HomeMy WebLinkAboutCS 51-08
Citq o~
REPORT TO
EXECUTIVE COMMITTEE
Report Number: CS 51-08
Date: November 10, 2008
! 7i I
From:
Gillis A. Paterson
Director, Corporate Services & Treasurer
Subject:
2008 Year End Audit
Recommendation:
1. That the Audit Plan as submitted by Deloitte & Touche LLP, included as Attachment
1 to this report be received for information; and,
2. That the Chief Administrative Officer and the Director, Corporate Services &
Treasurer be authorized to sign the Auditor's Engagement Letter on behalf of the
City.
Executive Summary: In accordance with generally accepted auditing standards
the audit plan is prepared to communicate the auditor's approach and reporting
responsibilities to the Executive Committee, who has oversight responsibility for the
Financial Reporting Process. This plan is submitted prior to the ,commencement of the
year end audit.
Financial Implications: The audit fee, for City & Library, of $66,900 represents an
increase of approximately 4% over the prior year. Sufficient provision was included in
the 2008 Current Budget.
Sustainability Implications:
implications.
This report does not contain any sustainability
Background: In the Committee's role as the body responsible for oversight of
the Financial Reporting Process, the Committee is to review the audit plan for the
upcoming 2008 year end audit. The audit plan provides the scope of the audit services
to be provided, the auditor's formal reporting responsibilities and an outline of the audit
approach. It is included as Attachment 1 to this report.
At the Council meeting of October 10, 2006 Resolution 154/06 appointed Deloitte &
Touche as the City's external auditors for a period of 5 years which would encompass
the 2006 to 2010 audits inclusive. However Deloitte & Touche require an Engagement
Letter be signed annually with each audit which summarizes their role as external
Report CS 51-08
Date: November 10, 2008
Subject: 2008 Year End Audit
Page 2
76
auditor, management's responsibilities and provides the estimate of the audit fees. The
audit fee for the 2008 year end audit increased overall, including City & Library, by
$2,650 or approximately 4% which is deemed acceptable.
Attachments:
1 . Audit Plan
2. Engagement Letter
Prepared By:
~-{aR S:?~A~
Kristine Senior
Manager, Accounting Services
Approved I Endorsed By:
.~~z:~
Gillis A. Paterson
Director, Corporate Services & Treasurer
GAP:vw
Copy: Chief Administrative Officer
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ATTACHMENT.#--L. TO REPORT#..c..~ -51- u'j!
Deloitte
The Corporation of
the City of Pickering
Au.dit Plan
Year Ending December 31, 2008
Audit. Tax .Consulting . Financial Advisory.
Deloitte
78
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Deloitte & Touche LLP
5140 Yonge Street
Suite 1700
Toronto, ON M2N 6L7
Canada
Tel: (416) 601 6150
Fax: (416) 601 6151
www.deloitte.ca
October 24, 2008
Private and Confidential
The Members of the Executive Committee
The Corporation of the City of Pickering
1 The Esplanade
Pickering ON LlV 6K7
Dear Executive Committee Members:
Weare pleased to submit for your review our 2008 audit plan for the audit of the consolidated financial
statements of the Corporation of the City of Pickering (the "City") for the year ending December 31,
2008.
The key objectives of this document are to:
Outline our services to be provided;
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 external audit ofthe City of Pickering.
The objective of an audit of the consolidated financial statements in accordance with Canadian generally
accepted accounting standards ("GAAS") is to express an opinion on the fairness of the presentation of the
consolidated financial statements in accordance with Canadian generally accepted accounting principles
("GAAP") for local governments.
This audit plan is intended solely for the use of the Executive Committee, to assist you in discharging your
responsibilities with respect to the consolidated financial statements and should not be used for any other
purpose. Any use that a third party makes of this report is the responsibility of such third party.
Yours sincerely,
dJ~ 0/- f~e., LLI
Chartered Accountants
Licensed Public Accountants
Member of
Deloitte Touche Tohmatsu
',. 79
Table of contents
Client service objectives
Financial reporting responsibilities
Communications plan
The Deloitte audit approach
Auditor independence
Appendices
Appendix I - Audit team
Appendix II - Accounting update and other developments (Public Sector)
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City of Pickering - 2008 Audit Plan 2
80
CJient service objectives
In serving you/ we develop client service objectives that strive to meet the expectations of
both the Executive Committee and management.
Our client service objectives for 2008 are:
· Develop an audit plan for the City to fulfill all professional requirements and provide
timely, value added services.
· Deliver professional services to assist the Executive Committee in meeting the current
requirements of Canadian Generally Accepted Accounting Principles ("GAAP") and
financial reporting requirements.
· Assign an audit service team specific to the City's needs.
· Maintain and demonstrate our commitment to the Municipal sector.
· Regularly communicate with management so that they are fully informed of the status
of our audit work and issues detected through such work on a timely basis.
· Provide regular communication to the Executive Committee and management on our
findings.
· Assist the Executive Committee and management in the early identification of changing
professional requirements regarding Canadian GAAP for local governments and other
reporting requirements.
· Review with the Executive Committee and management identified areas of risk or focus
and develop the appropriate audit response.
· Proactively keep the Executive Committee and management informed as to current
business, financial and other developments, which are relevant to the City.
In summary, we will provide:
· Timely communications on the results of our audit work to management and the
Executive Committee; and
· The statutory auditors' reports for the City (Consolidated financial statements, Trust
Funds and Public Library).
Integral to our plan is an understanding of the respective financial reporting roles and
responsibilities of each of management, the Executive Committee and Deloitte. These have
been documented in the following section.
