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FIN 20-24
Report to Executive Committee Report Number: FIN 20-24 Date: October 7, 2024 From: Stan Karwowski Director, Finance & Treasurer Subject: 2024 Year End Audit (Interim) - File: F-3300-001 Recommendation: 1. That the 2024 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 Engagement Letter, set out in Attachment 2 to this report, on behalf of the City. Executive Summary: The purpose of this report is to present the 2024 Audit Service Plan and authorize the Chief Administrative Officer and the Director, Finance & Treasurer to sign the Engagement letter on behalf of the City. In accordance with generally accepted auditing standards, the 2024 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. Relationship to the Pickering Strategic Plan: The recommendations in this report respond to the Pickering Strategic Plan Corporate Key to Deliver on Good Governance – Open & Transparent Decision-Making. Financial Implications: The base audit fee for City and Library is estimated at $96,700. Sufficient provision is available in the 2024 Budget. Discussion: The purpose of this report is to present the 2024 Audit Service Plan and authorize the Chief Administrative Officer and the Director, Finance & Treasurer to sign the Engagement letter on behalf of the City. 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 2024 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. FIN 20-24 October 7, 2024 Subject: 2024 Year End Audit (Interim) Page 2 At the Council meeting of March 27, 2023 (Resolution #119/23), Council 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 an annual Engagement Letter (EL) 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 EL is included as Attachment 2 to this report. Attachments: 1. 2024 Audit Service Plan 2. Engagement Letter Prepared By: Approved/Endorsed By: Original Signed By: Original Signed By: Susan Marsh Stan Karwowski Senior Accounting Analyst, Internal Audit Director, Finance & Treasurer Original Signed By: Kristine Senior Manager, Accounting Services 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 2024 Audit service plan For the year ending December 31, 2024 To be presented at October 7, 2024 Executive Committee meeting Attachment 1 to Report FIN 20-24 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 ending December 31, 2024. 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 Pickerings consolidated financial statements (the Financial Statements) for the year ending December 31, 2024, prepared in accordance with Canadian Public Sector Accounting Standards (PSAS) An audit of the City of Pickering Public Library Boards financial statements for the year ending December 31, 2024, prepared in accordance with Canadian PSAS, and An audit of the Trust Funds of the City of Pickerings financial statements for the year ending December 31, 2024, 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 September 18, 2024 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 2024 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 6 Appendix 2 Communication requirements 10 Appendix 3 New and Revised Public Sector Accounting Standards 12 Appendix 4 Deloitte resources a click away 13 Appendix 5 Assurance services 14 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 new accounting standards 5 Changes to CAS 600 Revised Group Audit standard 6 Implementation of new payroll system 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 ending, December 31, 2024 (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 Engagement Letter dated October 7, 2024, which will be signed on behalf of the Committee by 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 managements 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 managements 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 IT Audit Specialists 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 risks 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. We have pinpointed this inherent fraud risk to the following revenue streams: Government grants (Occurrence, Accuracy and Cut-off) User charges (manual entries only) Developer contributions and development charges (Occurrence and Accuracy) and the corresponding Deferred Revenue (Existence, Rights and Obligations, Completeness, and Valuation and Allocation) Contributed tangible capital assets (Occurrence and Accuracy) The following revenue streams are considered a significant risk but concluded no fraud risk: Penalties and interest on taxes (Occurrence and Cut-off) 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 contributions (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 new accounting standards Audit risk Our proposed audit response The City must adopt several new accounting standards in fiscal 2024, including: PS 3160 Public Private Partnerships PS 3400 Revenue PSG-8 Purchased Intangibles These standards require preparation by the City, including development of accounting policies, information gathering with various City departments 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 implementation, including procedures undertaken to ensure completeness of identification of transactions within scope. Review financial statements disclosures with respect to the first-time adoption and new accounting policies. 