HomeMy WebLinkAboutFebruary 7, 2006
V)
VI)
Audit Committee Meeting
Agenda
Tuesday, February 7,2006
4:00 PM
Main Committee Room
PAGE
I)
INTRODUCTION OF MANAGER. INTERNAL AUDIT & CONTROL
II)
ADOPTION OF MINUTES
1-4
Minutes of the meeting held on Monday, July 25, 2005
In Camera Minutes of the meeting held on Monday, July 25, 2005
Under Separate
Cover
III)
1.
MATTERS FOR CONSIDERATION
Audit Plan for Year Ending December 31 2005
- Presentation by Auditor
5-35
2.
Interim Audit Update
- Auditor's Interim Management Comments and
Management's Response
. Under Separate
Cover
IV)
REPORTS
1.
Director, Corporate Services & Treasurer
Re: Clerks Division Revenue Cycle Review
36-66
RECOMMENDATION
THAT Report No. CS 11-06 of the Director, Corporate Services &
Treasurer be received for information
OTHER BUSINESS
1.
Letter from MMAH Advising of May 31,2006 Filing Requirements for
FIR and Performance Measures
67 -68
ADJOURNMENT
001
AUDIT COMMITTEE MEETING MINUTES
Monday, July 25, 2005
4:30 PM
PRESENT:
Mayor David Ryan, Chair
COMMITTEE MEMBERS:
M. Brenner
ALSO PRESENT:
D. Dickerson
T. J. Quinn
D. Bentley
G. Paterson
J. Reble
K. Senior
D. Watrous
- Councillor
- Chief Administrative Officer
- City Clerk
- Director, Corporate Services & Treasurer
- Solicitor for the City
- Manager, Accounting Services
- Committee Coordinator
GUESTS:
P. Jesty, Deloitte & Touche
R. Oake, Cake & Associates
G. E. Moulton, Deloitte & Touche
ABSENT:
Councillor Ashe
Councillor McLean
The Committee proceeded without a quorum and recommendations were approved
pending ratification.
(I)
ADOPTION OF !\IIINUTES
Meeting of Monday, June 20,2005
ß!) R_EPORTS
The Committee met In Camera at 4:37 pm.
- 1 -
002
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AUDIT COMMITTEE MEETING MINUTES
Monday, July 25, 2005
4:30 PM
Moved by Councillor Brenner
That the meeting be closed to the public in order to consider the receiving of
advice that is subject to solicitor-client privilege, including communications
necessary for that purpose.
CARRIED PENDING RATIFICATION
Discussion ensued with respect to a confidential memorandum from the Director,
Corporate Services & Treasurer, with respect to the 2004 Forensic Audit.
Refer to the Closed minutes of July 25, 2005.
Moved by Councillor Brenner
That the meeting be open to the public.
CARRIED PENDING RATIFICATION
1.
Director, Corporate Services & Treasurer
Re: Confidential Memorandum on 2004 Forensic Audit
Approved
See Recommendation #1
2.
Director, Corporate Services & Treasurer, Report No. CS 58-05
Re: Clerks Division Revenue Cycle Review
Approved As Amended
See Recommendation #2
II
OTHER BUSINESS
a)
Audit Committee Meetinq Schedule
A meeting schedule will be implemented for the Audit Committee to meet three
times a year with further meetings when required.
- 2-
003
AUDIT COMMITTEE MEETING MINUTES
Monday, July 25, 2005
4:30 PM
b)
Work Plans for Internal Audit Processes
Deloitte & Touche will provide sample work plans to the Director, Corporate
Services & Treasurer.
ß!!)
ADJOURNMENT
The meeting adjourned at 5:50 pm.
The Committee reconvened at 10:45 pm and ratified the actions taken.
- 3 -
004
Appendix I
Audit Committee Report
AC 2005-02
That the Audit Committee of the City of Pickering having met on July 25,2005, presents
its Second Report to Council and recommends:
1.
Director, Corporate Services & Treasurer
Re: Confidential Memorandum on 2004 Forensic Audit
That Confidential Memorandum from the Director, Corporate Services &
Treasurer, dated July 15, 2005, be received for information.
2.
Director, Corporate Services & Treasurer, Report No. CS 58-05
Re: Clerks Division Revenue Cycle Review
1. That Report No. CS 58-05 of the Director, Corporate Services & Treasurer be
received for information; and
2. That Deloitte & Touche be retained for the purposes of investigating the
recommendations noted within the Clerks Division Revenue Cycle Review
and providing their comments with respect to the actions taken by the Clerks
Division; and
3. That the appropriate officials of the City of Pickering be given authority to give
effect thereto.
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Deloitte #&
Deloitte & Touche LLP
5140 Yonge Street
Suite 1700
Toronto, ON M2N 6L7
Canada
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January 27, 2006
Tel: (416) 601 6150
Fax: (416) 601 6151
www.deloitte.ca
The Members of the Audit Committee,
The Corporation of the City of Pickering
Dear Audit Committee Members:
We are pleased to have the opportunity to meet with you to review our 2005 audit plan for the examination of the financial statements of The
Corporation of the City of Pickering for the year ended December 31, 2005.
Our primary goal is to report to the Audit Committee on the faimess of the presentation of The Corporation of the City of Pickering's financial
statements. We intend to provide the best quality service at a fair price and in a timely and efficient manner, with open and effective
communication with both the Audit Committee and Management.
The key objectives of this document are to:
.
.
Outline our formal reporting responsibilities;
Outline our audit approach;
Introduce the professional resources we will employ on the audit;
Provide you with the opportunity to review our audit plan and ask any questions you might have; and
Assist you in discharging your responsibilities relative to the extemal audit of The Corporation of the City of Pickering
.
.
.
We view the development of our audit plan as an important process that provides all parties involved in the audit (i.e. The Audit Committee,
Management and Deloitte & Touche) with an opportunity to assess together audit needs, focus areas, approach and expectations for performance.
We are confident that the plan will enable us to fommlate our report on the financial statements of The Corporation of the City of Pickering on a
cost-effective basis.
This communication is intended solely for the use of the Audit Committee to assist it in discharging its responsibilities with respect to the financial
statements and is not intended for any other purpose. We accept no responsibility to a third party who relies on this infomlation.
We look forward to meeting with you to discuss this report and to answer any questions which you may have.
Yours sincerely,
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Paula A. Jesty, CA
Partner
Member of
Deloitte Touche Tohmatsu
Index
Overview
Financial Reporting Responsibilities
Determining Audit Scope
Audit Risk
Materiality
Areas of Audit Risks or Focus
Internal Controls
Audit Work Plan for 2005
Deloitte & Touche Client Service Team
Auditor Independence
Proposed Audit Fees
Current Developments
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Overview
We have been engaged to perform the following statutory audits for the year-ending December 31, 2005:
. Consolidated financial statements of the Corporation of the City of Pickering (the "City").
. Financial Statements of the Pickering Public Library Board,
. Financial Statements of the City of Pickering Trust Funds, and
. Financial Statements of the Ajax-Pickering Transit Authority (separate audit plan is presented to APTA's
board)
This audit plan forms part of our ongoing communication with the audit committee in accordance with Section
5751 of the CICA Handbook, "Communications with those having oversight responsibility for the financial
reporting process."
Over the past couple of years, the auditing environment has changed dramatically due to numerous new
auditing standards and the harmonization of Canadian auditing standards with international auditing standards.
This has resulted in changes for all audits, in particular as it relates to areas such as the assessment of risk,
fraud and error and internal controls. These matters are discussed in more detail in this audit plan document.
@ Deloitte & Touche LLP and affiliated entities.
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Financial Reporting Responsibilities
. Our audit procedures on the financial statements of the City will be conducted in accordance with Canadian
generally accepted auditing standards ("GAAS").
. Our responsibilities under these standards include:
. the expression of an opinion on the financial statements based on an audit thereof;
. obtaining reasonable, but not absolute, assurance as to whether the financial statements are free from
material misstatement;
. examining on a test basis, evidence supporting the amounts and disclosures in the financial statements;
. assessing the risk that the financial statements may contain misstatements that are material to the
financial statements taken as a whole;
. assessing significant estimates made by Management; and
. assessing the accounting principles used and their application.
. The responsibility for the preparation of the financial statements resides with Management. This
responsibility includes, but is not restricted to, responsibilities related to internal control, selecting and
applying accounting policies, safeguarding assets and preventing and detecting error and fraud.
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Financial Reporting Responsibilities (continued)
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- Review, and approve financial statements
- Review audit plan and audit results
- Ensure systems are in place to manage and
monitor risks
- Maintain oversight of management control
and information systems
- Report financial results on a fair, consistent
and timely basis in accordance with
Canadian GAAP
- Select appropriate accounting policies
- Identify principal risks and establish and
maintain a cost-effective internal control
environment
- Provide management representations
- Assess accounting principles and financial
statement disclosures
- Understand key management control
systems and processes
- Perform audit in accordance with Canadian
generally accepted auditing standards
- Report opportunities for improvements in
control processes
- Report any identified instances of
suspected fraud and error
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Audited Financial
Statements of the
City
Communications to
the Audit Committee
The City of Pickering - 2005 Audit Plan
5
Determining Audit Scope
» Understand the City and its environment
» Understand Internal Control and the Accounting Process
» Review of current regulatory, accounting and auditing
developments
» Consideration of any significant transactions
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2005 Audit Scope
Assess risk and determine materiality.
Development of a business risk based audit
approach.
Determine areas of audit focus and extent
of testing.
» Discussions with Senior Management
» Reassessment of critical accounting policies &
management estimates
» Assess the effectiveness of the design and implementation of internal
controls over key financial accounting cycles
» Assess prior year's audit scope and findings
@ Deloitte & Touche LLP and affiliated entities.
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Audit Risk
Þ- We will perform our audit in accordance with Canadian generally accepted auditing standards. As guided by
these standards, we will employ a risk-based approach in the discharge of our professional responsibilities.
Þ- Audit Risk is the risk that we will express an inappropriate opinion on the financial statements. In order to
reduce the overall audit risk to an acceptable level we make assessments of inherent risk, control risk and
detection risk.
Þ- We assess risk both in terms of risk to the engagement as a whole and risks which are specific to certain
account balances (e.g. existence of assets). The level of inherent risk associated with account balances will
influence the level of controls testing and substantive audit procedures which we will need to perform.
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Materiality
~ Materiality is an essential element of Canadian generally accepted auditing standards and affects the judgment of
the auditor. In the context of financial reporting, materiality refers to the magnitude of an omission or
misstatement of accounting information that, in light of the surrounding circumstances, makes it probable that
the judgment of a reasonable person relying on the information would have been influenced, or a decision
changed, by the omission or misstatement.
~ Materiality is calculated based on professional judgement which involves an assessment of quantitative and
qualitative considerations. We utilize materiality as a basis for evaluating errors noted during the audit to assess
whether there is a misstatement in the financial statements that would impair their quality. Materiality is also
used in the determination of sample sizes for certain substantive tests and as guidance in conducting our
analytical review.
~ Our quantitative calculation of materiality is based on the current assurance guidelines. Consistent with the prior
year, we have selected budgeted expenditures as the quantitative basis for materiality. In our professional
judgment, this measure most appropriately meets the needs of the users of the financial statements. We will use
1.5% of budgeted expenditures for our planning materiality.
@ Deloitte & Touche LLP and affiliated entities.
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Areas of Audit Risks or Focus
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In developing our audit plan, we identify areas where significant audit emphasis will be placed. These audit focus areas are
based on a variety of factors including:
. significance of the balance in relation to materiality;
. internal control considerations;
. degree of judgment required by Management in the area;
. complexity of accounting applications;
. impact on expenditures; and;
. application of new accounting pronouncements.
In our audit plan, amongst other areas, we have identified the areas of focus below. The Audit Committee may wish to add to
this list.
Liabilities
. Completeness of certain liabilities such as WSIB and
Employee Future Benefits
. Review of Actuarial Reports including calculations and
assumptions used
. Review of client calculations and information
. Ensure appropriate accounting treatment has been
applied
. Review related note disclosure in the financial statements
. Reliance on the City's actuary with respect to actuarially
determined liabilities
Reserve and Reserve
Funds
Revenue - Clerks
Department
Investment in Veridian
Corporation
Management Estimates
Year-end cut-off
Public Sector Accounting
(PSAB) Standards
. Various activities were approved and incurred during the year
. Initiatives to improve the overall recording of these activities
to promote accuracy and efficiency
. Review of continuity and material transactions
. Review of revenue recognition criteria for those externally
restricted reserve funds classified as deferred revenue
. Completeness of revenue
. Review of systems and procedures
. Develop expectation for revenue accounts and compare to
amounts recorded
. Assess implication on financial statements of the City
. Communicate with Veridian's auditor regarding reliance
on audit.