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City of Pickering - 2008 Audit Plan 3
8 1
Financial Reporting Responsibilities
Executive
Committee
- Review the audit
plan and audit
results documents
- Review, recommend
and approve the
annual consolidated
financial statements
- Follow up on audit
recommendations
- Understand, discuss
and address fraud
and error risk factors
with management
- Maintain oversight of
the systems of
internal control
- Oversight in
managing and
monitoring financial
risks
- Review external
financial
com mu n ications
Management
- Maintain appropriate
controls and accurate
financial records
- Report financial
results on a fair,
consistent and timely
basis in accordance
with GAAP for local
government
- Select appropriate
accounting and
disclosure policies
- Maintain compliance
with reporting and
regulatory
requirements
- Identify principal
risks and establish
and maintain a cost-
effective control
environment
- Prepare financial
statements
- Provide management
representations
D.eloitte
- Perform a cost-
effective audit in
accordance with
Canadian generally
accepted auditing
standards
- Assess accounting
principles and
financial statement
disclosures
- Understand key
management control
systems and
processes and assess
risk
- Report opportunities
for improvements in
control processes
- Express an opinion on
the fairness of
presentation of the
financial statements
· We believe the optimal client relationship is one in which there is an open line of
communication between the Executive Committee, City Management and Deloitte.
· In order to achieve a balanced relationship, each party must have the opportunity to
meet with each of the other two parties on a timely basis.
· Commitment from, and interaction between, all three parties lead to continual
improvement in the quality of the financial reporting process.
@ Deloitte & Touche LLP and affiliated entities.
City of Pickering - 2008 Audit Plan 4
Communications plan
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As external auditors to the City we are accountable to the Executive Committee
We have been engaged to perform the following statutory audits for the year ending
December 31, 2008:
· Consolidated financial statements of the Corporation of the City of Pickering (the "City");
· Financial Statements of the City of Pickering Public Library Board; and
· Financial Statements of the City of Pickering Trust Funds.
Our formal communications will include:
· The audit plan; including the level of responsibility assumed in performing an audit under
Canadian generally accepted auditing standards;
· The audit results document, including any managelTlent letter comments as applicable;
· Our auditors' report on the financial statements;
· Report on matters requested by the Executive Committee; and
· Confirmation of our independence (including disclosure of any relationships that bear on
our independence) and reporting on all services.
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Communications plan (continued)
· We are also required to report on:
- Whether there were any limitations placed on our audit scope; and any difficulties
encountered during the audit;
- Appropriateness of significant accounting policies and the application thereof, effect of
significant changes in accounting policies and existence of alternative acceptable
accounting policies;
- Management judgments and accounting estimates; and
- All significant unadjusted differences as well as significant adjustments made as a result
of our findings.
· Should any of the following matters be noted during the audit we will bring them to the
attention of the Executive Committee:
- Evidence of fraud, or possible fraud, misstatements or illegal acts;
- Significant weaknesses in internal control relating to the preparation of the financial
statements;
- Significant or unusual transactions;
- Related party transactions which are not in the normal course of operations;
- Disagreements with management;
- Consultation by management with other accountants about any significant auditing or
accounting matters;
- Actions that if they become public, might cause embarrassment;
- Non-compliance with regulatory requirements; and
- Major issues discussed with management that influenced the audit appointment.
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City of Pickering - 2008 Audit Plan 6
The Deloitte audit approach
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The Deloitte audit approach is a systematic methodology used to tailor our audit scope and
plan specifically for the unique issues facing the City.
The Deloitte audit approach has the following key attributes. It is:
· Partner-led - The audit plan is driven by our partners' experience and detailed
knowledge of the City's business. Significant input is obtained from the partners at all
stages of the audit engagement.
· Focused - We identify and design appropriate audit procedures that focus on risks
associated with the City, the audit engagement, and potential errors in significant
account balances or disclosures.
· Interactive - We interact with the City's management and the Executive Committee
and respond to their needs and expectations.
· Dynamic - We tailor our audit plan to respond to changing circumstances.
Perform pre-engagement activities
Plan
Perform preliminary planning
Perform audit plan
~
Perform
Perform post-engagement activities
Conclude
Conclude and report
These five steps are not necessarily chronological and are not mutually exclusive. For
example, once the audit plan has been developed and is being performed, we may become
aware of a risk that was not identified during the planning phase. Based on the new
information, we will reassess our planning activities and adjust the audit plan accordingly.
The Deloitte audit approach interweaves our year-round involvement, the use of specialists,
and a focus on continuous communication with management and the Executive Committee
throughout the audit process.
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City of Pickering - 2008 Audit Plan 7
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The Deloitte audit approach (continued)
The key elements of the audit approach are as follows:
Planning
· Review results from prior year's audit
· Understanding of governance processes and
expectations
· Assess areas of risk and exposure in financial
statement reporting
. Assess the design and implementation of entity
wide controls and significant business cycle
controls j
· Update our understanding of the business
· Establish materiality guidelines!
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Testing of systems & Substantive testing
controls . Test significant
· Assess operating effectiveness of transactions and account
key control activities, upon which balances
we intend to rely, in ensuring the . Consider appropriateness
integrity of financial reporting and and relevance of
risk management monitoring accounting policies
processes · Evaluate results based on
· Consider reliability and integrity of materiality guidelines
technology that supports key
processes and controls
. Consider the control and
governance processes underlying
all significant transactions
· Evaluate audit results
. Consider impact of new accounting
pronouncements
· Assess compliance with Canadian GAAP for
local governments
· Conclude and report
Review of financial
statements and related
disclosures
1 Materiality is an essential element of Canadian generally accepted auditing standards. 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.
Quantitative Guidelines for Not-for-Profit Entities are generally .5 to 2% of total expenses or total revenues. We will base
the quantitative considerations of our materiality for the consolidated financial statements of the City on 1.5% of budgeted
expenditures.
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The Deloitte audit approach (continued)
Auditor's responsibility to consider fraud and error
In response to CICA Assurance Handbook Section 5135, "The Auditor's Responsibility to
Consider Fraud", we will perform audit procedures to address fraud risks.
The Executive Committee should recognize that every organization has inherent fraud risks
due to internal and external conditions such as size, dispersed locations, general economic
conditions, nature of various operations, and the like.
There are three common fraud risk factors, the existence of which can increase the
likelihood that fraud could occur. These include:
· pressures and incentives;
· attitudes/rationalization; and
· opportunity.
The Executive Committee's oversight and understanding of fraud and error risks helps to
ensure that management fulfills its responsibility to facilitate a strong internal control
environment to minimize fraud opportunities and can also deter management from
committing fraud.