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 | Audit risks 5 © Deloitte LLP and affiliated entities Changes to CAS 600 Revised Group Audit standard Audit risk Our proposed audit response Effective for the December 31, 2024, year end audit, revisions to the Group Audit standard will apply to our audit of the Citys consolidated financial statements. These revisions may impact our assessment of the significant components within our audit of the Citys consolidated financial statements (considered as a group audit). As an example, the City of Pickering Public Library Board, as well as the Citys investment in Elexicon, are both considered to be components of the City of Pickering group audit. This may have implications on our audit strategy, scoping, determination of testing to be done at either the group or component level, component materiality, and therefore impact our extent of audit testing and work effort. We will perform our assessment on the areas of applicability of CAS 600 Revised and the impact on our current group audit strategy. We will accordingly tailor our audit procedures to properly address all identified and in-scope component and group account balances. We will adjust our communications and instruments to any component auditors, most notably, the auditors of Elexicon, to ensure the proper conduct of procedures to satisfy our group audit requirements. This will include our involvement in direction, supervision and review of component auditors work, as needed. Implementation of new payroll system Audit risk Our proposed audit response Accuracy and completeness of information transferred into new payroll system during the system conversion process. We will obtain an understanding of the project scope for the systems implementation through discussion with Finance and IT management to assess the implications on our audit strategy. We will test that the data was properly transferred by reviewing and assessing the transfer process and testing data on a sample basis. We will assess the adequacy of new processes related to the system changes. The Corporation of the City of Pickering | Appendix Audit approach 6 © Deloitte LLP and affiliated entities Appendix 1 Audit approach Deloittes 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 managements 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 7 © 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 8 © Deloitte LLP and affiliated entities Focus area Audit technology Deloitte Connect Use Deloittes 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 Deloittes 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. Deloittes artificial intelligence tool that extracts analytics across an entire population of documents and highlights variations that can help us identify risks. Deloittes 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. Deloittes 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 9 © 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 10 © 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 managements 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 auditors 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 11 © 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 Citys related parties CAS 550.27 The Corporation of the City of Pickering | Appendix New and Revised Public Sector Accounting Standards 12 © 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 2024 and beyond. Public Sector Accounting Standards Title Description Effective Date 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. Section PS 3160 Public Private Partnerships This Section establishes standards on how to account for public private partnership arrangements. Effective for fiscal years beginning on or after April 1, 2023. Earlier adoption is permitted. Guidelines PSG 8 Purchased Intangibles This new Guideline explains the scope of the intangibles now allowed to be recognized in financial statements given the removal of the recognition prohibition relating to purchased intangibles in Section PS 1000. Effective for fiscal years beginning on or after April 1, 2023. Earlier adoption is permitted. The Corporation of the City of Pickering | Appendix Deloitte resources a click away 13 © 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. Canadas 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) PSABs 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. The Corporation of the City of Pickering | Appendix Assurance services 14 © Deloitte LLP and affiliated entities Appendix 5 Assurance services At Deloitte, we offer a variety of services to assist our clients. We have included below some assurance services that we offer to our public sector clients for your consideration. Complex Accounting Advisory As accounting standards and the regulatory interpretations of these standards are ever evolving, we often see our clients asking what are the best practices for their business. Below are some common areas where technical accounting support is often needed as clients prepare to implement, implement and subsequently monitor. 1. Adoption of New Accounting Standards Deloitte often supports a business through its adoption of new accounting standards, including accounting memo review, advisory services on best practices related to accounting policy implementation and financial statement preparation. Topics often advised on include but are not limited to asset retirement obligations, financial instruments, purchased intangibles, and public private partnerships. 2. On-Call Advisory Many of our clients require technical accounting insights on an on-going basis, to ensure their accounting policies and treatments to new transactions reflect the industry best practices. Deloitte can discuss key considerations with management on the best treatments, provide relevant accounting guidance. 3. Training on new or amended accounting standards To ensure their organizations are up to date on their technical accounting knowledge and/or their professionals meet their certified professional development hour (CPD) requirement, Deloitte regularly hosts training for our clients. These trainings can include new accounting standards/amendments, regulatory exposure draft findings and upcoming standards to name a few. 4. Sustainability and ESG Compliance There is growing pressure for public sector entities to recognize and mitigate their environmental and social impact, and provide credible, transparent information to their stakeholders. The complexity only grows as changes in government policies and enforcement shift. Deloitte can assist an organization in creating strategies and practices to address the extensive oversight, disclosure, and reporting requirements in a context of evolving regulatory environment and stakeholder expectations. The Corporation of the City of Pickering | Appendix Assurance services 15 © Deloitte LLP and affiliated entities Accounting Operational Advisory As the business needs of our clients are ever evolving, we are often asked how their systems and