. Compliance with PS3060 Government Partnerships
. Value of Investment
. Requires management judgment
(i.e. allowance for assessment appeals, contingent liabilities,
etc.)
. Focused review of calculations
. Discussion with management
. Analytic Review of related account
. Focused substantive testing on accounts payable,
accruals, deferred revenue and receivables
. Accounting for revenue and expenditures in the proper period
. Impact of any new accounting standards
. Work with Finance staff to ensure compliance
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Areas of Audit Risks or Focus (continued)
Fraud and Error
We have continued to identify fraud and error as an audit focus area in 2005. This is largely a reflection of the
auditing/accounting environment which included the introduction of a revised standard entitled "Auditors' Responsibility to
Consider Fraud and Error" effective 2004.
Procedures we will perform to address the risk of fraud and error will include discussions with Management within and
outside of the Finance Department, discussions with the Audit Committee relating to processes in place to prevent and
detect fraud, consideration of the ability of Management to perpetrate fraud through override of internal controls and a
review of selected journal entries, with a focus on entries posted around the year-end date.
Our procedures are designed to identify fraud risk factors that may have a material impact on the financial statements.
Any such items identified will be communicated to the Audit Committee. Due to the limitations and restricted scope of an
audit, as well as the nature of fraud, we may not identify all matters that may be of interest to the Audit Committee.
Management's Role
. Must assess internal control over financial reporting using procedures sufficient to evaluate and test their effectiveness
. Includes controls related to the prevention, identification, and detection of fraud
. Set "tone at the top"
Audit Committees' Responsibilities
. Oversight responsibilities of management's efforts to create a strong internal control environment
. Includes design and implementation of anti-fraud programs and controls
. Proactive in reviewing management's internal controls and process of assessing the risk of fraud
. Responsibility for performing the fraud risk assessment lies with management
. Audit Committee's role is to oversee the process and have a clear understanding of the fraud risks
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Areas of Audit Risks or Focus (continued)
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Fraud and Error Risk Factors
.
Audit Committee should recognize that every organization has inherent fraud risks due to internal and external conditions
relative to:
- Entity's industry
- Operations
- Geographical locations
- Size
- Organizational structure
- General economic environment
Consider potential risk of management's override of controls or other inappropriate influence over the financial reporting
process
More specifically, there are three common fraud risk factors whose existence can increase the likelihood that a fraud could
occur. These are pressures/incentives, attitudes/rationalizations and opportunity.
Not all three factors need be present for a fraud to occur
Pressures/Incentives
- Created by circumstances either real or perceived
- e.g. - Personal financial pressures / Pressures to achieve a break even level of operations
.
.
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Attitudes/ Rationalization
- Process by which person legitimizes or justifies the crime
- May include attitude of entitlement or belief "the City can afford it"
- The greater the incentive or pressure, the greater the likelihood that the individual will be able to rationalize the
acceptability of committing fraud
Opportunity
- Manifest in different ways - i.e.
- Inadequate internal controls
- Insufficient safeguarding of assets
- Personnel in position to override controls
- Collusion
@ Deloitte & Touche LLP and affiliated entities.
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Areas of Audit Risks or Focus (continued)
Specific Inquiries to be addressed by the Audit Committee
.
Any knowledge of any actual, suspected or alleged fraud or error affecting the entity
.
What role, if any, does the audit committee exercise in oversight of:
1. Management processes for identifying and responding to the risks of fraud and error in the entity and;
2. The internal controls that management has established to mitigate these risks.
.
What are your views about the risks of fraud in the entity?
Discussion
Aud itors
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Internal Controls
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Background
. By January 2006 the Canadian auditing standards issued by the CICA will be compliant with the
International Standards on Auditing (ISA) issued by the International Auditing and Assurance Standards
Board. The Deloitte International Audit Approach (IAA) was updated effective for 2005 calendar year end
audits to be compliant with the ISA standards. The major international auditing firms have decided to
implement the ISA standards in 2005. These standards expand our requirements to annually review internal
control as part of our risk assessment process.
Significant changes impacting the audit
. Required to evaluate Organization/Entity level controls including documentation and substantiation. This
brings into scope various control elements including the control environment, risk assessment process,
information system and communication and monitoring controls.
. Required to evaluate the "design" of internal controls over financial reporting and to determine whether the
controls have been implemented, regardless of intent to test operating effectiveness of controls.
. Increased requirements for audit evidence and pervasive increase on documentation requirements in all
areas of the audit.
@ Deloitte & Touche LLP and affiliated entities.
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Internal Controls (continued)
Under the new audit risk model, and in line with changes in professional standards, our approach to controls testing has
been expanded in 2005 and is now divided into two phases:
.
Design and Implementation of Controls - mandatory for all business cycles in order to obtain an understanding of each
business cycle and identify the related audit risks.
Operating Effectiveness of Controls - tests of internal controls for those business cycles where we determine it may be
appropriate to test and rely on controls in order to reduce our substantive audit procedures.
.
Under the above approach, we assess risk for each business cycle. This assessment gives consideration to individual
transactions, systems, potential errors and internal controls. The approach includes identifying:
.
major business cycles within the operations of the City;
significant account balances and classes of transactions within each cycle;
.
.
specific financial risks or potential errors with respect to each significant account balance and class of transactions
which may result in the misstatement of financial reports or the misappropriation of assets; and
Management's response to those specific risks; i.e., the key elements of the internal control structure, which are
designed to prevent those errors from occurring or to detect them should they occur.
.
Once such risks are identified, an audit approach is developed in response to the risks. Details of account-balances risks
we have identified and the related audit approach for each risk are provided later in this report. As we progress through
the year, additional factors may come to our attention that may warrant modification to our audit plan.
@ Deloitte & Touche LLP and affiliated entities.
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Audit Work Plan for 2005
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Our audit work will be performed in the following phases and in accordance with the approximate timeline noted below. Key
milestones and deliverables are noted with an.. During the course of our audit, we will communicate both formally and
informally with the Audit Committee. We consider regular and timely communication key to the success of our audit.
Communication will take many forms and range from conversations regarding specific aspects of the City's activity to formal
reports.
DETAILED ANNUAL WORK PLAN
PHASE 1: PRE-COMMENCEMENT ACTIVITIES
Assess engagement risk
Meet with Management to discuss audit planning matters
Meet with the Audit Committee to present our Audit Plan
Key Client Deliverables:
Engagement Letter
Audit Plan
PHASE 2: PRELIMINARY PLANNING
Document/update our understanding of the business, control environment (including computer
controls) and accounting processes
Perform preliminary analytical review procedures
Determine planning materiality
PHASE 3: ASSESS RISK AND DEVELOP AUDIT
Assess risk at account and potential error level
Make preliminary conclusion about internal controls and reliability of financial information
Plan the audit approach including substantive tests and test of control as appropriate
Summarize and communicate the audit plan to the Audit Committee
PHASE 4: PERFORM AUDIT PLAN
Perform substantive analytical procedures
Perform tests of detail
Meet with management periodically during audit to review preliminary results (continuous)
Review draft financial statements
@ Deloitte & Touche LLP and affiliated entities.
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JAN
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MAR I APR
MAY
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Audit Work Plan for 2005 (continued)
DETAILED ANNUAL WORK PLAN (continued)
SEP
PHASE 5: CONCLUDE AND REPORT
Perform subsequent events review
Review all final financial audit reports and financial statements disclosures
Meet with Management to discuss audit results and findings
Obtain management representations, sign audit reports
Obtain responses from management and issue management letter
Meet with Audit Committee to discuss results of audit and present management letter
Key Client Deliverables:
Audit Results
Audit opinion
Management letter, including recommendations
PHASE 6: POST-ENGAGEMENT ACTIVITIES
Assess engagement quality and performance
Commence preliminary planning for the following year
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DEC
JAN
FEB
MAR
APR
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Deloitte &. Touche Client Service Team
The chart below shows the professionals from our firm that have been assembled to best serve the City of Pickering.
Computer Assu
Partner
Doug Wilkinso
Manager
Pina Colavecchia
Commodity Tax
Director
Craig Robertson
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Audit Senior
SherriMolzan
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Auditor Independence
The CICA Handbook requires that we communicate with you on an annual basis all relationships between the City of
Pickering and Deloitte & Touche LLP that, in our professional judgment, may reasonably be thought to bear on our
independence. In determining whether a relationship exists that may be thought to bear on our independence, we must
consider the following matters:
.
whether a financial interest, either directly or indirectly exists;
.
whether a position, either directly or indirectly is held by us that gives us the right or responsibility to exert significant
influence over the financial or accounting policies of the Corporation;
.
economic dependence on the Corporation;
.
services provided to the Corporation in addition to the audit engagement; and
.
any personal or business relationships of immediate family, close relatives, partners or retired partners, either directly
or indirectly with the Corporation.
We formally confirmed our independence as auditors of the City of Pickering in a letter dated May 20, 2005 and we will
formally report again at the conclusion of the 2005 audit.
We confirm that we continue to be independent under the Rules of Professional Conduct of the Institute of Chartered
Accountants of Ontario.
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We believe our audit approach is cost effective and every attempt has been made to keep our audit fees to a minimum. This
is accomplished through:
. Detailed planning and coordination with senior management.
. Encouraging involvement by, and assistance from, the City of Pickering finance personnel.
. Ensuring that the audit staff has the appropriate mix of municipal and client expertise and experience.
. Carefully managing and supervising staff through the audit.
. Significant partner and manager involvement throughout the audit.
Since we submitted our proposal in October 2001, professional standards have dictated an increased focus on new auditor
standards, particularly related to internal controls.
As previously noted we will identify, and test the design and implementation of selected controls relevant to the key financial
accounting cycles.
As a result, our proposed fees for audit services to be provided to the City of Pickering for 2005 are as follows:
. The City of Pickering consolidated financial statements
including trust funds - see below
. Pickering Public Library Board
$55,000
$ 3,750
The 2005 proposed audit fee for the consolidated financial statements was calculated as follows:
. 2004 fee
. Inflation factor as per our proposal document
. Additional work required due to the following:
- New Accounting and Assurance Standards
- Harmonization of audit approach with international
standards relating to the requirements to test the design
and implementation of internal controls over all financial
accounting cycles as well as entity level controls
$48,500
1,200
$ 5.300
$55.000
@ Deloitte & Touche LLP and affiliated entities.
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Current Developments
New PSAB Accounting Recommendations and Exposure Drafts
The Public Sector Accounting Board's (PSAB) goal is better financial and performance information for government
decision-making and accountability. PSAB meets this goal by setting accounting standards for all levels of government,
these standards are tailored to meet the unique information needs of the public sector.
.
Provides guidance for applying the definition of liabilities
.
Defines constructive and equitable obligations and indicates that if there are obligations of this type and they meet
the definition of a liability, they should be recognized as such
.
Effective for years beginning on or after September 1, 2004.
.
Defines and recommends general recognition, measurement and disclosure requirements for contingent liabilities
.
Effective for years beginning on or after September 1, 2004.
.
Defines and recommends general disclosure requirements for contractual obligations
.
Effective for years beginning on or after September 1, 2004.
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Current Developments (continued)
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New PSAB Accounting Recommendations and Exposure Drafts
.
Applies to Federal, Provincial, Territorial and Local Governments
.
Status: Revised Section issued August 2003, PS1300
.
Government reporting entity- includes organizations that are controlled by the government
.
Definition and explanation of "control", for purposes of applying the Section
Control is the power to govern the financial and operating policies of another organization with expected
benefits or the risk of loss to the government from the other organization's activities (PS1300.08)
.
Indicators of control to assess whether control exists for financial reporting purposes
Some indicators of control are more persuasive than others but on balance it is the preponderance of evidence
that would be considered
.
Guidance is included to provide examples of situations where control does not exist
.
Implications: Organizations previously not included as part of government reporting entity need to be reassessed
given the new definition as they may now need to be included
.
The recommendations are to be applied for fiscal year beginning on or after April 1, 2005. Earlier adoption is
encouraged.
@ Deloitte & Touche LLP and affiliated entities.
