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HomeMy WebLinkAboutOctober 3, 2006 AGENDA AUDIT COMMITTEE Tuesday, October 3,2006 6:30 pm Audit Committee Meeting Agenda Tuesday, October 3, 2006 6:30 PM Main Committee Room PAGE I) ADOPTION OF MINUTES Minutes of the meeting held on Monday, June 19,2006 1-5 II) REPORTS 1. Director, Corporate Services & Treasurer, Report CS 47-06 Re: Reappointment of Auditors 6-8 RECOMMENDATION 1. That Report No. CS 47-06 of the Director, Corporate Services & Treasurer be received; 2. That the Audit Committee recommend to Council that the firm of Deloitte & Touche, LLP be reappointed as the City Auditor for a five year term for the 2006-2010 audits inclusive; and 3. That the appropriate officials of the City of Pickering be given authority to give effect thereto. 2. Director, Corporate Services & Treasurer, Report CS 54-06 2006-2008 Internal Audit Work Plan Status Report 9-11 That Report CS 54-06 of the Director of Corporate Services & Treasurer be received for information. 3. Director, Corporate Services & Treasurer, Report CS 55-06 Internal Audit Charter 12-15 That Report CS 55-06 of the Director, Corporate Services & Treasurer be approved. 4. Director, Corporate Services & Treasurer, Confidential Report CS 59-06 2005 Audit Manaqement Letter - Update 'In Camera" Under Separate Cover Audit Committee Meeting Agenda Tuesday, October 3, 2006 6:30 PM Main Committee Room III) OTHER BUSINESS IV) ADJOURNMENT "\ r ~ uul Audit Committee Meeting Minutes Monday, June 19, 2006 Main Committee Room 4:00 PM PRESENT: Mayor David Ryan, Chair COMMITTEE MEMBERS: Councillor Ashe Councillor Brenner Councillor McLean ALSO PRESENT: T. J. Quinn G. Paterson D. Bentley K. Senior J. Halsall B. Wilson - Chief Administrative Officer - Director, Corporate Services & Treasurer - City Clerk - Manager, Accounting Services - Manager, Internal Audit & Control - Recording Secretary GUESTS: P. Jesty, Deloitte & Touche P. Colavecchio, Deloitte & Touche (I) ADOPTION OF MINUTES Moved by Councillor Brenner That the minutes of the meeting held on Tuesday, February 7,2006 be adopted. CARRIED Moved by Councillor McLean That the Audit Committee move into a closed meeting of Committee in order to discuss a matter that is subject to solicitor-client privilege, including communications necessary for that purpose. CARRIED - 1 - ~\ r., ,) GUt.. Audit Committee Meeting Minutes Monday, June 19, 2006 Main Committee Room 4:00 PM (II) MATTERS FOR CONSIDERATION 1. Director, Corporate Services & Treasurer Report CS 37-06 2005 Year End Audit P. Jesty, Deloitte & Touche provided a detailed overview of the Confidential Auditor's Report to the Audit Committee. A question and answer period ensued. A copy of the Auditor's Report dated June 13, 2006 was provided under separate cover. Based on the discussion, Mayor Ryan requested that the Director, Corporate Services & Treasurer look into the matter of assigning timelines (business workplan) to matters noted within the Confidential Audit report. Moved by Councillor Mclean That the Committee rise from the 'In Camera' discussion. CARRIED Moved by Councillor Mclean 1. That Report CS 37-06 of the Director, Corporate Services & Treasurer be received and referred to Council for information; 2. That the Auditor's Report to the Audit Committee as submitted by Deloitte & Touche be received for information; 3. That the Management letter from the Auditor be referred to the Director, Corporate Services & Treasurer for any further action deemed necessary and report back to the Committee; and, 4. That the 2005 draft Audited Financial Statements for the City of Pickering be received and forwarded to Council for Information. CARRIED - 2 - 003 Audit Committee Meeting Minutes Monday, June 19, 2006 Main Committee Room 4:00 PM 2. 2005 Financial Information Return A copy of the 2005 Financial Information Return was provided as a handout to all members present. Brief discussion ensued on this matter. Based on the discussion, the Director, Corporate Services & Treasurer noted that the 2005 Financial Information Return (FIR) was not available on the City's website, however, once it had been reviewed by the Ministry of Municipal Affairs; the Ministry posted all municipalities FIR's on their website. He further noted that a copy of the 2005 Financial Information Return was available upon request. Moved by Councillor Brenner That the 2005 Financial Information Return dated June 19, 2006 be received and forwarded to Council for Information. CARRIED 3. Director, Corporate Services & Treasurer, Report CS 35-06 Internal Audit Workplan 2006-2008 The Director, Corporate Services & Treasurer briefly outlined the contents of Report CS 35-06. A question and answer period ensued. The Manager, Internal Audit & Control noted that although a three year plan of audit priorities was provided, it would be reviewed and presented annually to the Audit Committee. The Chief Administrative Officer outlined the role of the Internal Auditor and discussions held in determining the priorities of the Manager, Internal Audit & Control. In response to questions, he noted that it was his desire to have an operational audit completed sooner rather than later, and he would work with the Director, Corporate Services & Treasurer, along with the Manager, Internal Audit & Control in pursuing this. Moved by Councillor Ashe That Report CS 35-06 of the Director, Corporate Services & Treasurer be received for information. CARRIED - 3 - OOct Audit Committee Meeting Minutes Monday, June 19, 2006 Main Committee Room 4:00 PM 4. Capital Asset Reportinq The Director, Corporate Services & Treasurer, provided a brief overview of the proposed new Provincial requirements for Capital Asset Reporting. He noted that this initiative had been in the discussion stage for many years and was now slated to be implemented by the year 2009. In addition he explained that this would require a significant budget increase for new software and additional manpower. He noted that at present there was no software identified and further, several other municipalities were trying to identify suitable software, with no results to date. He concluded that there are many concerns in terms of budget and value gained in regard to implementation and that further investigation would be required with updates to follow. In summary, the Chief Administrative Officer stated that he had significant concerns with the new Provincial reporting requirements and his concerns are shared by many other municipalities. He further stated that before any systems are implemented, the impact on all areas of business must be identified. He also express concern with respect to a significant increase to future budgets with no evidence that municipalities would receive additional value. He concluded by stating that the whole matter is still not finalized and that the City of Pickering, together with other municipalities are committed to extensive research/dialogue before any budget increases are made. Moved by Councillor Brenner That the verbal report of the Director, Corporate Services & Treasurer with respect to Capital Asset Reporting be received. CARRIED III) OTHER BUSINESS There were not items of Other Business presented. - 4 - 00:5 Audit Committee Meeting Minutes Monday, June 19, 2006 Main Committee Room 4:00 PM IV) ADJOURNMENT The meeting adjourned at 4:45 pm Following the Audit Committee meeting, Committee members briefly met informally with the representatives of Deloitte & Touche for the purpose of confidential discussion relating to the reports as presented. No staff were present during this discussion. - 5 - OOt; CiUI o~ REPORT TO AUDIT COMMITTEE Report Number: CS 47-06 Date: October 3, 2006 From: Gillis A. Paterson Director, Corporate Services & Treasurer Subject: Reappointment of Auditors Recommendation: 1. That Report CS 47-06 of the Director, Corporate Services & Treasurer be received; 2. That the Audit Committee recommend to Council that the firm of Deloitte & Touche, LLP be reappointed as the City Auditor for a five year term for the 2006 - 2010 audits inclusive; and, 3. That the appropriate officials of the City of Pickering be given authority to give effect thereto. Executive Summary: Under the Municipal Act, 2001 Council must review the provision of audit services at least every five years and appoint an Auditor, including the reappointment of the existing Auditor, for a period not to exceed five years. The existing Auditor, Deloitte & Touche was appointed on January 15, 2002 following the conclusion of an extensive request for proposals, interviews and analysis process involving four of Canada's largest and most respected accounting and auditing firms. Deloitte undertakes the annual audit for the City, Library Board and previously APT A. The five-year appointment is drawing to a close and it is recommended the firm be reappointed as discussed below. Financial Implications: None beyond fees included in the Annual Current Budget approved by Council. For 2007 Budget, we anticipate a 5 percent inflationary increase on the 2006 audit fees which is generally in line with the industry and past years fees. This increase equates to approximately $3,500 for the Audits of the City and Library. Report CS 47-06 Date: October 3, 2006 00'" Subject: Reappointment of Auditors Page 2 Background: The Municipal Act, 2001 8.0. 2001, Section 296 states in part: "1. Auditor - a municipality shall appoint an auditor licenced under the Public Accountancy Act, 2004 who is responsible for, a) annually auditing the accounts and transactions of a municipality and it's local boards and expressing the opinion of financial statements of these bodies based on the audit; b) performing duties designated by the Minister; and c) performing duties required by the municipality or local board which do not conflict with the duties designated by the Minister. 