operational functions can be optimized. Below are common areas where accounting operational advisory services have been rendered, resulting in increased operational capacity, enhanced financial insights or optimized system functionality. Finance Diagnostic Do you have new business processes? Are there new regulatory requirements? Has the business completed an acquisition or restructuring? Does your process have a history of control failures? Deloitte can assess the finance functions, evaluating whether the process has any weaknesses or inefficiencies that can be remediated. Deloitte can advise management through the development or integration of new business processes, ensuring they reflect the industry best practices. Data Analytics Do you have a limited use of data to complete your analysis? Are you looking to understand the leading data tools and the benefits they can provide your business? Deloitte can review current data limitations and provide a road map for improved data transformation. Deloitte can assist in leveraging enabling technologies to centralize and harmonize various information to enhance reporting, analysis, and decision-making. System Optimization & Selection Does your process have inefficiencies or excessive manual elements? Does your system meet all your business needs? Do your systems integrate effectively? Deloitte can assess your current processes and recommend adjustments to improve inefficiencies or reduce manual tasks. Deloitte can evaluate your existing systems and advise on optimal transformation and integration. KPIs & Benchmarking Do you know how your competitors are benchmarking their performance? Do your KPIs align with your long-term strategic objectives and those of the market? Deloitte can advise on the most appropriate benchmarking metrics based on the industry. Deloitte can assess your alignment of KPIs with your strategic goals, evaluate potential gaps and recommend changes to promote better alignment. Dear Ms. Carpino and Mr. Karwowski: Deloitte LLP (Deloitte)is privileged to be your professional services provider. The purpose of this letter is to confirm our mutual understanding of: (a) the services that we will provide to you, including a description of the scope of our services, and (b) the general business terms related to such services. Services and fees Appendix A to this Engagement Letter (EL)contains a description of the following services: Appendix A Financial statement audit (Audit). Should we during the term of this EL, 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 EL, 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). In addition to the professional fees, you will also pay applicable taxes. Scope of services chart Entity name Year end Service Type Fee The Corporation of the City of Pickering December 31, 2024 Financial Statement Audit $88,600 The Corporation of the City of Pickering Trust Funds December 31, 2024 Financial Statement Audit Included in fee above Pickering Public Library Board December 31, 2024 Financial Statement Audit $8,100 Deloitte LLP Bay Adelaide East 8 Adelaide Street West Suite 200 Toronto ON M5H 0A9 Canada Tel: 416 601 6150 Fax: 416 601 6151 www.deloitte.ca October 7, 2024 Private and confidential Marisa Carpino Chief Administrative Officer and Stan Karwowski Director, Finance and Treasurer The Corporation of the City of Pickering 1 The Esplanade Pickering ON L1V 6K7 Attachment 2 to Report FIN 20-24 The Corporation of the City of Pickering October 7, 2024 Page 2 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. Invoice Date Amount Upon signing of engagement letter $35,000 Upon completion of fieldwork $50,000 Upon issuance of final financial statements $11,700 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. If payment is not received within thirty (30) days of the Payment Due Date, (i) such invoice shall accrue a late charge equal to the lesser of (a) 1½% per month or (b) the highest rate allowable by law, in each case compounded monthly to the extent allowable by law, and (ii) we may also suspend or terminate the Services. Invoices shall be paid by Electronic Fund Transfer (EFT). If circumstances affecting timing and fee estimate arise (such as those included in this EL), and as a result the fees for any of the services outlined are expected to be greater than indicated due to the need for additional work, we will contact you to discuss the reason and seek your approval for this additional work in writing. For purposes of this EL and the appendices,Financial Statementsshall 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. Also, we would be pleased to provide you with other services, such as tax advisory, 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 EL will apply. Term This EL will terminate upon completion of the Services herein stated. In accordance with section 2 of the general business terms, this EL can be terminated on 30 dayswritten notice. The Corporation of the City of Pickering October 7, 2024 Page 3 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; 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. 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. The Corporation of the City of Pickering October 7, 2024 Page 4 If this EL, including the appendices, the circumstances affecting timing and fee estimate section, and the general business terms, are acceptable and the services described are in accordance with your understanding, please sign the copy of this EL in the space provided below and return it to us to indicate your agreement. Yours truly, Chartered Professional Accountants Licensed Public Accountants Enclosure The Corporation of the City of Pickering October 7, 2024 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 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 Circumstances affecting timing and fee estimate The Corporation of the City of Pickering October 7, 2024 The fees quoted for the engagement are based on certain assumptions. Circumstances may arise during the engagement that may significantly affect the targeted completion dates and our fee estimate. As a result, additional fees may be necessary. Such circumstances include, but are not limited to, the following: Engagement facilitation 1. Changes to the timing of the engagement at the Citys request. Changes to the timing of the engagement usually require reassignment of personnel used by Deloitte in the performance of services hereunder. However, because it is often difficult to reassign individuals to other engagements, Deloitte may incur significant unanticipated costs. 