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Current Developments (continued)
New PSAB Accounting Recommendations and Exposure Drafts
.
Approved in November 2004. Key requirements are as follows:
.
Public Sector Reporting entities are to apply every primary source of GAAP. The primary sources of GAAP in
descending order are:
CICA Public Sector Accounting (PSA) Handbook Sections PS1200-3800
Public Sector Guidelines; and
Appendices and Illustrative material of those pronouncements described
.
In the absence of a primary source of GAAP, or if additional guidance is needed to apply a primary source to
specific circumstances, public sector reporting entities must exercise professional judgment and adopt accounting
policies and disclosures that are consistent with:
The primary sources of GAAP; and
The application of Section PS 1000, Financial Statement Concepts -- Federal, Provincial & Territorial
Governments, or Section PS1700, Objectives of Financial Statements -- Local Governments.
.
A public sector reporting entity required to prepare financial statements in accordance with regulatory, legislative,
or contractual requirements can describe the basis of accounting as in accordance with GAAP only when those
requirements are within the range of acceptable choices allowed by the proposed Section.
.
Italicized Recommendations and non-italicized paragraphs in PSA Handbook Sections have equal authority.
.
Effective for fiscal years beginning on or after April 1, 2005.
@ Deloitte & Touche LLP and affiliated entities.
The City of Pickering - 2005 Audit Plan
22
0
N
~
Current Developments (continued)
<=>
l"':)
00
New PSAB Accounting Recommendations and Exposure Drafts
.
The new section provides guidance for the disclosure of measurement uncertainty for items recognized and disclosed in
public sector financial statements.
The Section provides:
- A definition of measurement uncertainty
- Disclosure of measurement uncertainty to be provided for both recognized and disclosed amounts
- The nature and extent of measurement uncertainty to be disclosed
- When disclosure of the extent has not been made, the reason for the disclosure must be stated, and
- Key assumptions and the sensitivity of the amount is to be disclosed.
Effective for fiscal years beginning on or after April 1, 2005. Earlier adoption is encouraged.
.
.
Capital Assets for Local Governments
. The Public Sector Accounting (PSA) Handbook does not currently provide standards for accounting for capital assets for
local governments
. Tangible capital assets represent a significant investment for local governments. Financial information about the stock
and use of those assets is currently not being provided in the financial statements of local governments. This
information is vital for stewardship, accountability, costing and developing asset management plans including ongoing
maintenance and replacement requirements
. For a number of local governments, legislation is either being passed or being considered requiring local governments to
cost certain services. At the moment, there is no generally accepted definition of a capital asset, and practices vary
from local government to local government. Other initiatives are underway, such as benchmarking and performance
reporting, that are, in part, based on the cost of services provided. Accounting for the stock and use of non-financial
assets will provide needed information for these initiatives
. In June 2005, PSAB approved associate drafts of:
- Section PS 3150, Tangible Capital Assets; and
- A Public Sector Guideline, Tangible Capital Assets of Local Governments
. Both the standard and guidelines will be applicable to local governments. Local governments should be reviewing these
documents, providing comments and considering implementation plans.
@ Deloitte & Touche LLP and affiliated entities.
The City of Pickering - 2005 Audit Plan
23
Current Developments (continued)
New PSAB Accounting Recommendations and Exposure Drafts
Financial Instruments Project
.
Issue: Increase in availability and use by governments of sophisticated, non-traditional financial instruments gives rise to
complex recognition and measurement issues
.
The AcSB approved three Handbook sections: Financial Instruments - Recognition and Measurement, Section 3855,
Comprehensive Income, Section 1530 and Hedges, Section 3865. The new standards are for fiscal years beginning on or
after October 1, 2006
.
Development of accounting standards in both the private and public sectors is not keeping pace
- PSAB only deals with temporary and portfolio investments and long term debt
.
PSAB is silent, therefore new standards in the private sector handbook will be applicable to government business
enterprises and government business-type enterprises for the purposes of preparing their own financial statements
.
Expected to pose accounting and reporting difficulties for governments
.
PSAB plans to conduct a survey to ask governments at all levels about the nature and extent of, as well as current
reporting practices for, their financial instruments
.
Objective of project will be to develop standards that will make government's use of financial instruments as transparent
and understandable as possible.
Periormance Reporting Project
.
Project on financial and non-financial performance reporting approved
.
Designed to develop a set of basic principles that will guide the future development of
a framework for identifying specific performance indicators
performance reporting including
.
A Public Exposure Draft "Introduction to Public Performance Reporting" has been approved
.
"Statement of Recommended Practice" expected to be issued in 2006.
@ Deloitte & Touche LLP and affiliated entities.
The City of Pickering - 2005 Audit Plan
24
0
l\~
~
Current Developments (continued)
0
C,;.)
0
New Assurance Requirements and Exposure Drafts
.
New Assurance Standard issued effective for audits of periods ending on or after December 15, 2004
.
Harmonizes Canadian standards with the equivalent international (ISA 240) and US Standards (SAS 99)
.
Principal changes from the Existing 5135
- More emphasis on the respective responsibilities of auditors, management, and those charged with
governance with respect to fraud
-- Significantly more guidance on assessing the risk of misstatement due to fraud
-- Greater emphasis on the risk that management can override internal controls and management fraud
generally
-- Requirements for procedures to be performed to address management's ability to override internal controls
.
Classification of fraud risk factors into factors relating to:
-- Incentive to commit fraud
-- Opportunity to commit fraud
-- Ability to rationalize the fraudulent act.
Impact:
.
Additional audit procedures required in considering Fraud & Error risks in planning the audit.
@ Deloitte & Touche LLP and affiliated entities.
The City of Pickering - 2005 Audit Plan
25
Current Developments (continued)
New Assurance Requirements and Exposure Drafts
.
This new Section contains new requirements for:
- understanding the entity's business risks to the extent they are relevant to the financial statements;
- understanding each component of the entity's internal controls;
-- obtaining an understanding of the design and implementation of controls on all audits;
-- understanding an entity's risk assessment process and its monitoring of controls; and
specifically addressing significant risks.
.
In addition, this new Section places more emphasis on:
-- using various sources to obtain a broader understanding of the entity and its environment, including its internal
control;
u- supporting the assessment of the risks of material misstatement at the financial statement level and at the
assertion level; and
-- adhering to more rigorous documentation requirements.
.
The new Recommendations are effective for audits of financial statements for periods beginning on or after January 1,
2006.
Impact on City:
.
Recent changes to the Deloitte international audit approach have brought our procedures in line with these new
requirements. Deloitte will be applying these new requirements during the audit of the 2005 consolidated financial
statements of the City.
@ Deloitte & Touche LLP and affiliated entities.
The City of Pickering - 2005 Audit Plan
26
0
W
~
Current Developments (continued)
<=>
W
N
New Assurance Requirements and Exposure Drafts
.
Section establishes standards and provides guidance on determining overall responses to assessed risks, and
designing and performing further audit procedures to respond to the assessed risks of material misstatement at the
financial statement and assertion levels.
.
The Section contains new requirements for specifically addressing significant risks and places more emphasis on:
- directly linking assessed risks to audit procedures that are responsive to those risks;
- performing tests of controls when the auditor has determined that evidence obtained from substantive
procedures alone will not reduce risk tò an acceptably low level;
- assessing whether, in certain circumstances, reliance can be placed on evidence from prior periods;
- obtaining evidence about disclosures; and
- adhering to more rigorous documentation requirements.
Impact on City;
.
Additional audit procedures required
.
Effective for periods ending on or after June 30, 2004
Understand entity's processes and controls
Evaluate management's significant assumptions
Evaluate management's ability and intent
Evaluate method and consistency of application
Consider use of a specialist
Communicate sensitive fair value estimates.
.
.
.
.
.
.
Impact on City:
.
Additional audit procedures for any fair value disclosure requirements. Should not have significant impact on City.
@ Deloitte & Touche LLP and affiliated entities.
The City of Pickering - 2005 Audit Plan
27
Current Developments (continued)
New Assurance Requirements and Exposure Drafts
.
This Section has been revised and expanded to set out requirements for the auditor of an entity's financial
statements who uses a service auditor's report when planning the audit; assessing control risk at the entity; using
audit evidence obtained from substantive procedures performed by service auditors; and evaluating audit evidence.
It also contains requirements related to communication of internal control weaknesses and to the content of the
auditor's report when a service auditor's report is used.
The new Recommendations are effective for financial statements and financial reports for periods beginning on or
after January 1, 2006.
.
.
Impact on City:
. Additional audit procedures required.
.
Section establishes standards and provides guidance on the use of management's representations as audit evidence
and on obtaining written representations from management.
The new Section emphasizes that the auditor:
- should corroborate management's representations when obtaining sufficient appropriate audit evidence;
- discusses the relevance of management representations to the audit evidence and the need to obtain written
representations with both management and the audit committee when planning the engagement;
- obtains management's written representations for all financial periods covered by the auditor's report;
- obtains written representations from current management even if current management was not present for
part or all of the financial periods covered by the auditor's report; and
- should express a qualified opinion or deny an opinion if there is a scope limitation as a result of management's
refusal to provide written representations requested by the auditor.
The new Recommendations are effective for audits of financial statements for periods beginning on or after August 1,
2005.
.
.
Impact on City:
. Additional audit procedures required.
@ Deloitte & Touche LLP and affiliated entities.
The City of Pickering - 2005 Audit Plan
<::>
Co.\;)
<:..ù
28
Cu rrent Developments (continued)
<:>
w
~
New Assurance Requirements and Exposure Drafts
.
The Section requires the auditor to establish an understanding of the terms of the engagement with the entity and
to document this understanding in a written agreement. This agreement is to include the objective, scope and
limitations of the engagement; the responsibilities of the auditor and the responsibilities of the entity's
management.
.
Recommendations are effective for periods commencing on or after August 1, 2005.
Impact on City:
.
No current impact as procedures are already compliant.
.
Date for auditors' report is the date of substantial completion
.
Substantial completion - paragraph .03 "date by which the auditor has identified and sought all the audit evidence
they require to support their opinion, and has obtained and examined substantially all such evidence; however, they
will often be awaiting receipt of specific corroborating evidence or documentation before signing and releasing their
report.
.
Represents completion of the audit
.
Considers events to the report date
.
After financial statements are approved by management.
Impact on City:
.
No current impact as procedures are already compliant.
@ Deloitte & Touche LLP and affiliated entities.
The City of Pickering - 2005 Audit Plan
29
Deloitte
@ Deloitte & Touche LLP and affiliated entities.
Deloitte, one of Canada's leading professional services firms, provides audit, tax, consulting, and
financial advisory services through more than 6,100 people in 47 offices. Deloitte operates in
Québec as Samson Bélair/Deloitte & Touche s.e.n.c.r.1. The firm is dedicated to helping its
clients and its people excel. Deloitte is the Canadian member firm of Deloitte Touche Tohmatsu.
Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms,
and their respective subsidiaries and affiliates. As a Swiss Verein (association), neither Deloitte
Touche Tohmatsu nor any of its member firms has any liability for each other's acts or
omissions. Each of the member firms is a separate and independent legal entity operating under
the names "Deloitte," "Deloitte & Touche," "Deloitte Touche Tohmatsu," or other related names.
Services are provided by the member firms or their subsidiaries or affiliates and not by the
Deloitte Touche Tohmatsu Verein.
Member of
Deloitte Touche Tohmatsu
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CJ1
036
Cih¡ c~
REPORT TO
AUDIT COMMITTEE
Report Number: CS 11-06
Date: February 7, 2006
From:
Gillis A. Paterson
Director, Corporate Services & Treasurer
Subject:
Clerk's Division Revenue Cycle Review
Follow up Review by Deloitte
Recommendation:
That Report CS 11-06 of the Director, Corporate Services & Treasurer with respect to
the report by Deloitte concerning a follow up to the June 2004 Revenue Cycle Review
be received for information.
Executive Summary: As per the direction of the Chief Administrative Officer to
engage our auditors to undertake a process and controls review of the Clerks Division
revenue cycle in June 2004, a further follow up review was completed in August 2005
by Deloitte.