3. An auditor of a municipality shall not be appointed for a term exceeding five years." The current Auditors were appointed by Council through adoption of the Recommendations contained in Report CS 01-02 in January, 2002 which means their term is now nearing it's end. A reappointment must take place prior to the 2006 Audit which commences with the Interim Audit in late October, 2006 and extends into 2007. In 2002 an extensive RFP process was undertaken with four large international firms together with our local Auditor which resulted in the appointment of Deloitte & Touche as the highest scoring firm as evaluated by the Selection Committee. Deloitte & Touche is one of the larger international firms and it has also focused on the municipal sector, particularly in Ontario. It is heavily involved with the various accounting boards, associations and the provincial government in reviewing and implementing improvements to Municipal Accounting. In fact, one of the most significant advantages associated with Deloitte is their vast experience in the municipal Sector and the derivation and implementation of Public Sector Accounting Board (PSAB) recommendations. The firm's knowledge in this particular area has been especially beneficial to the City. Locally, the firm provides municipal audit expertise to six of the eight local area municipalities, the Regional Municipality of Durham and the Durham District School Board. The services provided by the firm have clearly demonstrated proficiency in the municipal environment and have demonstrated more than just a working knowledge of City operations. Their comments and assistance is always relevant and practical. Based on the experience to date the firm has provided an excellent level of service at a reasonable cost. C03 Report CS 47-06 Date: October 3, 2006 Subject: Reappointment of Auditors Page 3 Another consideration is that not reappointing the existing auditor and proceeding with an RFP after only five years can be counterproductive. Such a process involves a considerable amount of limited staff resources; a long learning curve with the new firm (at least three years) and additional annual work by staff for those same years. Finally, switching firms too frequently can indicate that the City is not willing to invest in a long term relationship that provides the necessary level of service, only the lowest bid. Neither of these are messages that we want to entertain for such an important, and increasingly complex function. Attachments: None Prepared I Approved I Endorsed By: ~~ ~)7- <L- Gillis A. Paterson Director, Corporate Services & Treasurer GAP:vw Copy: Chief Administrative Officer Recommended for the consideration of Pickering City Council c., ~,.' ~J CiUI 0# REPORT TO AUDIT COMMITTEE OO~j Report Number: CS 54-06 Date: October 3,2006 From: Gillis A. Paterson Director, Corporate Services & Treasurer Subject: 2006 - 2008 Internal Audit Work Plan Status Report Recommendation: That Report CS 54-06 of the Director, Corporate Services & Treasurer be received for information. Executive Summary: The following report provides a summary on the status of the 2006 - 2008 Internal Audit Work Plan for the current year. Financial Implications: None Background: At the June 19, 2006 Audit Committee Meeting, the 2006 - 2008 Internal Audit Work Plan was received for information. Providing senior management and the Audit Committee with periodic updates on internal audit activity's performance relative to the plan is considered a "best practice" and is specifically referred to in the standards promoted by the Institute of Internal Auditors. As the next Audit Committee Meeting is not expected until early next year, this update on the status of the Work Plan has been prepared. Attached is the 2006 Internal Audit Project Status Report, which shows the status of the 2006 - 2008 Work Plan for the current year. The Seniors Centre Theft and Wellness Centre Break-in and Theft investigations were completed earlier in the year. In all instances the report recommendations have been accepted and implemented by management. The city-wide Petty Cash/Change Floats audit is in the reporting stage and the Pickering Recreation Complex Cash Receipts and Revenues audit is in the fieldwork stage. The remaining three audits will commence in late 2006. Attachments: 1. 2006 Internal Audit Project Status Report C1C, Report CS 54-06 Date: October 3, 2006 Subject: 2006 - 2008 Internal Audit Work Plan Status Report Page 2 Prepared By: Approved I Endorsed By: k)~ ?:James Halsall Manager, Internal Audit & Control ~:?~ ~ ~;:::.- ._'''-''7, .-' .'-. - .--..:.~ ~"."._<...""".'- _.t1i1lis A. Paterson Director, Corporate Services & Treasurer GAP:jh Attachment Copy: Chief Administrative Officer Recommended for the consideration of Pickering City Council - CD o o N It) ,... ~ Q,) .c E - Q,) .- - "Co. ~ Q,) <t(l) me E f/) Q,) m -- c_ - ~ CDO 00. o Q,) Na: f/) ~ - m - (I) - o Q,) '0 ~ a. f/) - c Q,) E E o o f/) ~ - m - (I) "0 "0 a> a> (j) (j) 0. 0. 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() c ~ +-' 1i5 oCS 0 c .- a> .- co "0 >~cCt1{g"C::l ~ E a> " .2 .- () <( .2 .:::: c ~ 1i5 ~ ::c ~ ca>a>a>a>>.enco a>"C>....>:t:coo (f)!->CDEoou.. a> Ct1 a> Ct1 a> Ct1 a> a> a> u u u c c c a> a> a> E E E E<OE<OE<O 000000 o~o~o~ u.. <0 o - or- (Y) 0) ::l <( "c"O co en c c co CO:t: ~ o -g<c c <( .... o en a> c .- x en a> a> 0 Ct1 a> 0.. c::l CD ~ en:> 0' a> 0.'- :> .... .... E a> a> :!:: .0 :t: ~ co +-' U u>c"Oc"O....-c a>0a>a>0::l::l::la>d)0 a:oa:a:o<co<co_o o o a.. c- o co .