2. All schedules are not (a) provided by the City on the date requested, (b) completed in a format acceptable to Deloitte, (c) mathematically correct, or (d) in agreement with the appropriate City records (e.g., general ledger accounts). Deloitte will provide the City with a separate listing of required schedules, information requests, and the dates such items are needed. 3. Significant delays in responding to our requests for information such as reconciling variances or providing requested supporting documentation (e.g., invoices, contracts, and other documents). 4. Deterioration in the quality of the Citys accounting records during the current year engagement in comparison with the prior year engagement. 5. A completed trial balance, referenced to the supporting analyses, schedules and Financial Statements, is not provided timely by the City. 6. Draft Financial Statements with appropriate supporting documentation are not prepared accurately and timely by the Citys personnel. 7. Electronic files in an appropriate format and containing the information requested are not provided by the City on the date requested for our use in performing file interrogation. Deloitte will provide the City with a separate listing of the required files and the dates the files are needed. 8. The engagement team, while performing work on the Citys premises, is not provided with high speed access to the Internet via the Citys existing network for purposes of conducting the engagement. Significant issues or changes 1. Significant deficiencies are identified in the Citys internal control that result in the expansion of our engagement procedures. 2. A significant level of proposed adjustments is identified during our engagement. 3. A significant number of drafts of the Financial Statements are submitted for our review or we identify a significant level of deficiencies in the draft Financial Statements. Circumstances affecting timing and fee estimate The Corporation of the City of Pickering October 7, 2024 Page 2 4. Significant new issues or changes arise as follows: a. New accounting issues; b. Changes in accounting policies or practices from those used in prior years; c. Changes in auditing standards; d. Events or transactions not contemplated in our budgets; e. Changes in the Citys financial reporting process or IT systems; f. Changes in the Citys accounting personnel, their responsibilities, or their availability; and g. Change in the Citys use of specialists or the specialists and/or their work product does not meet the qualifications required by Canadian GAAS for our reliance upon their work. 5. Changes in engagement scope caused by events that are beyond our control. General business terms The Corporation of the City of Pickering October 7, 2024 The following general business terms (the GBTs)apply to all services that are performed under this EL that further amend or describe services issued under this EL (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 EL (the Client).The GBTs and the EL (including the appendices to the EL) are together the Agreement. The Engagement Letter, any appendices, and these general business terms issued by Deloitte and addressed to the Client (together the Agreement)constitute the whole agreement between the Client and Deloitte in relation to the services and work product (including Advice as defined below) described in the Engagement Letter to be provided by Deloitte (the Services)and Deloittes responsibilities for providing the Services. Capitalized terms not defined in these general business terms shall have the meaning given to them in the Engagement Letter. a) This Engagement Letter is between the Client and Deloitte. For the purposes of this Engagement Letter: Clientshall mean the entity specified in the Engagement Letter and shall include such of the Clients subsidiaries and/or affiliates as are identified in the Engagement Letter or, if none is identified, all the Clients subsidiaries and affiliates (together with the Client,Client Group)and references to the Client shall include the other members of the Client Group unless the context requires otherwise. The Client represents and warrants that it has the power and authority to (i) sign the Engagement Letter, and (ii) bind, itself and the members of the Client Group. Adviceshall mean all advice, opinions, reports and other work product in any form (including Deliverables) provided by or on behalf of Deloitte and/or its subcontractors as part of the Services. Affiliatemeans, in relation to the Client, any company, partnership or other legal entity (other than a natural person) which from time to time directly or indirectly Controls, is Controlled by or is under the common Control with, the Client, where Controlmeans the legal power to direct, or cause the direction, of the general management of the company, partnership or other legal entity. Deliverablesmeans any and all tangible work outputs of the Services to be delivered by Deloitte as part of the Services, including written returns, reports, documents and other materials. General business terms The Corporation of the City of Pickering October 7, 2024 Page 2 b) Deloitte Entitiesmeans Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (DTTL),its member firms and their respective subsidiaries and affiliates (including Deloitte), their predecessors, successors and assignees, and all partners, principals, members, owners, directors, employees, subcontractors and agents of all such entities. Neither DTTL nor,except as expressly provided herein, any member firm of DTTL has any liability for each others acts or omissions. Each member firm of DTTL is a separate and independent legal entity operating under the names Deloitte, Deloitte &Touche, Deloitte Touche Tohmatsuor other related names; and services are provided by member firms or their subsidiaries or affiliates and not by DTTL. 1. Timely performance Deloitte will not be liable for failures or delays in performance that arise from causes beyond Deloittes 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 LP, an affiliate of Deloitte. All Services performed by Deloitte Canada LP shall be performed under the direction of Deloitte which shall remain responsible to the Client for such Services. Deloitte Canada LP 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 Deloittes 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. 