Background: The new City Clerk was hired on May 30, 2005 and was updated in
July 2005 on the original review of Deloitte. A preliminary review was conducted at that
time by the City Clerk based on the Divisional workplan that was created after the June
2004 Deloitte process review.
On July 20, 2005, a report on the original June 2004 Deloitte recommendation was
presented to the Audit Committee through Report CS 58-05, a copy of which is includeQ
as Attachment 1 to this report.- Further to the Audit Committee meeting held on July 25,
2005 and the request of Mayor Ryan to ensure that all processes were formally in place
with respect to the revenue cycle review, the City Clerk began to document the
divisional processes for tighter controls related to the manual systems in place, with the
understanding that a large part of the audit controls required would be permanently
enhanced with the implementation of an electronic business licensing system (Amanda
location module).
The enhancement of the Amanda system for the licensing module was ordered in
September 2005, following meetings held by the City Clerk with the Manager,
Information Technology. Installation of the module was completed late November and
testing of the system commenced in November 2005, with the launch of the majority of
the system in January 2006. It should be noted that this location module was further
developed in December 2005 in order to accommodate animal services licensing.
Report CS 11-06
Date: February 7,2006
037
Clerk's Division Revenue Cycle Review
Page 2
Due to the implementation of the Amanda module, staff have spent considerable time
testing the system to ensure the options of tracking, data management and renewal
activities meet our needs as well as comments received in relation to the revenue cycle
review. Due to the large volume associated with animal services licensing, the focus by
staff was geared to this testing in December 2005. This aspect of licensing is fully
integrated and functional as of January 1, 2006 and aside from minor changes
requested, such as greater search capabilities, it appears to be meeting our needs.
With respect to remaining licensing functions of the Clerks Division, staff are currently
transferring all manual files into the Amanda location module. As we enter the files we
are completing quality assurance testing to ensure it will meet our needs. At the
present time, we are completing the entry and testing of the licensing files for home
based businesses. It is anticipated that the entry and final testing will be completed by
the end of April, 2006. The timing is such that we are giving ourselves plenty of time for
the implementation due to the sheer volume of animal licenses (approximately 300 per
week) that are required to be entered, on top of current staff constraints.
It should also be noted that the the Clerks Division is now at full complement with
respect to the senior management team and a large number of processes and
procedures related to budget monitoring and revenue cycles have now been more
appropriately assigned to these staff, with formal review and sign off by the City Clerk.
Based on the review results of October 19, 2005 by Deloitte, the following comments
are offered based on the fact that the Amanda location module has now been installed.
You will recall that a large number of the recommendations by Deloitte were dependant
upon this installation.
It should further be noted that the City Clerk was satisfied with the comments submitted
by Deloitte following the review, based on the time and staff constraints that were
placed upon the Division, along with any further advice for improvement that was
recommended.
0 3 ~eport CS 11-06
Clerk's Division Revenue Cycle Review
Date: February 7,2006
Page 3
CLERK'S DIVISION REVENUE CYCLE
RECOMMENDATIONS FROM DELOITTE & TOUCHE
Budget Monitoring: Financial tracking Management Manual informal
Clerk's Division sheets have been comments address reconciliations are still
management should established for By-law the being prepared by the
monitor activities on a Enforcement and are recommendations. Audit Analyst pending full
regular basis through currently being finalized implementation of the
reviewing reports and for balance of the Management Amanda system in the
analyzing the statistics. Division. Policy and comments have been interim.
Results and comments on procedures have been implemented with the
any deviations should be completed. exception of the Tracking sheets and
documented and signed- Clerks division reconciliations, including
off. Finance, as an The Clerk's Division will reconciliations. reconciliations for our
independent party, should reconcile all accounts Manual informal contractor with respect to
review the actual revenue on a monthly basis and reconciliations are Animal licensing are in
numbers per type of provide verification to being prepared by the place.
licence, permit, service or the Finance Division. Audit Analyst pending
parking ticket and follow Regular reviews will be the launch of the Monthly computer print
up with Clerk's Division completed by the Amanda system. outs of sectional
management on any Finance staff. Statistics accounts are provided to
noted variances on the number of the management team
licences, permits. for review and
Parking tags, etc. have subsequent sign off by
been or are in process the City Clerk. (January
of being produced for 30, 2006 will be first full
management review, month for new process)
productivity and control
ur oses.
Central Filing: All documents are filed Management With the furniture move
All documents should be within central files, with comments address that recently took place
filed in the Central the exception of active the within the Division, all
Files, which should be by-law enforcement recommendations. Clerks Division files are
locked during non- officer files. All files are within a central filing
business hours. locked during non- Management system. File sign out
Procedures for filing business hours. comments have been sheets are in place within
documents should be Procedures have been implemented with the the central files in the
established and followed developed for tracking exception of event staff are utilizing
by all employees involved. of the work in progress procedures for files for work in progress.
files. Access to the tracking work in
central files after hours progress files.
have been restricted to
management only. No formal procedures
were noted to track
work in process files
stored outside of
central filin .
039
Report CS 11-06
Date: February 7,2006
Clerk's Division Revenue Cycle Review
Page 4
Reconciliations: Reconciliation Management Monthly computer print
Reconciliations and procedures have been comments address outs of sectional
reviews need to be established and forms the accounts are provided to
documented and signed- have been developed. recommendations. the management team
off by the responsible for review and
personnel. Any deviations Establishment of Management has subsequent sign off by
or problems encountered additional separate implemented the City Clerk. (January
should be explained. revenue accounts have reconciliation 30, 2006 will be first full
been completed. procedures however month for new process)
they do not include
documented reviews
and signoffs.
Templates have been
developed for
tracking sheets.
Separate revenue
accounts have been
created.
Policies and Desk reference binders Management Ongoing project for 2006
Procedures: have been com pleted comments address and established as a
We understand that for clerical staff, and will the recommendation. divisional goal.
management has initiated be incorporated into The desk reference
the process of Clerks Division policy binders have been
documenting the activities and procedure manual. developed however
and we encourage By-law Enforcement they will be
management to continue staff are anticipating significantly changed
with its efforts in completion early in 2006 upon the full
developing and due to current workload implementation of the
documenting the commitments. Amanda software.
Clerk's Division's
procedures. These We encourage
procedures such as pre- management to
numbering forms, central continue with its
filing, segregation of efforts in developing
duties should cover areas and documenting
such as pre-numbering, procedures in light of
reconciliations of revenue, the anticipated
etc. software
implementation.
Taxi Driver's Licence: All files and blank forms Recom mendations Identicam software has
Taxi driver licence cards are secured at all times. have not been been purchased and is
should be pre-printed and implemented pending currently being tested by
contain special features Software program - the launch of the IT staff. Delay for
(i.e. watermark, digital Identicam has been Identicam software. installation due to
photos) to prevent researched for licence implementation of new
falsification. Additionall , issuance and is in the Files and blank forms front counter in the Clerks
Report CS 11-06
04 °Clerk's Division Revenue Cycle Review
Date: February 7, 2006
Page 5
cards should be
numbered to allow
management to
control the stock of blank
cards and the number of
licences issued by the
Division. The issuance of
taxi driver licences should
be recorded in a
centralized database to
allow Clerk's Division to
have better control of the
licences and the expiry
dates. Physical files
should be securely
locked during non-
business hours. Licences
should not be signed until
documentation is
completed and
ready to be issued.
Blank stock of Sensitive
Forms:
Blank stock of sensitive
forms should be securely
locked outside of
business hours.
Management
should keep control of
forms received and
issued. Monthly
reconciliations should be
performed, documented
and signed-off, by an
independent party, who
should also compare the
stock position to the
monthly revenue.
process of being
purchased. Database is
currently being
developed for licence
tracking. No licences
are pre-signed and a
temporary manual
numbering system has
been established.
All licences are
reviewed by the City
Clerk effective July 1,
2005, prior to issuance.
Sensitive forms are
locked and a monthly
stock reconciliation (log
book) has been
developed. Private
information is securely
locked during non-
business hours.
The Clerk's Division
completes
reconciliations on a
monthly basis and
Finance staff completes
final reconciliation every
six months.
DJ;I:iOl'rrE";> '(k ,
~~EVlE:W:
RESULTS
'aCrOBE'
, '," , "', .
have been secured.
Licenses are being
reviewed prior to
issuance by either
the City Clerk or the
Manager, By-Law
Enforcement.
Management
comments address
the
recommendations.
The comments have
been implemented
with the exception of
the reconciliations of
blank stock which will
now be the
responsibility of the
new Deputy Clerk.
Management expects
that this
recommendation will
be implemented by
the new Deputy
Clerk.
March 2006
implementation
anticipated.
Reconciliations are now
in place by the Deputy
Clerk.
Report CS 11-06
Date: February 7,2006
Clerk's Division Revenue Cycle Review
Page 6
041
Permits, birth Pre-printed forms are Management Full implementation with
registrations, licences being used but special comments address the Amanda system
and compliance letters: security measures are the expected by April 2006.
Birth registration, pending the integration recommendations.
municipal licences, of upgrades to the
permits and compliance Amanda system in the Pre-printed
letters should be issued Fall. Enhancement of sequentially
on pre-printed forms with the existing database numbered forms are
special features to will also be realized as only used for
prevent part of the Amanda marriage and lottery
falsification. Forms should system. licenses, thus the
be sequentially numbered recommendation has
to allow management to Compliance letters are not been fully
control the number of now completed utilizing implemented.
registrations, licences and a standard template
permits issued by the including computer Compliance letters
Division. All issuance of generated numbers and are completed using
licences and permits are signed by clerical a standard template
should be recorded in a personnel. however the
database to allow Clerk's numbering system is
Division to maintain better still manual.
control of the documents
and, if applicable, the There is no formal
expiry date. database for the
issuance of all
licenses and ermits.
Safeguard of Private All central file cabinets Management Completed.
Information: are locked during non- comments address
Private information should business hours and the the recommendations
be kept securely locked key secured and appear to have
during non-business been implemented.
hours.
Customer Information: Counter signage has Recommendations Completed.
Signage should notify been established and have yet to be
customers to make permanent signage is implemented.
payments only at the pending redesign of the Expected to be
cashiers. front counter and the implemented upon
necessary approvals. remodeling of the
counter area.
042 Report CS 11-06
Clerk's Division Revenue Cycle Review
Date: February 7, 2006
Page 7
Vital Statistics/Lottery
Systems:
Management should
consider updating these
systems and enforcing
users to change their
passwords at least every
90 days. Passwords
should have a minimum
length of 6 characters
and, if possible,
complexity should be
enforced. The system
should lockout users who
exceed 3 unsuccessful
login attempts until the IT
Section can reset the
password.
Segregation of Duties:
The following duties
should be segregated:
By-law Section or an
independent party
.- Recording ticket
information into Ticket
Processor from
handhelds and manual
tickets should be
delivered directly to this
section. By-law Section
should not have access to
Ticket Processor
functionalities other than
uploading and viewing
tickets.
Clerical personnel
- Reconciling tickets
recorded in Ticket
Processor with handheld
print-outs or
manual tickets;
- Recording payment into
Ticket Processor;
- Cancelling tickets
accordin to
Excel database created
and implemented by IT
for affected staff.
Restricted password
access established.
Procedures have been
developed
Duties have been
segregated and controls
established, including a
cancellation policy. This
process will be further
reviewed upon the
purchase of the new
parking ticket handheld
units (lease expires this
year).
Co-signing of all
documents is strictly
enforced.
MTO plate information
can only be accessed by
the Manager, By-law
Enforcement and one
senior MLEO officer.
One clerical personnel
confirms the search and
matches to the
appropriate parking
ticket.
Daily log for pay tickets
is completed and signed
by the Cit Clerk, then
Management
comment does not
appear to address
password changes in
Vital Statistics and
Lottery System
Software.
Although computer
network access
requires regular
password changes,
access to Vital
Statistics/Lottery
systems do not
currently appear to
require password
changes.
Management
comments address
the
recommendations.
Segregation of duties
have not been
implemented as
recommended.
Co-signing of
documents, daily log
of Pay Tickets,
reconciliation of
Moneris information
and payment
processing has been
implemented.
I nstallation of new
handheld units being
completed in February
2006.
Segregation of duties will
be enhanced with the
implementation of this
new system.
Report CS 11-06
Clerk's Division Revenue Cycle Review
043
Date: February 7,2006
Page 8
cancellation policies;
- Obtaining MTO car
owner information;
and
- sending plate to plate
denial
Ticket cancellations
PayTicket payment
reversal and plate denial
activities should
also be co-signed by a
second clerical
staff member and
reviewed by management
on a regular basis.
Exceptions from
cancellation policy
should be approved by
management and
reasons noted.
If possible, system should
log the user responsible
for the cancellation and
second review.