It should be noted that the objective of an audit of financial statements is to enable the
auditor to express an opinion whether the financial statements present fairly, in all material
respects, the financial position, results of operations and cash flows in accordance with
Canadian generally accepted accounting principles. Due to the inherent limitations of an
audit, there is an unavoidable risk that some material misstatements of the financial
statements will not be detected, even though the audit is properly planned and performed
in accordance with generally accepted auditing standards. The assurance an auditor
provides concerning lack of misstatements arising from fraud is necessarily lower than the
assurance provided concerning those arising from error.
Specific Inquiries to be addressed by the Executive Committee
· Any knowledge of any actual, suspected or alleged fraud and error affecting the
City?
. What role, if any, does the Executive Committee exercise over the oversight of:
1 Management processes for identifying and responding to the risks of fraud and
error in the City?
2 The internal controls that management has established to mitigate these risks?
. What are your views about the risks of fraud in the City?
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The Deloitte audit approach (continued)
Areas of audit focus
We have identified the following areas of focus, based on our review of prior years' files,
awareness of current year activities and discussions with management.
Account
balance/ Description of issue Audit response
business issue
Year-end cut- . Determine if cut-off of revenues . Focused substantive testing on accounts
off and expenditures is appropriate. payable, accrued liabilities, deferred revenue
and accounts receivable.
. Test disbursements and cash receipts
subsequent to year-end.
. Test supporting assumptions for accrued
.
liabilities, deferred revenue and accounts
receivable.
Actuarially . Accuracy and completeness of . Review actuarial report, including related
Determined certain liabilities such as assumptions.
Liabilities Workplace Safety and Insurance
("WSIB") and post-employment . Ensure appropriate accounting treatment has
benefits. been applied.
. Review related financial statement note
disclosure for accuracy and completeness.
. Communicate with actuary on our reliance on
their report for audit purposes.
Reserves and . Approval of transfers to and from . Substantive testing of the continuity and of
Reserve Funds reserves and reserve funds. material transactions to determine if
transfers are in accordance with Council
approvals and/or legislative requirements.
Capital Fund . Revenue Recognition. . Substantive testing to ensure restricted
contributions (Le. development charges, gas
. Capital expenditures- year end tax, conditional grants) have been
cut-off. recognized as revenue in the appropriate
period.
. Substantive testing to ensure appropriate
accruals for capital expenditures incurred
before the year-end.
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City of Pickering - 2008 Audit Plan 10
B8
The Deloitte audit approach (continued)
Areas of audit focus (continued)
Account
balance/ Description of issue Audit response
business issue
. Compliance with PS3070 . Review accounting for Investment in
"Investment in Government Veridian Corporation and related disclosures.
Business Enterprise".
Investment . Review financial statements of Veridian
in Veridian Corporation.
Corporation
· Communication with Veridian Corporation's
auditor on our reliance on their auditor's
report for purposes of the City's audit.
Management . Estimates require management . Focused review of calculations and support.
estimates judgment (i.e. allowance for ., Discussion with management.
significant property tax appeals, . Analytic review of related accounts.
contingent liabilities, etc.) .
Public Sector . Selection of appropriate . Review of significant accounting policies,
Accounting accounting policies, adequacy of implementation of new standards and any
Standards disclosures and treatment of non- unusual transactions.
routine transactions.
Impact of any new or upcoming . Work with City staff to determine if
. appropriate implementation plans are in
accounting standards (e.g.
segmented information fiscal place to enable compliance with the new
2008 (PS 2700); tangible capital standards.
assets disclosure 2008, (PsG#7),
recognition and measurement
fiscal 2009 (PS 3150)).
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Auditor independence
The rules of professional conduct require that we communicate with you on an annual basis
all relationships between the City (including its related entities), and Deloitte 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, gives us the right or
responsibility to exert significant influence over the financial or accounting policies of
the City;
· economic dependence on the City;
. services provided to the City 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 City.
We continue to be independent with respect to the City.
We formally confirmed our independence as auditors of the City in a letter dated May 18,
2008 and we will formally report again at the conclusion of the 2008 audit.
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City of Pickering - 2008 Audit Plan 12
Appendix I
Audit team
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Appendix II - Accounting update and
other developments (Public sector)
The information included in this appendix was obtained primarily from the CICA
Public Sector Accounting Board (PSAB) Web site (http://psab-ccsp.ca).
New effective standards
Tangible Capital Assets of Fiscal years beginning on The purpose of this Guideline is to provide
Local Governments, or after January 1, transitional guidance to a local government on
Public Sector Guideline 2007. reporting information related to tangible capital
PSG- 7 assets in notes or schedules to its financial
statements.
When, during the period of transition, a local
government has information on some but not all
categories of its tangible capital assets, the local
government would disclose information in
accordance with TANGIBLE CAPITAL ASSETS OF
LOCAL GOVERNMENTS, PSG-7 and, in addition,
disclosure of those categories of tangible capital
assets excluded from that disclosure until the
relevant information about the complete stock of
tangible capital assets can be provided.
Segment Disclosures, Fiscal years beginning This Section establishes standards on how to define
Section PS 2700 on or after April 1, and disclose segments in a government's
2007. consolidated financial statements. These standards
apply to the summary financial statements of
federal, provincial, territorial and local
governments.
Other government organizations that apply the
standards of the CICA Public Sector Accounting
Handbook (CICA PSA Handbook) are encouraged to
provide the disclosures established in this Section
when their operations are diverse enough to
warrant such disclosures.
Transitional provisions From fiscal years This Section has been amended to add transitional
to Government beginning on or after provisions that allow a government, in limited
Reporting Entity, April 1, 2005 until cases, to choose to record the newly included
Section PS 1300 fiscal years beginning government organizations in the financial
on or after April 1, statements on a modified equity basis, rather than
2008. fully consolidating, from the date of initial
application until fiscal years beginning on or after
April 1, 2008.
For fiscal years beginning on or after April 1, 2008,
the government will be required to fully consolidate
these government organizations, in accordance
with paragraph PS 1300.27.
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. Appendix II - Accounting update and
other developments (Public sector)
( continued)
92
Tangible Capital
Assets, Section PS
3150
Financial statement
concepts, Amendment
- Section PS 1000
Financial statement
objectives, Amendment
- Section PS 1100
Financial statement
presentation,
Amendment - Section
PS 1200
Currently effective for
federal, provincial and
territorial governments.