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. General business terms The Corporation of the City of Pickering October 7, 2024 Page 3 7. Third parties Deloittes 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 Deloittes 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). Deloittes 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. If the engagement will involve an EU data subject, please contact taxcontracts@deloitte.ca to obtain a copy of the GDPR Privacy statement. 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 Clients consent, except as may be required or permitted by law, regulation, legal authority or professional obligations, or as otherwise permitted by this Agreement. Confidential Information may be disclosed by Deloitte to its affiliates and to member firms of Deloitte Touche Tohmatsu Limited and their respective subsidiaries and, affiliates, 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, processed or stored. The Client also agrees that Deloitte and such third party service providers to Deloitte may aggregate Confidential Information and use and disclose that information as part of research and advice, including, benchmarking services, provided that all such information will be rendered anonymous and not subject to association with the Client. General business terms The Corporation of the City of Pickering October 7, 2024 Page 4 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 Deloittes 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 amount in excess of the fees paid by the Client to Deloitte for the specific Service giving rise to claim, liability or expense. 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 Deloittes liability will be several and not joint and several and the Client may only claim payment from Deloitte of Deloittes 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,Deloitteshall 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. 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 Deloittes liability do not apply. General business terms The Corporation of the City of Pickering October 7, 2024 Page 5 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 Clients computing systems. Deloitte recommends that the Client perform adequate security and other appropriate testing on the Extractors before installation. 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 Deloittes performance of the Services. 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 Extractorssource 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 Clients computing systems, unless Deloitte and the Client have entered into a subsequent agreement that allows for the Clients 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 isand 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. 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. General business terms The Corporation of the City of Pickering October 7, 2024 Page 6 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. 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 Deloittes 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. 19. 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 sy rattachant soient rédigés dans la langue anglaise. 20. 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). 21. Marketing &Publicity Material &Use of Name Neither Deloitte nor the Client shall use the others trademarks, service marks, logos, and/or branding in external publicity material without such other partys prior written consent.Client shall not: i) issue any press release or make any statements to the media pertaining to Deloitte, ii) refer the media to Deloitte or ask Deloitte to act as media spokesperson on behalf of the Client, iii) make any public statement relating to this Agreement, the Services, the Deliverables (where applicable) or the partiesbusiness relationship without the prior written consent of Deloitte, iv) nor shall the Client disclose the existence or contents of this [Agreement], except as required by law. 22. Anti corruption Deloitte understands that the Client may be subject to laws that prohibit bribery and/or providing anything of value to government officials with the intent to influence that persons actions in respect of the Client. Deloitte may be subject to similar laws and codes of professional conduct and has its own internal policies and procedures which prohibit illegal or unethical behaviors. In providing the Services, Deloitte undertakes not to offer, promise or give financial or other advantage to another person with the intention of inducing a person to perform improperly or to reward improper behavior for the benefit of the Client, in each case, in violation of applicable law. 23. Anti money laundering Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) (the Act),Deloitte and its personnel are permitted to report any (a) attempted or completed suspicious transactions (transactions which are reasonably suspected to be related to the commission of a money laundering or terrorist financing offence), (b) terrorist property that comes into the possession of Deloitte, and (c) large cash transactions (receipt by Deloitte of over $10,000 Canadian or equivalent in cash) to the Financial Transactions and Reports Analysis Centre of Canada, a government agency. The Act specifically prohibits Deloitte from informing a client that a report has been made. Appendix A Financial statement audit The Corporation of the City of Pickering October 7, 2024 Our audit services and audit scope The consolidated financial statements We