Finance
.. Receiving payments
done at the
cashier, drop-box, direct
deposit via
PayTicket or cheques
from MTO.
.. Recording payment
received in the
accounting system.
.. Reconciling payments
processed by
the Finance with payment
information
recorded into Ticket
Processor.
Ticket Cancellation
Process:
Each condominium or
private area should
formally designate the
appropriate personnel
who will have the authorit
forwarded to Finance
staff for processing.
Reconciliation on a
monthly basis is
completed by the
Clerk's Assistant and
amended forms are
forwarded to Finance
staff for payment.
Any payment processing
is handled by the
cashiers in the Finance
Division.
The Clerk's Division, in
accordance with the
cancellation policy,
handles all
cancellations.
A letter was sent to all
Management
comments do not
address the
recommendations.
Management has
implemented a
Completed. Cancellation
policy has been updated
to formally list the
designated personnel
with approval to authorize
ticket cancellation.
- Report CS 11-06
044 Clerk's Division Revenue Cycle Review
Date: February 7, 2006
Page 9
to cancel tickets. condominiums advising cancellation policy
Only authorized personnel of this change in policy however it does not
should be able to request in the fall of 2004. include the
the cancellation of a recommended listing
ticket. Requests should of formally
be signed and the original designated personnel
document should be with approval to
compared to the name authorize ticket
and signature in the cancellation.
authorization process and
filed together with the
cancelled tickets. Ticket
cancellation should be co-
signed by two clerical staff
members. Any exceptions
from the policy should be
approved by management
and reasons noted.
Management should
review cancellations on a
regular basis.
Reconciliation: Monthly reconciliations Management Completed.
Monthly reconciliations have re-commenced comments address
should be performed, since the hiring of the the recommendation.
documented and signed- new City Clerk.
off by an independent Formal
party. Payments reconciliations are
processed by Finance not being performed
should be compared to by the Audit Analyst
the information in the pending the launch of
Ticket Processor system. the Amanda
software.
Logic Security: Information from the Management Reconciliations of
Information downloaded downloads are saved comments address uploaded information and
from the handhelds within a protected the recommendation. ticket information are
should be saved in a directory and errors are under review.
protected directory in the verified by Clerical Reconciliations of
network to which only the personnel prior to uploaded information
Ticket Processor has further processing. and ticket information
access. Control totals has not been
checks should be All ticket reconciliations implemented.
implemented in Ticket are handled by one
Processor to ensure clerical personnel, with Clerical personnel
information was uploaded an additional sign off by restricted as does not
correctly. Additionally, the Clerk's Assistant. have access to
tickets uploaded into change or modify
Ticket Processor should Clerical staff do not uploaded ticket
Report CS 11-06
Clerk's Division Revenue Cycle Review
045
Date: February 7, 2006
Page 10
be reconciled to the
handhelds printed tickets
by an independent party.
Clerical personnel should
not have access to
change nor to modify
ticket information
uploaded from handhelds.
Payments Received at
the Drop-Box:
Drop-box content should
be directed to Finance
to count and document
the payments received.
A list of payments should
then be sent to the
Clerk's Division to identify
whether payments
should be processed or
returned to the
customer.
Car Owner Request to
MTO:
Cancellation due to
inconsistent or lack of
information should be co-
signed by two clerical
personnel. Any
exceptions from the policy
should be approved by
management and reasons
noted. Management
should review
cancellations on a regular
basis.
Distribution of Manual
Ticket Books:
Ticket books should be
given to authorized
personnel upon
presentation of
identification document.
Clerk's Division should
kee track of which officer
have the authority to
change or modify the
ticket information
uploaded.
Finance document
through a log the
cheques received and
send to clerical
personnel for
verification. Payment is
processed once the
verification is received
All cancellations are
reviewed in accordance
with the cancellation
procedures by two
clerical personnel and
final review and
approval by the
Manager, By-law
Enforcement.
A log book for sign out
of the books have been
established. A copy of
the officer identification
is kept with the log book
for verification purposes.
Management
comments address
the recommendation
and have been
implemented.
Completed.
A cancellation policy
requiring co-signing
by the two clerical
personnel plus
management
signature for
exceptions has been
implemented.
Completed.
This policy is
consistent with the
recommendations,
however, it is
inconsistent with
management
comments.
Management
comments address
the
recommendations.
Completed.
Management has
implemented a log
book for the sign out
of the books which
~eport CS 11-06
046
Clerk's Division Revenue Cycle Review
Date: February 7, 2006
Page 11
collected which books.
Periodic reconciliations
should be performed by
an independent party to
ensure ticket books are
being used appropriately
(i.e. if there are no tickets
missing nor gaps in the
sequence).
Ticket Processor Audit
Trail:
Customized reports
should be developed to
allow management to
monitor Clerks Division
activities.
Attachments:
An RFP for the
handheld units has been
prepared and
specifications have
been developed to
ensure customized
reports can be
developed.
With the existing units,
customized reports
cannot be obtained.
DELOITTE
REVIEW
RESULTS
OCTOSE
2005
keeps track of the
officer who collected
the books. Officer
identification and
periodic reconciliation
were not evident.
RFP is still
outstanding thus
recommendation has
not been
implemented.
Completed purchase of
handheld units and
installation scheduled for
February 2006.
1.
2.
Report CS 58-05 of the Director, Corporate Services & Treasurer
Clerk's Division Revenue Cycle - Follow up dated October 2005
047
Report CS 11-06
Date: February 7,2006
Clerk's Division Revenue Cycle Review
Page 12
Prepared By:
Approved I Endorsed By:
Db', çQ:-;¡3,..-noo 1
Debi A. Bentley
City Clerk
ß~~
Gillis A. Paterson
Director, Corporate Services & Treasurer
GAP/vw
Attachments
Copy: Chief Administrative Officer
Recommended for the consideration of
Pickering Cit~o
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ATTACHMENT#Í- TO REPORT#..ts-Ll-o~
REPORT TO
AUDIT COMMITTEE
048
Report Number: CS 58-05
Date: July 20, 2005
From:
Gillis A. Paterson
Director, Corporate Services & Treasurer
Subject:
Clerks Division Revenue Cycle Review
Recommendation:
1.
That Report CS 58-05 of the Director, Corporate Services & Treasurer be
received for information.
Executive Summary: As per the direction of the Chief Administrative Officer, the
Director, Corporate Services & Treasurer engaged our auditors, Deloitte & Touche, to
undertake a process and controls review of the Clerks Division revenue cycle in June
2004. The purpose of the review was to document the processes of the Division's
principal business activities and provide recommendations to enhance internal controls
within these processes. Deloitte & Touche issued their report in August 2004 and a
Divisional implementation workplan was developed from this report.
The following report is a summary update of actions taken and those in progress for the
information of the Audit Committee.
Background: By the direction of the Chief Administrative Officer, with the
endorsement of Council, the Clerks Division was transferred to the Corporate Services
Department in May 2004. At that time it was thought necessary and beneficial to-
undertake a process review of the Clerks Division's revenue cycle to documenLand
review their business processes. With the various sources of revenue the Division
collects, it was seen as an opportunity to assess where efficiencies or synergies could
be made within the Division and the Department as a whole. As existing City resources
were not available due to daily workload and other commitments, Deloitte & Touche
was engaged to undertake the review based on the firm's extensive municipal
background. The scope of the review was to document key systems and processes as
weB as the intemal controls for each of these processes. They were to review the
existence and effectiveness of the controls and provide recommendations for
improvements where necessary. It was agreed jointly by the Chief Administrative
Officer and the Director, Corporate Services & Treasurer, that following the Forensic
Audit, the next logical step was to undertake this review.
Report CS 58-05
Clerks Division Revenue Cycle Review
Date: July 20, 2005
049
Page 2
Deloitte & Touche's report was received in late August 2004 and was forwarded to the
Clerk in early September to assist in and oversee the implementation of the various
recommendations. The Supervisor, Legislative Services and the Audit Analyst reviewed
the report and drafted an implementation plan for each of the recommendations. Work
on the implementation plan continued through the fall and early winter. Progress
meetings were held with the Clerk, the Supervisor and the Department Head up until
the end of the year to ensure all actions that could be undertaken quickly were readily
implemented. However with the by-election in the fall of 2004, year end work,
departure of the Supervisor at the end of 2004, together with the Manager, By-law
Enforcement and the announcement of the Clerk's retirement in June 2005, progress
was impeded and a number of original target dates had to be revised. With the hiring
of the new Clerk in May 2005, she has had an opportunity to review the
recommendations, meet with staff, and review and update the implementation plan.
She is confident that any remaining key items will soon be addressed and implemented
accordingly.
Below are the recommendations included in Deloitte & Touche's report. In light of
discussions at the Audit Committee meeting of June 20, 2005, we have provided our
comments on the status of these recommendations and a copy of this report has been
provided to the auditors for their information.
A number of the items reflected within the table are contingent upon the upgrade of the
Amanda software, which was provided for in the 2005 Budgets, and database
development assistance from the IT Division. This assistance commenced in the fall of
2004 and the new City Clerk will be meeting with the Manager, Information Technology
in order to prioritize Divisional requirements and seek the necessary guidance from IT.
CLERKS DIVISION REVENUE CYCLE
RECOMMENDATIONS FROM DELOITTE & TOUCHE
INSIGHT
Budget Monitoring:
Management prepares the annual
budget mainly based on previous
year numbers per type of licence,
permit, service or parking tickets.
However, Finance only reviews the
budget for the total revenue.
RECOMMENDATION
MANAGEMENT'
COMMENTS.
Financial tracking sheets
have been established for
By-law Enforcement and
are currently being finalized
for balance of the Division.
Policy and proced ures have
been completed.
Clerks Division
management should
monitor activities on a
regular basis through
reviewing reports and
analyzing the statistics.
Results and comments on
any deviations should be
documented and signed-
off. Finance, as an
independent party, should
review the actual revenue
numbers per type of
licence, permit, service or
i The Clerks Division will
I reconcile all accounts on ê.
month I)! basis and provide
verification to the Finance
Division. Regular reviews
will be com leted b the
,.1eport CS 58-05
050
Clerks Division Revenue Cycle Review
Central Filing:
Currently, part of the supporting
documentation used to issue licences
and permits is filed in the Central Files;
however, some documents are kept in
separate files by the By-law officer
responsible for the review and approval
of the licence/permit (e.g. business
licence, pool enclosure permits, etc.).
Decentralized filing may make it
difficult to locate required records as
each record set would be arranged and
managed differently.
Reconciliations:
As part of the process of monitoring
Clerks Division's activities, reconciliations and
reviews need to be performed. We observed
that some reviews and reconciliations are not
documented nor are they signed-off.
Policies and Procedures:
Clerks Division's procedures have not
been formalized. Work is performed
based on the experience of clerical
personnel.
Taxi Driver's Licence:
The stock of blank licence cards is kept
RECOMI\II.Ef.l[1
parking ticket and follow
up with Clerks Division
management on any noted
variances
All documents should be
filed in the Central
Files, which should be
locked during non-
business hours.
Procedures for filing
documents should be
established and followed
by all employees involved.
Reconciliations and
reviews need to be
documented and signed-
off by the responsible
personnel. Any deviations
or problems encountered
should be explained.
We understand that
management has initiated
the process of
documenting the activities
and we encourage
management to continue
with its efforts in
developing and
documenting the
Clerks Division's
procedures. These
procedures such as pre-
numbering forms, central
filing, segregation of duties
should cover areas such
as pre-numbering,
reconciliations of revenue,
etc.
Taxi driver licence cards
should be pre-printed and
contain special features
Date: July 20,2005
Page 3
rtlL~NAG.ËME
. COMMENT
Finance staff. Statistics on
the number of licences,
permits, parking tags, etc
have been or are in the
process of being produced
for management review,
productivity and control
ur oses.
All documents are filed
within central files, with the
exception of active by-law
enforcement officer files. All
files are locked during non-
business hours.
Procedures have been
developed for tracking of
the work in progress files.
Access to the central files
after hours have been
restricted to management
only.
Reconciliation procedures
have been established and
templates have been
developed incorporating the
recommendations.
Establishment of additional
separate revenue accounts
have been com leted.
Desk reference binders
have been completed for
clerical staff, and will be
incorporated into Clerks
Division policy and
procedure manual. By-law
Enforcement staff are
anticipating completion
early in 2006 due to current
workload commitments.
All files and blank forms are
secured at all times.