Effective for fiscal years
beginning on or after
January 1, 2009 for local
governments only. Earlier
adoption is encouraged.
Currently effective for
federal, provincial and
territorial governments.
Effective for fiscal years
beginning on or after
January 1, 2009 for local
governments only. Earlier
adoption is encouraged.
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The revisions to Section PS 3150, Tangible
Capital Assets, focus primarily on local
governments recognizing and amortizing all
their tangible capital assets. They are
applicable for fiscal years beginning on or after
January 1, 2009.
Additional revisions to Section PS 3150, which
affect all governments, include:
· The definition of cost has been amended to
clarify that cost is the gross amount, and
that capital grants are not to be netted
against the cost of the related tangible
capital asset. Guidance on the cost of leased
tangible capital assets is also provided.
· There is additional guidance on the
commencement and cessation of capitalizing
carrying costs.
· During the period of transition, local
governments should follow PUBLIC SECTOR
GUIDELINE PSG-7, Tangible Capital Assets of
Local Government.
The Section now applies to all levels of
government. It applies to local governments
for fiscal years beginning on or after January 1,
2009.
In November 2006, after extensive
consultation with the local government
community and with only minor amendments
to the existing standards for senior
governments, the Public Sector Accounting
Board (PSAB) approved revised Sections PS
1000, Financial Statement Concepts, PS 1100,
Financial Statement Objectives, and PS 1200,
Financial Statement Presentation, a single
conceptual framework and reporting model for
all levels of government in Canada. The
revisions focus primarily on local governments
applying the same reporting model currently
adopted by senior governments for fiscal years
beginning on or after January 1, 2009.
Beginning on or after January 1, 2009, all
governments in Canada will be reporting on a
full-accrual basis of accounting. In addition, the
PS 1700 and PS 1800 for local governments
required a modified accrual basis of
accounting, and as such, these Sections will be
withdrawn.
City of Pickering - 2008 Audit Plan 15
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Appendix II - Accounting update and
other developments (Public sector)
( continued)
Introduction to Public
Sector Accounting
Standards
N/A
In November 2007 ,the introduction was revised to deem
government business enterprises and government
business-type organizations publicly accountable and to
continue to follow the generally accepted accounting
principles for publicly accountable enterprises in the CICA
Handbook - Accounting. Therefore, paragraph 06 and
appendix A of the introduction and appendix A of Section
2500 (Basic principles of consolidation) were amended.
PSAB has approved a Phase II to the Introduction to Public
Sector Accounting Standards which will continue to assess
the effect of the Accounting Standards Board (AcSB)
strategies on government not-for-profit organizations and
other government organizations that currently apply the
CICA Handbook - Accounting.
Government Not-for-Profit Organizations:
In September 2008, PSAB agreed to work in conjunction
with the Accounting Standards Board's efforts toward the
issuance of a collaborative Invitation to Comment that will
seek views on the sources of GAAP that could be applied by
various types of not-for-profit organizations in both the
private and public sectors.
Government Organizations:
In September 2008, PSAB considered the response to
letters received from stakeholders. PSAB agreed to seek
additional information relating to the application of the
current definitions of and the source of GAAP used by
government organizations.
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Appendix II - Accounting update and
other developments (Public sector)
( continued)
Introduction to Statements of
Recommended Practice
Assessment of Tangible Capital
Assets
PSAB approved revisions to the "Introduction to Statements of
Recommended Practice". It reviewed several suggestions for
changing the name of SORPs and concluded that the alternatives
did not sufficiently reflect the nature of SORPs. Revisions to the
Introduction make it abundantly clear that SORPs do not
constitute GAAP and that they are intended to provide general
guidance but are not mandatory or prescriptive.
The main features of this SORP are as follows:
. A government can choose to report only on individual,
specific categories or groups of tangible capital assets.
. Reporting on the physical condition of tangible capital
assets is information that does not necessarily have to
accompany the financial statements. It could be included in
a standalone report or in other public reports such as a
budget document.
. Information should, at a minimum, include the overall
average physical condition rating, average age and useful
life and the nature and extent of tangible capital assets in
each category.
. Narrative information would include discussion of trends in
changes in the physical condition and identify the basis of
measurement and measurement scale used to assess and
report on the physical condition of tangible capital assets.
PSAB has approved Assessment of Tangible Capital Assets, as a
new Statement of Recommended Practice (SORP). The SORP
applies to all governments and government organizations that
choose to prepare and present a report on the physical condition
of their tangible capital assets.
PSAB expects the final SORP to be released in November 2008.
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Appendix II - Accounting update and
other developments (Public sector)
( continued)
Environmental Liabilities
In June 2006, PSAB approved a Project Proposal.
This project will focus on providing guidance for the recognition,
measurement and disclosure of those environmental obligations
that result in environmental liabilities.
Environmental liabilities can represent a significant cost to all
levels of government. They have some unique characteristics
that challenge financial statement preparers and auditors, i.e.:
. there are increasing obligations under laws and regulations
and a growing concern over environmental issues;
. there may be multi-year activities and various courses of
action necessary to address this concern;
. identifying when a government has, and is responsible for,
an environmental liability is uncertain;
. measuring the environmental liability can be difficult as the
full costs may not be known until well into the future; and
. the timing of the settlement is not always clear.
Without accounting standards specific to environmental liabilities,
diverse accounting practices may evolve regarding recognition
and measurement.
Next steps:
The work of the task force continues, with a view to issuing a
new standard in March 2010.
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. Appendix II - Accounting update and
other developments (Public sector)
( contlnued)
Entity-level Financial
Statements
At its June 2008 meeting, PSAB approved a new project to address those
issues specific to entity-level financial statements that are not currently
addressed in the Handbook.
Next steps:
The first step in the project will be to identify those issues.
Foreign Currency
Translation
The objective of this project was to review the current provisions in Section PS
2600, Foreign Currency Translation, to eliminate the deferral and amortization
provisions and apply immediate recognition for foreign-denominated monetary
items.
Next steps:
Exposure of proposed changes has been deferred.