- E en._ '> c +-' o<c:.o ::l oCS<c a> 0) co +-' (f) 0) c t: o 0. a> a: II a: "0 c co a> 0) co +-' (f) ~ .... o ~ ::Q a> u: II u.. a> 0) co +-' (f) 0) C C C co a.. II a.. "0 a> +-' a> 0. E o o II o 01Z- Cilil a~ REPORT TO AUDIT COMMITTEE Report Number: CS 55-06 Date: October 3,2006 From: Gillis A. Paterson Director, Corporate SeNices & Treasurer Subject: Internal Audit Charter Recommendation: That Report CS 55-06 of the Director, Corporate SeNices & Treasurer be approved. Executive Summary: The Institute of Internal Auditors' professional standards require that a charter be established for the internal audit activity and be approved by the Audit Committee. Financial Implications: None Background: A charter is an important document in the foundation of an internal audit function. It outlines the purpose, authority, and responsibility of the internal audit activity and establishes what senior management and the Audit Committee expect from the internal audit staff. The professional standards promoted by the Institute of Internal Auditors require the charter be approved by the Audit Committee. Attached is the City of Pickering's Internal Audit Charter that was designed based on the Institute of Internal Auditors' sample charter, as well as examples from other organizations. The charter sets out the mission, objective and scope, accountability, authority, responsibilities and standards of practice of the internal audit activity. Attachments: 1. City of Pickering Internal Audit Charter Report CS 55-06 Date: October 3,2006 013 Subject: Internal Audit Charter Page 2 Prepared By: Approved I Endorsed By: .~ 7JiJ1dL ~mes Halsall Manager, Internal Audit & Control ~ ...,.<if'" ~, "'; ,.:s:.' " .......... ,. .' ~.~ Grilis A. Paterson Director, Corporate Services & Treasurer GAP:jh Attachment Copy: Chief Administrative Officer Recommended for the consideration of Pickering City Council ,.~ 6 (' 1 C' 11 -t ATTACHr"l~i.: ,-,-' . ....FORT #u 55... oj, City of Pickering Internal Audit Charter Mission The mission of the internal audit function is to provide independent, objective assurance and consulting services designed to add value and improve the City of Pickering's operations. It helps the City accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes. Objective and Scope The objective of the internal audit function is to work co-operatively with management and staff to improve the economy, efficiency, effectiveness, and accountability of City programs and operations. The scope of internal audit's activities shall encompass all systems, functions, activities and operations of the City. Specifically, the internal audit function is to determine whether the risk management systems, control environment and governance processes, as designed and represented by management, are adequate and functioning in the following manner: . risks are appropriately identified and managed; . programs are delivered in an efficient and effective manner, and objectives are achieved; . adequate financial and operating information is provided to Council and City management and staff for decision making and accountability; . regulatory or contractual requirements are recognized and met; and . resources are adequately protected, used economically and effectively applied against stated priorities. The internal audit function contributes to an effective control environment. However, it does not relieve management of its primary responsibility for establishing and maintaining adequate internal controls to provide reasonable assurance that organizational goals and objectives will be accomplished in the most effective, efficient and economical manner. Accountability The Director, Corporate Services & Treasurer, with the assistance of the Manager, Internal Audit & Control will be accountable to the Audit Committee and Chief Administrative Officer for the management and delivery of the internal audit program. 01~) Authority The Manager, Internal Audit & Control, reports directly to the Director, Corporate Services & Treasurer. Where necessary, the Manager, Internal Audit & Control shall have direct communication with the Audit Committee and/or Chief Administrative Officer. The Manager, Internal Audit & Control and the Audit Analyst shall have: . unrestricted access to all activities, records, properties and personnel necessary to carry out their responsibilities; . authority to allocate resources, set frequencies, select subjects, determine scopes of work and apply techniques required to accomplish audit objectives; and . full support and cooperation of City management and staff. Responsibilities The Manager, Internal Audit & Control, shall have a responsibility to: . develop a three year audit plan using an appropriate risk-based methodology in consultation with senior management, and submit the plan to the Audit Committee for its review; . implement the audit plan and provide periodic updates to senior management and the Audit Committee; . maintain a professional audit staff with sufficient knowledge, skills and experience to meet the requirements of this Charter; . report audit results to the Audit Committee and senior management; . follow-up on previous issued audit report recommendations every six months; and . assist in the investigation of significant suspected fraudulent activities within the City and notify the Audit Committee and senor management of the results. The Manager, Internal Audit & Control and the Audit Analyst has no authority over, and are not directly responsible for, any activities reviewed. Standards To the extent possible, the Internal Audit function will follow the Standards for the Professional Practice of Internal Audit and the Code of Ethics adopted by the Institute of Internal Auditors. Approval Approved by the Audit Committee on October 3,2006.