Software ro ram-
Report CS 58-05
Clerks Division Revenue Cycle Review
Date: July 20,2005
05ìl1
Page 4
unlocked and pre-signed on a desk.
Cards are not sequentially numbered.
In addition, information about taxi
driver's licence is not recorded into a
centralized database. Physical files are
kept in an open cabinet.
(Le. watermark, digital
photos) to prevent
falsification. Additionally,
cards should be numbered
to allow management to
control the stock of blank
cards and the number of
licences issued by the
Division. The issuance of
taxi driver licences should
be recorded in a
centralized database to
allow Clerks Division to
have better control of the
licences and the expiry
dates. Physical files
should be securely locked
during non-business
hours. Licences should not
be signed until
documentation is
completed and ready to be
issued.
Blank stock of sensitive
forms should be securely
locked outside of business
hours. Management
should keep control of
forms received and
issued. Monthly
reconciliations should be
performed, documented
and signed-off, by an
independent party, who
should also compare the
stock position to the
monthl revenue.
Blank Stock of Sensitive Forms:
Marriage and lottery licences are
printed on pre-printed numbered
paper. However, the stock of blank
forms is not securely stored and is
accessible at any time. Additionally,
management does not control the
sequence of lottery licence forms.
Numbering and inventory of marriage
licence forms is reconciled by the
Finance Section.
GE~E
. ENtS
Identicam has been
researched for licence
issuance and is in the
process of being
purchased. Database is
currently being developed
for licence tracking. No
licences are pre-signed and
a temporary manual
numbering system has
been established.
All licences are reviewed by
the City Clerk effective July
1 , 2005, prior to issuance.
Sensitive forms are locked
and a stock reconciliation
(log book) has been
developed. Private
information is securely
locked during non-business
hours.
The Clerks Division
completes reconciliations
on a monthly basis and
Finance staff com pletes
final reconciliation every six
months.
. qeport CS 58-05
052
Clerks Division Revenue Cycle Review
Permits, birth registration, licences and
compliance letters:
Permits, birth registration, licences
and compliance letters with the exception of
marriage and lottery licences, are issued on
plain blank paper. Although these
documents need to be signed by the
City Clerk, Manager, Municipal Law
Enforcement Officer "MLEO" or clerical
personnel, depending on the type of
document, controls do not ensure that
the City only issues and charges for
legitimate documents.
Compliance letters are also printed on
plain blank paper and do not need to
be signed.
In addition, most of the licences and
permits are not controlled by a system
nor are they recorded into a database.
Safeguard of Private Information:
Some files like the marriage licence and taxi
driver's licence contain private information.
Documents are ke t in unlocked cabinets.
Customer Information:
There are no signs indicating that payments
can not be accepted by the clerical personnel
and should be made directl at the cashier.
Vital Statistics/Lottery Systems:
The Vital Statistics system is used to
record birth registrations, marriage
licences and burial permits. The
Lottery system records lottery licences.
None of these systems enforce periodic
user password changes.
RECOMMENDATION
Birth registration,
municipal licences,
permits and compliance
letters should be issued on
pre-printed forms with
special features to prevent
falsification. Forms should
be sequentially numbered
to allow management to
control the number of
registrations, licences and
permits issued by the
Division. All issuance of
licences and permits
should be recorded in a
database to allow Clerks
Division to maintain better
control of the documents
and, if applicable, the
expiry date.
Private information should
be kept securely locked
during non-business
hours.
Sign age should notify
customers to make
payments only at the
cashiers.
Management should
consider updating these
systems and enforcing
users to change their
passwords at least every
90 days. Passwords
should have a minimum
length of 6 characters
and, if possible, complexity
should be enforced. The
system should lockout
users who exceed 3
unsuccessful login
attempts until the IT
Section can reset the
assword.
Date: July 20,2005
Page 5
. MANÃGEM EN't
, , '
COMMENTS
Pre-printed sequentially
numbered forms are being
used and special security
features are pending the
integration of upgrades to
the Amanda system in the
Fall. Enhancement of the
existing database will also
be realized as part of the
Amanda system.
Compliance letters are now
completed utilizing a
standard template including
computer generated
numbers and are signed by
clerical personnel.
All central file cabinets are
locked during non-business
hours and the key secured.
Counter signage has been
established and permanent
signage is being reviewed.
Excel database created and
implemented by IT for
affected staff. Restricted
password access
established. Procedures
have been developed.
Report CS 58-05
Clerks Division Revenue Cycle Review
053
Date: July 20, 2005
Page 6
Segregation of Duties:
Manual parking tickets are keyed into
the system by the Clerks Division,
which is also responsible for processing
ticket cancellation, recording payment,
obtaining car owner information from
the MTO and sending plates to plate
denial.
RECOMMENDATION
The following duties
should be segregated:
By-law Section or an
independent party
. Recording ticket
information into Ticket
Processor from
handhelds and manual
tickets should be
delivered directly to
this section. By-law
Section should not
have access to Ticket
Processor
functionalities other
than uploading and
viewing tickets.
Clerical personnel
. Reconciling tickets
recorded in Ticket
Processor with
handheld print-outs or
manual tickets;
. Recording payment
into Ticket Processor;
. Cancelling tickets
according to
cancellation policies;
. Obtaining MTO car
owner information;
and
. sending plate to plate
denial
. Ticket cancellations,
PayTicket payment
reversal and plate
denial activities should
also be co-signed by a
second clerical staff
member and reviewed
by management on a
regular basis.
Exceptions from
cancellation policy
should be approved by
management and
reasons noted. If
possible, system
should 10 the user
MANAGEfI(1EN
COMMENTS
Duties have been
segregated and controls
established, including a
cancellation policy. This
process will be further
reviewed upon the
purchase of the new
parking ticket handheld
units.
Co-signing of all documents
is strictly enforced.
Plate information can only
be accessed by the
Manager, By-law
Enforcement and one
senior MLEO officer. One
clerical personnel confirms
the search and matches to
the appropriate parking
ticket.
Daily log for Pay Tickets is
completed and signed by
the City Clerk, then
forwarded to Finance staff
for processing.
Reconciliation on a monthly
basis is completed by the
Clerk's Assistant and
amended forms are
forwarded to Finance staff
for payment.
Any payment processing is
handled by the cashiers in
the Finance Division.
, 'ieport CS 58-05
0154
Clerks Division Revenue Cycle Review
Date: July 20, 2005
Page 7
RECOMMENDATION
responsible for the
cancellation and
second review.
Finance
. Receiving payments
done at the cashier,
drop-box, direct
deposit via PayTicket
or cheques from MTO.
. Recording payment
received in the
accounting system.
. Reconciling payments
processed by Finance
with payment
information recorded
into Ticket Processor.
MANAGEMENT.
COMMENTS.
Report CS58-05
Clerks Division Revenue Cycle Review
Date: July 20, 2005
Page 8
055
u
Ticket Canceilation Process:
Condominium or private area parking tickets
are cancelled upon issuer request. During our
work, we identified a ticket that was cancelled
upon the receipt of a fax document. The fax
had the logo of the condominium but it was
not signed and did not indicate the full name
of the condominium representative. In
addition, there is no second review/approval
for the cancellation of a ticket.
Reconciliation:
Ticket payments processed by Finance and
recorded into the G/L are not reconciled to the
tickets paid in Ticket Processor (system used
to control parking tickets).
Logic Security:
Information stored in the handheld
units is downloaded via Citation+,
which produces a text file to be saved
in a network directory. A File is then
uploaded into Ticket Processor by
appropriate clerical personnel. The
Interface file contains control totals;
however, the Ticket Processor does not
perform checks to ensure information
was uploaded correctly.
Each condominium or
private area should
formally designate the
appropriate personnel
who will have the authority
to cancel tickets.
Only authorized personnel
should be able to request
the cancellation of a ticket.
Requests should be
signed and the original
document should be
compared to the name
and signature in the
authorization process and
filed together with the
cancelled tickets. Ticket
cancellation should be co-
signed by two clerical staff
members. Any exceptions
from the policy should be
approved by management
and reasons noted.
Management should
review cancellations on a
regular basis.
Monthly reconciliations
should be performed,
documented and signed-
off by an independent
party. Payments
processed by Finance
should be compared to the
information in the Ticket
Processor s stem.
Information downloaded
from the handhelds
should be saved in a
protected directory in the
network to which only the
Ticket Processor has
access. Control totals
checks should be
implemented in Ticket
Processor to ensure
information was uploaded
correctly. Additionally,
tickets uploaded into
Ticket Processor should
be reconciled to the
handhelds printed tickets
b an inde en dent art.
N
I\iI.ÅJNÂGEM
C0MMENT
The Clerks Division, in
accordance with the
cancellation policy, handles
all cancellations.
A letter was sent to all
condominiums advising of
this change in policy in the
fall of 2004.
Monthly reconciliations
have re-commenced since
the hiring of the new City
Clerk.
Information from the
downloads are saved within
a protected directory and
errors are verified by
clerical personnel prior to
further processing.
All ticket reconciliations are
handled by one clerical
personnel, with an
additional sign off by the
Clerk's Assistant.
Clerical staff do not have
the authority to change or
modify the ticket information
u loaded.
056
Report CS 58-05
Clerks Division Revenue Cycle Review
Date: July 20,2005
Page 9
Payments Received at the Drop-Box:
Payments received at the drop-box are
directed to the clerical personnel to
ensure parking tickets are due (i.e.,
identify whether ticket is in court or
was sent to MTO for plate denial). If
Clerks Division approves payment
receipt, then cheque or cash is sent to
Finance to process payment.
Car Owner Request to MTO:
Tickets that are not paid up to 14 days
after the due date are extracted from
Ticket Processor and a text file is
produced to be sent to MTO, which
sends back a text file containing the car
owner information. A Text file is
received by clerical personnel and
uploaded into Ticket Processor. If the
information received from MTO is
inconsistent or the car owner
information can not be found, the ticket
is cancelled.
Distribution of Manual Ticket Books:
Parking tickets books are distributed at the
Clerks Division. To obtain a book, a
document identifying the number sequence of
the book must be signed by the
recipient/parking control officer. However, no
identification is requested, as the recipients
are usually in uniform.
Ticket Processor Audit Trai!:
Ticket Processor records audit trails.
However, there are no customized reports to
be used for monitoring purposes. In order to
check all the operations done by clerical
personnel, a query needs to be run against
the database.
Clerical personnel should
not have access to change
nor to modify ticket
information uploaded from
handhelds.
Drop-box content should
be directed to Finance
to count and document the
payments received.
A list of payments should
then be sent to the Clerks
Division to identify whether
payments should be
processed or returned to
the customer.
Cancellation due to
inconsistent or lack of
information should be co-
signed by two clerical
personnel. Any
exceptions from the policy
should be approved by
management and reasons
noted. Management
should review
cancellations on a regular
basis.
Ticket books should be
given to authorized
personnel upon
presentation of
identification document.
Clerks Division should
keep track of which officer
collected which books.
Periodic reconciliations
should be performed by an
independent party to
ensure ticket books are
being used appropriately
(i.e. if there are no tickets
missing nor gaps in the
se uence.
Customized reports should
be developed to allow
management to monitor
Clerks Division activities.
Finance document through
a log the cheques received
and send to clerical
personnel for verification.
Payment is processed once
the verification is received.
In accordance with the
cancellation procedures, all
cancellations are reviewed
by two clerical personnel
and final review and
approval by the Manager,
By-law Enforcement.
A log book for sign out of
the books have been
established. A copy of the
officer identification is kept
with the log book for
verification purposes.
Periodic reconciliations will
be undertaken by an
independent person.
An RFP for the handheld
units has been prepared
and specifications have
been developed to ensure
customized reports can be
developed.
057
Report CS 58-05
Date: July 20, 2005
Clerks Division Revenue Cycle Review
Page 10
INSIGHT AND IMPLICATION RECOMMENDATION MANAGEMENT
COMMENTS
With the existing units.
customized reports cannot
be obtained.
With all the recent changes within the Division, it should be noted that special care has
been taken to ensure there is a strong focus on internal controls, customer service and
best practices. The workplan developed based on the recommendations will be
reviewed by the City Clerk on a bi-weekly basis with management staff within the
Division, along with monthly briefing at Clerks Division staff meetings to ensure that all
parties are on track and best practices are continually addressed to determine the
feasibility of implementation within the Division.
Attachments:
1 .