Financial
Instruments
Presently, guidance in the Public Sector Accounting (PSA) Handbook in respect
of accounting for derivative financial instruments is limited to their application
in hedging foreign currency items. Derivative financial instruments are
increasingly being used by governments to manage other financial exposures
such as interest rate exposures. The scope of the project provides for
consideration of public sector reporting implications of the breadth of guidance
offered by the recently approved CICA Handbook - Accounting Sections
addressing the reporting of financial instruments and related hedge accounting
provisions.
In March 2008, PSAB discussed the responses received to date on the
Statement of Principles (SOP) issued in June 2007. Alternatives to respond to
the issues raised relating to accounting for, and presenting information about,
financial instruments in government financial statements are being considered.
Next steps:
PSAB expects to have an exposure draft approved by March 2009, and a final
Handbook Section by September 2009.
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City of Pickering - 2008 Audit Plan 19
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Appendix II - Accounting update and
other developments (Public sector)
( continued)
Government Transfers
This project was started to develop amendments to Section PS
3410, Government Transfers, to address application and
interpretation issues raised by the government community. The
major issues in the project include:
. resolving the debate over the appropriate accounting for
multi-year funding provided by governments;
. clarifying the nature and extent of the authorization needed
to be in place for a transfer to be recognized;
. clarifying the degree to which stipulations imposed by a
transferring government should impact the timing of .
recognition of the transfer by both the transferor and
recipient governments; and
. addressing the appropriate accounting for capital transfers
received under an expense-based accounting regime.
In March 2008, PSAB discussed the responses received on the first
Re-Exposure Draft issued in April 2007. The first Re-Exposure
Draft proposed a different approach to recipient accounting for
transfers. It describes when a recipient government would
recognize a liability for a transfer. The proposed approach
considers the views of the majority of respondents to the ED,
builds on the transfers' principles in IPSAS 23 and incorporates
elements from the two previous PSAB Associates' Drafts.
In September 2008, PSAB received an update on the comments
received on the 2007 Re-Exposure Draft as well as proposals being
considered by the Government Transfers Task Force. PSAB
directed the task force to continue to explore all alternatives and
report back.
Next steps:
PSAB expects to issue a second Re-Exposure Draft in late 2008
once it considers the feedback received and a final Handbook
Section by March 2009.
<9 Deloitte & Touche LLP and affiliated entities.
City of Pickering - 2008 Audit Plan 20
98
Appendix II - Accounting update and
other developments (Public sector)
( continued)
Identifying and Reporting
Performance Indicators
The objective of this project is to provide guidance on the factors
to consider for identifying and reporting performance indicators.
It will not identify specific indicators for governments, but will
enhance and support the Statement of Recommended Practice
SORP-2, Public Performance Reporting.
Both the type and level of performance indicators varies from
government to government as there is no generally accepted
guidance to assist selecting particular performance indicators.
Performance indicators prepared using a consistent approach
across governments will increase credibility and confidence in
those reported leading to increased understanding and
acceptance of them as a useful tool for assessing accountability.
Next steps:
This project has been deferred.
Indicators of Government
Financial Condition
In June 2008, PSAB approved a draft SORP on "Indicators of
Financial Condition." The draft provides a framework of elements
of financial condition and proposes, but does not require a core
set of indicators for each element. A draft SORP was published on
September 4, 2008. The comment period ends on October 24,
2008.
Next steps:
PSAB expects to have a final SORP by November 2008
@ Deloitte & Touche LLP and affiliated entities.
City of Pickering - 2008 Audit Plan 21
99
Appendix II - Accounting update and
other developments (Public sector)
( continued)
Service Concession
Arrangements
The International Public Sector Accounting Board (IPSASB) has
issued a Consultation Paper "Accounting and Financial Reporting
for Service Concession Arrangements" that explores accounting
and financial reporting issues for a subset of public-private
partnerships from the perspective of the grantor (typically a
public sector entity).
The IPSASB has identified the following Specific Matters for
Comment
. It is proposed that a grantor report the property underlying
a Service Conc~ssion Arrangement (SCA) as an asset in its
financial statements if it is considered to control the
property. Criteria for determining control are proposed in
the Consultation Paper.
. It is proposed that the underlying property reported by the
grantor as an asset and the related liability (reflecting any
obligation to provide compensation to the operator) is
initially measured based on the fair value of the property
other than in cases where scheduled payments made by the
grantor can be separated into a construction element and a
service element. In such cases, the present value of the
scheduled construction payments should be used if lower
than the fair value of the property.
. It is proposed that contractually determined inflows of
resources to be received by a grantor from an operator as
part of an SCA should be recognized as revenue by the
grantor as they are earned over the life of the SCA
beginning at the commencement of the concession term,
that is, when the underlying property is fully operational.
These inflows generally should be considered earned as the
grantor provides the operator access to the underlying
property, and amounts received in advance of providing a
commensurate level of access to the property should be
reported as a liability.
Next steps:
The comment period ended on August 1, 2008. IPSASB is
deliberating on the comments received.
@ Deloitte & Touche LLP and affiliated entities.
City of Pickering - 2008 Audit Plan 22
1 00
Appendix II - Accounting update and
other developments (Public sector)
( continued)
Tax Revenue (formerly Revenue) The original Revenue Project was intended to address a strategic
gap in government GAAP in - most notably the absence of a
definition of revenue for governments in the CICA Public Sector
Accounting (PSA) Handbook. That project proposed to address the
accounting for numerous revenue types covering both exchange
and non-exchange transactions.
Developments in accounting for government transfers resulted in
PSAB starting a separate Government Transfers Project to address
this issue. Further, PSAB's review of its government reporting
model (see the Reporting Model and Tangible Capital Assets
project summary) resulted in a proposed definition of revenue.
In relation to the accounting and reporting guidance for various
types of government tax revenues, PSAB used the work done by
the International Public Sector Accounting Standards Board
(IPSASB) on revenues from non-exchange transactions as a basis
for determining how to accou.nt for government tax revenues.
PSAB approved an Exposure Draft in December 2007 and the
responses to the Exposure Draft were reviewed by PSAB at its
June 2008 meeting. The task force expects to analyze the
comments in detail and recommend next steps for the project.
