comprised of the consolidated statement of financial position as at the fiscal year end of the City (“Fiscal Year”), and the consolidated statements of operations, changes in net financial asset and cash flows for the Fiscal Year, and a summary of significant accounting policies and other explanatory information (collectively, the “Financial Statements”). 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. Appendix A | Financial statement audit The Corporation of the City of Pickering April 16, 2023 Page 2 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. 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 conclusions 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 an annual report), we are required to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements 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 Auditor’s Responsibilities Relating to Other Information. Communication with the Board of Directors The Board of Directors 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 timing 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; Appendix A | Financial statement audit The Corporation of the City of Pickering April 16, 2023 Page 3 ● 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. 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 Board of Directors 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 Board of Directors 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. Appendix A | Financial statement audit The Corporation of the City of Pickering April 16, 2023 Page 4 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 advise 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. 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 proposed to 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. Appendix A | Financial statement audit The Corporation of the City of Pickering April 16, 2023 Page 5 Independence For purposes of the following three paragraphs, “Deloitte” shall mean Deloitte LLP and Deloitte Touche Tohmatsu Limited, including related 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. Lilian Cheung. 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. 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 April 16, 2023 We will provide you with our report, 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 statements of The Corporation of the City of Pickering (the ”City”), which comprise the consolidated 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 (“PSAS”). 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 PSAS, 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. 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 Appendix A(i) | Financial statement audit The Corporation of the City of Pickering April 16, 2023 Page 2 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. 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. Appendix A(i) | Financial statement audit The Corporation of the City of Pickering April 16, 2023 Page 3 Chartered Professional Accountants Licensed Public Accountants [DATE]