Clerks Division Revenue Cycle - Deloitte & Touche Report
Prepared By:
Approved I Endorsed By:
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Gillis A. Paterson
Director, Corporate Services & Treasurer
GAP/vw
Attachment
Copy:
Chief Administrative Officer
City Clerk
Manager, Accounting Services
Audit Analyst
Deloìtte & Touche
Recommended for the consideration of
Pickering Cify cil
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Deloitte
Deloitte & Touche LLP
5140 Yonge Street
Suite 1700
Toronto, ON M2N 6L7
Canada
Tel: (416) 601 6150
Fax: (416) 6016151
www.deloitte.ca
Audit Committee
The Corporation of the City of Pickering
1 The Esplanade
Pickering, Ontario Ll V 6K7
Dear Audit Committee Members:
As requested by the Audit Committee, we have followed up on the Clerk's Division Revenue Cycle recommendations prepared by Deloitte &
Touche in June 2004 and the respective management comments dated July 20, 2005.
As of October 19,2005, Deloitte & Touche reviewed management comments to determine if they were implemented as stated and addressed the
recommendations. The results of this review are included in the attached document.
Overall, it was noted that the majority of the recommendations have not been fully implemented. The Clerk's Division is expecting to implement
the Amanda software in January 2006. Management anticipates addressing the Deloitte & Touche recommendations as part of this software
implementation.
We would like to acknowledge the assistance and co-operation of management and all the staff during the course of the review. We would be
pleased to discuss the results of our review and provide any assistance you may wish in their implementation.
Yours truly,
/Lt ;~
Paula A. Jesty, CA
Partner
Member of
Deloitte Touche Tohmatsu
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Clerks Division Revenue Cycle
Recom mendations From Deloitte &. Touche
Insight and Implication
Budget Monitoring:
Management prepares the annual
budget mainly based on previous year
numbers per type of licence, permit,
service or parking tickets. However,
Finance only reviews the budget for
the total revenue.
Central Filing:
Currently, part of the supporting
documentation used to issue licences
and permits is filed in the Central
Files; however, some documents are
kept in separate files by the By-law
officer responsible for the review and
approval of the licence/permit (e.g.
business licence, pool enclosure
permits, etc.). Decentralized filing
may make it difficult to locate required
records as each record set would be
arranged and managed differently.
Reconciliations:
As part of the process of monitoring
Clerks Division's activities,
reconciliations and reviews need to be
performed. We observed that some
reviews and reconciliations are not
documented nor are they signed-off.
Recommendation - June 2004
Clerks Division management should
monitor activities on a regular basis
through reviewing reports and
analyzing the statistics. Results and
comments on any deviations should be
documented and signed-off. Finance,
as an independent party, should
review the actual revenue numbers
per type of licence, permit, service or
parking ticket and follow up with
Clerks Division management on any
noted variances.
All documents should be filed in the
Central Files, which should be locked
during non-business hours.
Procedures for filing documents should
be established and followed by all
employees involved.
Reconciliations and reviews need to be
documented and signed-off by the
responsible personnel. Any deviations
or problems encountered should be
explained.
@ Deloitte & Touche LLP and affiliated entities.
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Management Comments - July 20, 2005 I Follow up - October 19,2005
Financial tracking sheets have been
established for By-law Enforcement and are
currently being finalized for balance of the
Division. Policy and procedures have been
completed.
The Clerks Division will reconcile all accounts
on a monthly basis and provide verification
to the Finance Division. Regular reviews will
be completed by the Finance staff. Statistics
on the number of licences, permits, parking
tags, etc. have been or are in the process of
being produced for management review,
productivity and control purposes.
All documents are filed within central files,
with the exception of active by-law
enforcement officer files. All files are locked
during non-business hours.
Procedures have been developed for tracking
of the work in progress files. Access to the
central files after hours have been restricted
to management only.
Reconciliation procedures have been
established and templates have been
developed incorporating the
recommendations.
Establishment of additional separate revenue
accounts have been completed.
Management comments address the
recommendations.
Management comments have been
implemented with the exception of
the Clerks division reconciliations.
Manual informal reconciliations are
being prepared by the Audit Analyst
pending the launch of the Amanda
System.
Management comments address the
recommendations.
Management comments have been
implemented with the exception of
procedures for tracking work in
progress files.
No formal procedures were noted to
track work in process files stored
outside of central filing.
Management comments address the
recommendations.
Management has implemented
reconciliation procedures however
they do not include documented
reviews and sign-offs.
Templates have been developed for
tracking sheets.
Separate revenue accounts have
been created.
City of Pickering - Clerk's Revenue Process
2
Clerks Division Revenue Cycle
Recommendations From Deloitte & Touche
Insight and Implication
Policies and Procedures:
Clerks Division's procedures have
not been formalized. Work is
performed based on the experience
of clerical personnel.
Taxi Driver's Licence:
The stock of blank licence cards is
kept unlocked and pre-signed on a
desk. Cards are not sequentially
numbered. In addition, information
about taxi driver's licence is not
recorded into a centralized database.
Physical files are kept in an open
cabinet.
Blank Stock of Sensitive Forms:
Marriage and lottery licences are
printed on pre-printed numbered
paper. However, the stock of blank
forms is not securely stored and is
accessible at any time. Additionally,
management does not control the
sequence of lottery licence forms.
Numbering and inventory of
marriage licence forms is reconciled
by the Finance Section.
Recommendation - June 2004
We understand that management has
initiated the process of documenting
the activities and we encourage
management to continue with its
efforts in developing and documenting
the Clerks Division's procedures.
These procedures such as pre-
numbering forms, central filing,
segregation of duties should cover
areas such as pre-numbering,
reconciliations of revenue, etc.
Taxi driver licence cards should be pre-
printed and contain special features
(i.e. watermark, digital photos) to
prevent falsification. Additionally,
cards should be numbered to allow
management to control the stock of
blank cards and the number of licences
issued by the Division. The issuance of
taxi driver licences should be recorded
in a centralized database to allow
Clerks Division to have better control
of the licences and the expiry dates.
Physical files should be securely locked
during non-business hours. Licences
should not be signed until
documentation is completed and ready
to be issued.
Blank stock of sensitive forms should
be securely locked outside of business
hours. Management should keep
control of forms received and issued.
Monthly reconciliations should be
performed, documented and signed-
off, by an independent party, who
should also compare the stock position
to the monthly revenue.
@ Deloitte & Touche LLP and affiliated entities.
Management Comments - July 20, 2005
Desk reference binders have been completed
for clerical staff, and will be incorporated into
Clerks Division policy and procedure manual.
By-law Enforcement staff are anticipating
completion early in 2006 due to current
workload commitments.
All files and blank forms are secured at all
times.
Software program - Identicam has been
researched for licence issuance and is in the
process of being purchased. Database is
currently being developed for licence
tracking. No licences are pre-signed and a
temporary manual numbering system has
been established.
All licences are reviewed by the City Clerk
effective July 1, 2005, prior to issuance.
Sensitive forms are locked and a stock
reconciliation (log book) has been developed.
Private information is securely locked during
non-business hours.
The Clerks Division completes reconciliations
on a monthly basis and Finance staff
completes final reconciliation every six
months.
Follow up - October 19, 2005
Management comments address the
recommendation. The desk reference
binders have been developed
however they will be significantly
changed upon the full
implementation of the Amanda
software.
We encourage management to
continue with its efforts in developing
and documenting procedures in light
of the anticipated software
implementation.
Recommendations have not been
implemented pending the launch of
the Identicam software.
Files and blank forms have been
secured. Licenses are being reviewed
prior to issuance by either the City
Clerk or the Manager, By-Law
Enforcement.
Management comments address the
recommendations.
The comments have been
implemented with the exception of
the reconciliations of blank stock
which will now be the responsibility
of the new Deputy Clerk.
Management expects that this
recommendation will be implemented
by the new Deputy Clerk.
City of Pickering - Clerk's Revenue Process
3
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Clerks Division Revenue Cycle
Recommendations From Deloitte & Touche
Insight and Implication
Permits, birth registration,
licences and compliance letters:
Permits, birth registration, licences
and compliance letters with the
exception of marriage and lottery
licences, are issued on plain blank
paper. Although these documents
need to be signed by the City Clerk,
Manager, Municipal Law Enforcement
Officer "MLEO" or clerical personnel,
depending on the type of document,
controls do not ensure that the City
only issues and charges for legitimate
documents.
Compliance letters are also printed on
plain blank paper and do not need to
be signed.
In addition, most of the licences and
permits are not controlled by a system
nor are they recorded into a database.
Safeguard of Private Information:
Some files like the marriage licence
and taxi driver's licence contain
private information. Documents are
kept in unlocked cabinets.
Customer Information:
There are no signs indicating that
payments can not be accepted by the
clerical personnel and should be made
directly at the cashier.
Vital Statistics/Lottery Systems:
The Vita Statistics system is used to
record birth registrations, marriage
licences and burial permits. The
Lottery system records lottery
licences. None of these systems
enforce periodic user password
changes.
@ Deloitte & Touche LLP and affiliated entities.
Recommendation - June 2004
Birth registration, municipal licences,
permits and compliance letters should
be issued on pre-printed forms with
special features to prevent
falsification. Forms should be
sequentially numbered to allow
management to control the number of
registrations, licences and permits
issued by the Division. All issuance of
licences and permits should be
recorded in a database to allow Clerks
Division to maintain better control of
the documents and, if applicable, the
expiry date.
Private information should be kept
securely locked during non-business
hours.
Signage should notify customers to
make payments only at the cashiers.
Management should consider updating
these systems and enforcing users to
change their passwords at least every
90 days. Passwords should have a
minimum length of 6 characters and,
if possible, complexity should be
enforced. The system should lockout
users who exceed 3 unsuccessful login
attempts until the IT Section can reset
the password.
Management Comments - July 20, 2005
Pre-printed sequentially numbered forms are
being used and special security features are
pending the integration of upgrades to the
Amanda system in the Fall. Enhancement of
the existing database will also be realized as
part of the Amanda system.
Compliance letters are now completed
utilizing a standard template including
computer generated numbers and are signed
by clerical personnel.
All central file cabinets are locked during
non-business hours and the key secured.
Counter signage has been established and
permanent signage is being reviewed.
Excel database created and implemented by
IT for affected staff. Restricted password
access established. Procedures have been
developed.
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Follow up - October 19, 2005
Management comments address the
recommendations.
Pre-printed sequentially numbered
forms are only used for marriage
and lottery licenses, thus the
recommendation has not been fully
implemented.
Compliance letters are completed
using a standard template however
the numbering system is still
manual.
There is no formal database for the
issuance of all licenses and permits.
Management comments address the
recommendations and appear to
have been implemented.
Recommendations have yet to be
implemented. Expected to be
implemented upon remodeling of
the counter area.
Management comment does not
appear to address password
changes in Vital Statistics and
Lottery System Software.
Although computer network access
requires regular password changes,
access to Vital Statistics/Lottery
systems do not currently appear to
require password changes.
City of Pickering - Clerk's Revenue Process
4
Clerks Division Revenue Cycle
Recommendations From Deloitte & Touche
Insight and Implication
Segregation of Duties:
Manual parking tickets are
keyed into the system by the
Clerks Division, which is also
responsible for processing
ticket cancellation, recording
payment, obtaining car owner
information from the MTO and
sending plates to plate denial.
Recommendation - June 2004
The following duties should be segregated.
Bv-Iaw Section or an indeDendent Dartv
. Recording ticket information into Ticket
Processor from handhelds and manual
tickets should be delivered directly to this
section. By-law Section should not have
access to Ticket Processor functionalities
other than uploading and viewing tickets.
Clerical Dersonnel
. Reconciling tickets recorded in Ticket
Processor with handheld print-outs or
manual tickets;
. Recording payment into Ticket Processor;
. Cancelling tickets according to cancellation
policies;
. Obtaining MTO car owner information; and
. Sending plate to plate denial
. Ticket cancellations, PayTicket payment
reversal and plate denial activities should
also be co-signed by a second clerical staff
member and reviewed by management on a
regular basis. Exceptions from cancellation
policy should be approved by management
and reasons noted. If possible, system
should log the user responsible for the
cancellation and second review.
Finance
. Receiving payments done at the cashier,
drop-box, direct deposit via PayTicket or
cheques from MTO.
. Recording payment received in the
accounting system.
. Reconciling payments processed by Finance
with payment information recorded into
Ticket Processor.
@ Deloitte & Touche LLP and affiliated entities.