Next steps:
PSAB approved an Exposure Draft in December 2007 and the
responses to the Exposure Draft were reviewed by PSAB at its
June 2008 meeting. The responses to the exposure draft are
currently being analyzed and the task force expects to
recommend next steps for the project.
@ Deloitte & Touche LLP and affiliated entities.
City of Pickering - 2008 Audit Plan 23
1 01
eloitte
Deloitte, one of Canada's leading professional services firms, provides
audit, tax, consulting, and financial advisory services through more than
7,600 people in 56 offices. Deloitte operates in Quebec as Samson
Belair/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 have 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.
@ Deloitte & Touche LLP and affiliated entities.
50EST
E'dPLOYERS
. IN CANADA
2008
r:'"
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Member of
Oeloitte Touche Tohmatsu
ATTACHMENT#L.. TO REPOl\T# (5' 6/' Df'
Deloitte
Deloitte & Touche LLP 1 0 2
5140 Yonge Street
Suite 1700
Toronto ON M2N 6L7
Canada
Tel: 416-601-6150
Fax: 416-601-6610
www.deloitte.ca
October 20, 2008
Mr. Thomas Quinn
Chief Administrative Officer
The Corporation of the City of Pickering
1 The Esplanade
Pickering ON L1 V 6K7
Mr. Gillis Paterson
Director, Corporate Services and Treasurer
The Corporation of the City of Pickering
1 The Esplanade
Pickering ON L1 V 6K7
Dear Mr. Quinn and Mr. Paterson:
Deloitte & Touche LLP ("Deloitte" or "we" or "us") is pleased to serve as your auditors for the year
ending December 31,2008. Ms. Paula Jesty will be responsible for the services that we perform for The
Corporation of the City of Pickering (the "City"). She will, as considered necessary, call upon other
individuals with specialized knowledge, either in this office or elsewhere in our firm to assist in the
performance of our services.
In addition to the financial statement audit we are engaged to provide under this engagement letter, we
would also be pleased to assist the City on issues as they arise throughout the year. Hence, we hope that
you will call Ms. Paula Jesty whenever you believe Deloitte can be of assistance.
We will perform this engagement subject to the terms and conditions set forth herein and in the
accompanying appendices.
Audit of financial statements
Our engagement is to perform an audit of the City's consolidated financial statements for the year ending
December 31, 2008 in accordance with Canadian generally accepted auditing standards ("Canadian
GAAS"). In addition, we will perform a financial statement audit of the City of Pickering Public Library
Board and of the City of Pickering Trust Funds. The objective ofa financial statement audit conducted in
accordance with Canadian GAAS is to express an opinion on the fairness of the presentation, in all
material respects, of the City's financial statements for the year ended December 31, 2008 in accordance
with Canadian generally accepted accounting principles ("Canadian GAAP").
Appendix A contains a description of a financial statement audit in accordance with Canadian GAAS.
. . 1 03
The Corporation of the City of Pickering
October 20, 2008
Page 2
Our ability to express an opinion and the wording of our opinion will, of course, be dependent on the
facts and circumstances at the date of our report. If, for any reason, we are unable to complete the audit
or are unable to form or have not formed an opinion, we may decline to express an opinion or decline to
issue a report as a result of this engagement. If we are unable to complete our audit or if our auditors'
report requires modification, the reasons therefore will be discussed with the Executive Committee and
the City's management.
Management's responsibilities
Appendix B describes management's responsibilities for (1) the financial statements and the effectiveness
of internal control over financial reporting, (2) the representation letter, (3) independence matters as a
result of restrictions on providing certain services, (4) independence matters relating to hiring, and
(5) fraud and error.
Auditor communications with those having oversight responsibility for the financial reporting
process
In accordance with Canadian GAAS, we are required to communicate with those having oversight
responsibility for the financial reporting process about various matters in connection with our audit.
Appendix C describes such communications.
Inclusion of Deloitte reports in documents and public oral statements or references to Deloitte in
other documents and on electronic sites
If the City intends to publish or otherwise reproduce in any document our report on the City's financial
statements, or otherwise make reference to Deloitte in a document that contains other information in
addition to the audited financial statements, thereby associating Deloitte with such document, the City
agrees that its management will provide Deloitte with a draft of the document to read and obtain our
written consent for the inclusion or incorporation by reference of our report, or the reference to Deloitte,
in such document before the document is printed and distributed. The inclusion or incorporation by
reference of our report in any such document would constitute the re-issuance of our report. Management
agrees to provide adequate notice of the preparation of any such public documents. The City also agrees
that it will notify us and obtain our written approval prior to including our report or financial statements
with which we are associated on an electronic site. Further, it is agreed that in any electronic distribution,
for example on the City's web site, management is solely responsible for the accurate and complete
reproduction of our report and the subject matter on which we reported.
Our engagement to perform the services described above does not constitute our agreement to be
associated with any such documents published or reproduced by or on behalf of the City. Any request by
the City to re-issue our report, to consent to its inclusion or incorporation by reference in an offering or
other document, or to agree to its inclusion on an electronic site, will be considered based on the facts and
circumstances existing at the time of such request. The estimated fees outlined herein do not include any
services that would need to be performed in connection with any such required services; fees for such
services (and their scope) would be subject to our mutual agreement at such time and would be described
in a separate engagement letter.
'104
The Corporation of the City of Pickering
October 20, 2008
Page 3
Fees
We estimate that our total fees for this audit will be as follows, plus applicable taxes (such as Goods and
Services Tax):
The Corporation of the City of Pickering (including Trust Funds)
Pickering Public Library Board
$61,500
$5,400
Appendix D includes circumstances affecting timing and fee estimates.
Other matters
This engagement letter, including the appendices attached hereto and made a part hereof, constitutes the
entire agreement between the parties with respect to this engagement and supersedes all other prior and
contemporaneous agreements or understandings between the parties, whether written or oral, relating to
this engagement.
This engagement contract will continue in force for subsequent audits unless amended by the mutual
consent of ourselves and the City.
If the above terms are acceptable and the services described are in accordance with your understanding,
please sign the copy of this engagement letter in the space provided and return it to us.