have been requested by you 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 and the consolidated statements of operations, changes in net financial asset and cash flows for the Fiscal Year, and a summary of material accounting policy information and other explanatory information. The consolidated 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 auditors 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 October 7, 2024 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 Citys 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 Citys 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 Auditors Responsibilities Relating to Other Information. Communication with the Executive Committee The Executive Committee is responsible for the oversight of the financial reporting process and our work as auditors. We are required to communicate with the Executive Committee about certain matters that may arise during our audit and that may be significant to their role. These matters may include, but are not limited, to: the planned scope and timing of the audit; our views about significant qualitative aspects of the Citys accounting practices, including accounting policies, accounting estimates and financial statement disclosures; any significant matters arising from the audit in connection with the Citys related parties; any events or conditions identified that may cast significant doubt on the Citys ability to continue as a going concern, including whether the events or conditions constitute a material uncertainty; any significant difficulties encountered during the audit; Appendix A | Financial statement audit The Corporation of the City of Pickering October 7, 2024 Page 3 any significant matters that were discussed or subject to correspondence with management; written representations we are requesting; where CAS 720 applies, any uncorrected material inconsistencies between the other information and the Financial Statements or our knowledge obtained in the audit, and any uncorrected material misstatements of the other information we identify from reading the financial and non financial information included in the Citys 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 Executive Committee depending on the type and significance of the issue. Your responsibilities Financial statements and internal control The audit of the Financial Statements does not relieve management or the Executive Committee of their responsibilities. You are responsible for the preparation and fair presentation of the Financial Statements in accordance with PSAS. You are also responsible for establishing internal control necessary for the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error. You must determine what internal control is required, including how it is designed, implemented and maintained. You will advise us of any deficiencies identified and any changes in internal control over financial reporting. Access to information and personnel You are responsible for providing us with access to all information that is relevant to your preparation of the Financial Statements and any additional information that we may request for the purpose of the audit. You will also provide unrestricted access to persons in the City or others from whom we determine we need to obtain evidence for our audit. Appendix A | Financial statement audit The Corporation of the City of Pickering October 7, 2024 Page 4 Prevention of fraud and error You are responsible for designing and implementing programs and controls to prevent and detect fraud, illegal acts and error. You will inform us about all known or suspected fraud, illegal acts or errors affecting the City. You will further inform us of any allegations of fraud, illegal acts or potential errors received in communications (written or oral) from employees, former employees or any other parties external to the City. Compliance with laws and regulations You are responsible for identifying and ensuring that the City complies with the laws and regulations applicable to its activities. You will inform us of any known or possible violations of these laws or regulations. Related parties You will identify the Citys 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. Appendix A | Financial statement audit The Corporation of the City of Pickering October 7, 2024 Page 5 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. Independence For purposes of the following three paragraphs,Deloitteshall 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 Citys 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 Committees responsibilities The Executive Committee is responsible for the oversight of the financial reporting process, including managements preparation of the Financial Statements and monitoring of the Citys 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 December 31 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 Auditors 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 Auditors Responsibilities for the Audit of the Financial Statementssection 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. Appendix A(i) | Expected form of report The Corporation of the City of Pickering December 31 Page 2 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 Citys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the City or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Citys financial reporting process. Auditors 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 auditors 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 Citys 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 managements 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 Citys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors 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 auditors report. However, future events or conditions may cause the City to cease to continue as a going concern. Appendix A(i) | Expected form of report The Corporation of the City of Pickering December 31 Page 3 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. (To be signed Deloitte LLP) Chartered Professional Accountants Licensed Public Accountants [Date of the auditors report]