Management Comments - July 20, 2005
Duties have been segregated and controls
established, including a cancellation policy.
This process will be further reviewed upon the
purchase of the new parking ticket handheld
units.
Co-signing of all documents is strictly
enforced.
Plate information can only be accessed by the
Manager, By-law Enforcement and one senior
MLEO officer. One clerical personnel confirms
the search and matches to the appropriate
parking ticket.
Daily log for Pay Tickets is completed and
signed by the City Clerk, then forwarded to
Finance staff for processing.
Reconciliation on a monthly basis is completed
by the Clerk's Assistant and amended forms
are forwarded to Finance staff for payment.
Any payment processing is handled by the
cashiers in the Finance Division.
Follow up - October 19, 2005
Management comments address
the recommendations.
Segregation of duties have not
been implemented as
recommended.
Co-signing of documents, daily
log of Pay Tickets, reconciliation
of Moneris information and
payment processing has been
implemented.
City of Pickering - Clerk's Revenue Process
5
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Clerks Division Revenue Cycle
Recommendations From Deloitte & Touche
Insight and Implication
Ticket Cancellation Process:
Condominium or private area
parking tickets are cancelled upon
issuer request. During our work, we
identified a ticket that was cancelled
upon the receipt of a fax document.
The fax had the logo of the
condominium but it was not signed
and did not indicate the full name of
the condominium representative. In
addition, there is no second review/
approval for the cancellation of a
ticket.
Reconciliation:
Ticket payments processed by
Finance and recorded into the G/L
are not reconciled to the tickets paid
in Ticket Processor (system used to
control parking tickets).
Logic Security:
Information stored in the handheld
units is downloaded via Citation+,
which produces a text file to be
saved in a network directory. A File
is then uploaded into Ticket
Processor by appropriate clerical
personnel. The Interface file
contains control totals; however, the
Ticket Processor does not perform
checks to ensure information was
uploaded correctly.
Recommendation - June 2004
Each condominium or private area
should formally designate the
appropriate personnel who will have the
authority to cancel tickets. Only
authorized personnel should be able to
request the cancellation of a ticket.
Requests should be signed and the
original document should be compared
to the name and signature in the
authorization process and filed together
with the cancelled tickets. Ticket
cancellation should be co-signed by two
clerical staff members. Any exceptions
from the policy should be approved by
management and reasons noted.
Management should review
cancellations on a regular basis.
Monthly reconciliations should be
performed, documented and signed-off
by an independent party. Payments
processed by Finance should be
compared to the information in the
Ticket Processor system.
Information downloaded from the
handhelds should be saved in a
protected directory in the network to
which only the Ticket Processor has
access. Control totals checks should be
implemented in Ticket Processor to
ensure information was uploaded
correctly. Additionally, tickets uploaded
into Ticket Processor should be
reconciled to the handhelds printed
tickets by an independent party.
Clerical personnel should not have
access to change nor to modify ticket
information uploaded from handhelds.
@ Deloitte & Touche LLP and affiliated entities.
Management Comments - July 20, 2005
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Follow up - October 19, 2005
The Clerks Division, in accordance with the Management comments do not
cancellation policy, handles all cancellations. address the recommendations.
A letter was sent to all condominiums advising Management has implemented a
of this change in policy in the fall of 2004. cancellation policy however it
does not include the
recommended listing of formally
designated personnel with
approval to authorize ticket
cancellation.
Monthly reconciliations have re-commenced
since the hiring of the new City Clerk.
Information from the downloads are saved
within a protected directory and errors are
verified by clerical personnel prior to further
processing.
All ticket reconciliations are handled by one
clerical personnel, with an additional sign off
by the Clerk's Assistant.
Clerical staff do not have the authority to
change or modify the ticket information
uploaded.
Management comments address
the recommendation.
Formal reconciliations are not
being performed by the Audit
Analyst pending the launch of the
Amanda software.
Management comments address
the recommendation.
Reconciliations of uploaded
information and ticket information
has not been implemented.
Clerical personnel restricted as
they do not have access to
change or modify uploaded ticket
information.
City of Pickering - Clerk's Revenue Process
6
Clerks Division Revenue Cycle
Recommendations From Deloitte & Touche
Insight and Implication
Payments Received at the Drop-Box:
Payments received at the drop-box are
directed to the clerical personnel to ensure
parking tickets are due (i.e., identify
whether ticket is in court or was sent to
MTO for plate denial). If Clerks Division
approves payment receipt, then cheque or
cash is sent to Finance to process payment.
Car Owner Request to MTO:
Tickets that are not paid up to 14 days after
the due date are extracted from Ticket
Processor and a text file is produced to be
sent to MTO, which sends back a text file
containing the car owner information. A
Text file is received by clerical personnel
and uploaded into Ticket Processor. If the
information received from MTO is
inconsistent or the car owner information
can not be found, the ticket is cancelled.
Distribution of Manual Ticket Books:
Parking ticket books are distributed at the
Clerks Division. To obtain a book, a
document identifying the number sequence
of the book must be signed by the
recipient/parking control officer. However,
no identification is requested, as the
recipients are usually in uniform.
Ticket Processor Audit Trail:
Ticket Processor records audit trails.
However, there are no customized reports to
be used for monitoring purposes. In order
to check all the operations done by clerical
personnel, a query needs to be run against
the database.
@ Deloitte & Touche LLP and affiliated entities.
Recommendation - June 2004
Drop-box content should be
directed to Finance to count and
document the payments received.
A list of payments should then be
sent to the Clerks Division to
identify whether payments should
be processed or returned to the
customer.
Cancellation due to inconsistent or
lack of information should be co-
signed by two clerical personnel.
Any exceptions from the policy
should be approved by
management and reasons noted.
Management should review
cancellations on a regular basis.
Ticket books should be given to
authorized personnel upon
presentation of identification
document. Clerks Division should
keep track of which officer
collected which books. Periodic
reconciliations should be
performed by an independent
party to ensure ticket books are
being used appropriately (i.e. if
there are no tickets missing nor
gaps in the sequence).
Customized reports should be
developed to allow management to
monitor Clerks Division activities.
Management Comments - July 20, 2005 Follow up - October 19,2005
Finance document through a log the cheques Management comments address
received and send to clerical personnel for the recommendation and have
verification. Payment is processed once the been implemented.
verification is received.
In accordance with the cancellation
procedures, all cancellations are reviewed by
two clerical personnel and final review and
approval by the Manager, By-law
Enforcement.
A log book for sign out of the books have
been established. A copy of the officer
identification is kept with the log book for
verification purposes. Periodic
reconciliations will be undertaken by an
independent person. .
An RFP for the handheld units has been
prepared and specifications have been
developed to ensure customized reports can
be developed.
With the existing units, customized reports
cannot be obtained.
A cancellation policy requiring
co-signing by the two clerical
personnel plus management
signature for exceptions has
been implemented.
This policy is consistent with the
recommendations, however, it is
inconsistent with management
comments.
Management comments address
the recommendations.
Management has implemented a
log book for the sign out of the
books which keeps track of the
officer who collected the books.
Officer identification and periodic
reconciliation were not evident.
RFP is still outstanding thus
recommendation has not been
implemented.
City of Pickering - Clerk's Revenue Process
7
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<9 Deloitte & Touche LLP and affiliated entities.
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Deloitte, one of Canada's leading professional services firms, provides audit, tax, consulting, and
financial advisory services through more than 6,100 people in 47 offices. Deloitte operates in Québec
as Samson Bélair/Deloitte & Touche s.e.n.c.r.1. The firm is dedicated to helping its clients and its
people excel. Deloitte is the Canadian member firm of Deloitte Touche Tohmatsu.
Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms, and
their respective subsidiaries and affiliates. As a Swiss Verein (association), neither Deloitte Touche
Tohmatsu nor any of its member firms has any liability for each other's acts or omissions. Each of the
member firms is a separate and independent legal entity operating under the names "Deloitte,"
"Deloitte & Touche," "Deloitte Touche Tohmatsu," or other related names. Services are provided by
the member firms or their subsidiaries or affiliates and not by the Deloitte Touche Tohmatsu Verein.
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Member of
Deloitte Touche Tohmatsu
067
Ministry of
Municipal Affairs
and HousinQ
Ministère des
Affaires municipales
et du LoQement
~ Ontario
Municipal Performance and
Accountability Branch
777 Bay Street, 13th Floor
Toronto ON M5G 2E5
Phone: (416) 585-7264
Fax: (416)585-6161
Direction de la performance
et de la responsabilisation des municipalités
777, rue Bay, 13" étage
Toronto ON M5G 2E5
Téléphone: (416) 585-7264
Télécopieur: (416) 585-6161
November 2005
To Municipal Treasurers and Municipal Auditors:
I am writing to share with you some progress we've made on improving the timeliness of the
Financial Information Return (FIR) and some additional information on the Municipal Performance
Measurement Program (MPMP).
In the past, we have received feedback requesting that the tax schedule portion of the FIR be
provided earlier so that this section may be completed in advance of the others. I am pleased to
inform you that the entire FIR2005, including the tax and MPMP schedules, is now available for
downloading at the FIR website. This is about 8 weeks earlier than in most previous years.
The FIR website address has changed - please remember to update your bookmarks!
http://csconramp.mah.Qov.on.ca/fir/welcome.htm
All information on the FIR website, including the FIR2005, Instructions and Start-Up Guide have also
been updated and are available for downloading.
As in previous years, a Microsoft Excel Spreadsheet will be used for 2005 FIR reporting. Please
remember that only FIR's which have been created by the Ministry and downloaded from the FIR
website will be acceptable means of submission.
Although some minor content changes and improvements have been made, the functionality of the
FIR2005 remains very similar to previous years. For a complete list of content changes, please refer
to the FIR2005 Content Changes document available at the FIR website.
Before downloading and completing the FIRlMPMP Schedules, we recommend that you print the
FIR2005 Start-Up Guide for reference. For those of you already familiar with the FIR, we have
attached a quick reference sheet to this letter.
Once again, the deadline for completing the FIR and MPMP Schedules will be May 31,2006. In1he
past, some municipalities have experienced difficulty in submitting required information by this date.
I would like to take this opportunity to remind you that filing your FIR and MPMP data by the deadline
is a requirement under the Municipal Act, 2001. It is also critical for enabling the province to
calculate and reconcile Ontario Municipal Partnership Fund (OMPF) allocations.
12
1322(06195)
068,
After the FIR has been completed, it may be submitted by email to:
FIR@mah.gov.on.ca
Audit Questionnaires should also be submitted to your local Municipal Services Office.
Municipal Performance Measurement Program (MPMP)
You received a letter from Minister Gerretsen to your Head of Council dated November 17,2005that
describes the Municipal Performance Measurement Program (MPMP) requirements for the 2005
reporting year. After reviewing data for the parks and recreation and library measures introduced in
FIR2004, the Municipal Performance Measurement Program Advisory Committee recommended
revising the formulas for all efficiency measures to include external transfers. This revision should
improve the comparability of results. In light of this change, please take time to review the
instructions to the FIR for reporting external transfers (Instructions-Schedule 40) and consolidation
(Instructions -Introduction). Highlights of these definitions are also included in the instructions to
Schedule 91.
For FIR2005, the formula for the amount of program support allocated to other functions remains the
same. For a detailed discussion of the allocation formula, please see the introductory chapter to the
instructions to the FIR.
This formula may be revised in FIR2006 to include external transfers. In preparation forthis change,
the Treasurer's Group of the Ontario Municipal CAO's Benchmarking Association (OMBI) has
suggested that municipalities review any external transfers reported as program support in SLC 40
0260 06. External transfers related to program areas should not be reported on any line for general
government. If external transfers are not related to a specific program, they should be reported on1he
line for corporate management in SLC 40 0250 06.
Detailed instructions for MPMP measures are posted on the FIR web site. Also, see the section
called "MPMP Information" for an Excel workbook for apportioning library uses.
In addition, a workbook to assist your library in calculating library uses has been posted on the
Ministry website: www.mah.gov.on.ca under "Templates: Library Uses - MPMP 2005 Forms".
Should you have any questions or require assistance with completing the FIR and/or MPMP, please
contact; Debbie Chen-Yin (FIR) at (416) 585-6299, Bohdan Wynnycky (MPMP) at
(416) 585-6638, or your nearest Municipal Services Office.
Sincerely,
Larry Clay
Director
C:
Directors, MMAH Municipal Services Offices