Yours truly,
dJ~ cf tiw:Ae.- LLI
Chartered Accountants
Licensed Public Accountants
Enclosure
The services and terms set forth in this contract are accepted and agreed to by
The Corporation of the City of Pickering:
Signature
Title
Date
1 05
Appendix A
Description of a financial statement audit in accordance with
Canadian GAAS
The Corporation of the City of Pickering
December 31, 2008
Components of a financial statement audit
A financial statement audit includes the following:
. Obtaining an understanding of the entity and its environment, including internal control, sufficient to
identify and assess the risks of material misstatements of the financial statements, and sufficient to
design and perform further audit procedures. This understanding is not sufficient for, and should not
be relied upon for, any other purpose;
. Examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements;
. Inquiring directly of those responsible for oversight of the financial reporting process regarding their
views about the risk of fraud and whether they have knowledge of any fraud or suspected fraud
affecting the City;
. Assessing the accounting principles used and significant estimates made by management; and
. Evaluating the overall financial statement presentation.
Reasonable assurance
We will plan and perform the audit to obtain reasonable assurance about whether the financial statements
present fairly, in all material respects, the financial position, results of operations and changes in financial
position in accordance with Canadian GAAP. Accordingly, we will design our audit to provide
reasonable, but not absolute, assurance of detecting material misstatements whether caused by error or
fraud.
It is important to recognize that there are inherent limitations in the auditing process. Material
misstatements, if they exist, may not be detected because offactors such as the use of judgment, the
concept of selective testing of the data underlying the financial statements, and the persuasive rather than
conclusive nature of much of the evidence. Because of the nature of fraud, including attempts at
concealment through collusion and forgery, an audit designed and executed in accordance with Canadian
GAAS may not detect a material fraud. Furthermore, while effective internal control reduces the
likelihood that misstatements will occur and remain undetected, it does not eliminate that possibility. For
these reasons we cannot guarantee that fraud, error or other illegal acts, if present, will be detected.
Internal control over financial reporting
We obtain an understanding of internal control relevant to the audit however, not all controls are relevant
to every audit. We evaluate the design of c<;mtrols relevant to the audit and determine whether they have
been implemented. We are not, however, required to determine whether relevant controls are operating
effectively. Although it is not required by generally accepted auditing standards, we may decide that for
a particular engagement, it makes sense to rely on the effective operation of some controls in determining
the substantive procedures we will perform. In this case, we would go beyond evaluating the design of
relevant controls and determining whether they have been implemented, to also test whether the controls
on which we intend to rely are operating effectively. Accordingly, while generally accepted auditing
standards require us to report to the Executive Committee any significant weaknesses that have come to
our attention, we may not be aware of all material weaknesses in internal control that do, in fact, exist.
While we are not obligated to report other control matters coming to our attention we will endeavour to
report to management, and if requested the Executive Committee, other control deficiencies that we
believe may be of interest to management.
'] 06
Appendix B
Management's responsibilities
The Corporation of the City of Pickering
December 31, 2008
Financial statements and the effectiveness of internal control over financial reporting
The preparation and overall accuracy of the financial statements and their conformity with Canadian
GAAP is the responsibility of the City's management. In this regard, management has the responsibility
for, among other things:
1. Establishing and maintaining effective internal control over financial reporting and informing
Deloitte of weaknesses identified in the design or operation of internal control over financial
reporting;
2. Informing Deloitte of any changes in the City's internal control over financial reporting that occurred
during the current fiscal year that have materially affected, or are reasonably likely to materially
affect, the City's internal control over financial reporting;
3. Identifying and ensuring that the City complies with the laws and regulations applicable to its
activities and informing us of any known material violations of such laws or regulations;
4. Adjusting the financial statements to correct material misstatements;
5. Safeguarding assets; and
6. Making available to us complete information relating to the engagement including, but not limited to,
all financial records and related data including information on the recognition, measurement and
disclosure of specific items, and copies of all minutes of meetings of council, and committees of
council.
Representation letter
We will make specific inquiries of the City's management about the representations embodied in the
financial statements and internal control over financial reporting. As part of our audit procedures, we
will request that management provide us with a representation letter acknowledging management's
responsibility for the preparation of the financial statements and affirming management's belief that the
effects of any uncorrected financial statement misstatements aggregated by us during the current audit
engagement and pertaining to the latest period presented are immaterial, both individually and in the
aggregate, to the financial statements taken as a whole. We will request that management confirm certain
significant representations made to us during our audit on matters that are:
1. Directly related to items that are material, either individually or in the aggregate, to the financial
statements;
2. Not directly related to items that are material to the financial statements but are significant, either
individually or in the aggregate, to the engagement; and
3. Relevant to management's judgments or estimates that are material, either individually or in the
aggregate, to the financial statements.
The responses to inquiries and related written representations of management required by Canadian
GAAS are part of the evidential matter that we will rely on as auditors in forming our opinion on the
City's financial statements.
Independence matters
For purposes of the following two paragraphs, "Deloitte" shall mean Deloitte & Touche LLP, Deloitte
Touche Tohmatsu, its member firms and the affiliates ofDeloitte & Touche LLP, Deloitte Touche
Tohmatsu and its member firms.
. .Appe~dh ,
Independence matters as a result of restrictions on providing certain services
In connection with our engagement, Deloitte, management, and the Executive Committee will assume
certain roles and responsibilities in an effort to assist Deloitte in maintaining independence and ensuring
compliance with Canadian independence rules. Deloitte will communicate to its partners and employees
that the City is an attest client. Management of the City will ensure that the City, together with its boards
and other entities that comprise the City for purposes of the consolidated financial statements, has
policies and procedures in place for the purpose of ensuring that neither the City nor any such board or
other entity will act to engage Deloitte or accept from Deloitte any service that either has not been
subjected to their pre-approval process or that under Canadian independence rules or other applicable
rules would impair Deloitte's independence. All potential services are to be discussed with Ms. Paula
Jesty.
Independence matters relating to hiring
Deloitte must assess threats to independence created when a former Deloitte partner or member of the
engagement team is employed by management. In order to assist Deloitte in maintaining independence,
management should notify Ms. Paula Jesty where substantive employment conversations have been had
with a former or current Deloitte partner or engagement team member.
Fraud and error
Management is responsible for:
1. Designing and implementing programs and controls to prevent and detect fraud and error;
2. Informing us about all known or suspected fraud affecting the City involving (a) management,
(b) employees who have significant roles in internal control, and (c) others where the fraud could
have a material effect on the financial statements;
3. Informing us of its knowledge of any allegations of fraud or suspected fraud affecting the City
received in communications from employees, former employees, analysts, or others;
4. Informing us of any information it might have regarding any concerns or allegations of potential
errors in the selection of accounting policies or the recording of transactions affecting the City that
have been communicated to it by employees, former employees, analysts, or others, whether written
or oral;
5. Informing us of its assessment of the risk that the financial statements may be materially misstated as
a result of fraud; and
6. Communicating its belief that the effects of any uncorrected financial statement misstatements
aggregated during the audit are immaterial, both individually and in the aggregate, to the financial
statements taken as a whole.
'1 08
Appendix C
Auditor communications
The Corporation of the City of Pickering
December 31, 2008
Independence communications
In accordance with Canadian GAAS, we will disclose to the Executive Committee, in writing, all
relationships between Deloitte and the City and its related entities, that in our professional judgment may
reasonably be thought to bear on our independence and confirm to the Executive Committee in such letter
whether, in our professional judgment, we are independent of the City within the meaning of the Rules of
Professional Conduct of our profession. For purposes of this paragraph, "Deloi tte'; shall mean Deloitte &
Touche LLP, Deloitte Touche Tohmatsu, its member firms and the affiliates ofDeloitte & Touche LLP,
Deloitte Touche Tohmatsu and its member firms.
Fraud, error and illegal acts
If items of the following nature come to our attention, and in our judgment need to be reported to those
charged with governance, we will report them directly to the Executive Committee:
1. Any fraud that involves management;
2. Any fraud (whether caused by management or other employees) of which we become aware that has
resulted or could result in a non-trivial misstatement of the financial statements;
3. Any fraud involving employees who have significant roles in internal control;
4. Uncorrected misstatements aggregated by us during the audit that were determined by management
to be immaterial, both individually and in the aggregate, to the financial statements taken as a whole;
5. Questions regarding the honesty and integrity of management;
6. Matters that may cause future financial statements to be materially misstated;
7. Significant misstatements resulting from error that were corrected by management;
8. Significant weaknesses in internal control; and
9. Related party transactions that are not in the normal course of operations and which involve
significant judgments made by management concerning measurement or disclosure.
We will inform the appropriate level of management of the City and determine that the Executive
Committee is adequately informed with respect to illegal acts that have been detected or have otherwise
come to our attention in the course of our audit, unless the illegal acts are clearly inconsequential.
We will inform the appropriate level of management where we have identified a misstatement resulting
from an error, other than a trivial error.
The matters communicated will be those that we identify during the course of our audit. Our audit would
not identify all matters that may be of interest to management in discharging its responsibilities.
Communication with the appropriate level of authority in the organization's management and with those
charged with governance will be determined by the type and significance of the matter to be
communicated.
, I.
109
Appendix D
Circumstances affecting timing and fee estimate
The Corporation of the City of Pickering
December 31, 2008
The fees quoted for the audit are based on certain assumptions. Circumstances may arise during the
engagement that may significantly affect the targeted completion dates and our fee estimate. As a result,
additional fees may be necessary. Such circumstances include, but are not limited to, the following:
Audit facilitation
I. Changes to the timing of the engagement at the City's request. Changes to the timing of the
engagement usually require reassignment of personnel used by Deloitte in the performance of
services hereunder. However, because it is often difficult to reassign individuals to other
engagements, Deloitte may incur significant unanticipated costs.
2. All audit schedules are not ( a) provided by the City on the date requested, (b) completed in a format
acceptable to Deloitte, (c) mathematically correct, or (d) in agreement with the appropriate City
records (e.g., general ledger accounts). Deloitte will provide the City with a separate listing of
required schedules, information requests, and the dates such items are needed.
3. Significant delays in responding to our requests for information such as reconciling variances or
providing requested supporting documentation (e.g., invoices, contracts, and other documents).
4. Deterioration in the quality of the City's accounting records during the current year engagement in
comparison with the prior-year engagement.
5. A completed trial balance, referenced to the supporting analyses, schedules and financial statements,
is not provided timely by the City.
6. Draft financial statements with appropriate supporting documentation are not prepared accurately and
timely by the City's personnel.
7. Electronic files in an appropriate format and containing the information requested are not provided by
the City on the date requested for our use in performing file interrogation. Deloitte will provide the
City with a separate listing of the required files and the dates the files are needed.
8. The engagement team, while performing work on the City's premises, is not provided with access to
the Internet via the City's existing network or through a n, DSL, or cable connection for purposes of
conducting the engagement.
Significant issues or changes
9. Significant weaknesses are identified in the City's internal control that result in the expansion of our
audit procedures.
10. A significant level of proposed audit adjustments is identified during our audit.
11. A significant number of drafts of the financial statements are submitted for our review or we identify
a significant level of deficiencies in the draft financial statements.
12. Significant new issues or changes arise as follows:
a. New accounting issues.
b. Changes in accounting policies or practices from those used in prior years.
c. Events or transactions not contemplated in our budgets.
d. Changes in the City's financial reporting process or IT systems.
e. Changes in the City's accounting personnel, their responsibilities, or their availability.
f. Changes in auditing standards.
g. Change in the City's use of specialists, or the specialists and / or their work product does not
meet the qualifications required by Canadian GAAS for our reliance upon their work.
13. Changes in audit scope caused by events that are beyond our control.
Appendix E
Standard terms and conditions
The Corporation of the City of Pickering
December 31, 2008
, t \
1 1 0
The following general business terms (the "Terms") apply to the engagement except as otherwise
provided in the specific engagement letter agreement (the "engagement letter") between De10itte &
Touche LLP ("De10itte") and The Corporation of the City of Pickering (the "Client") to which these
Terms are attached.
1. Timely performance - Deloitte will not be liable for failures or delays in performance that arise from
causes beyond Deloitte's control, including the untimely performance by the Client of its obligations
as set out in the engagement letter.
2. Right to terminate services - If the Client terminates the engagement or requests that De10itte resign
from the engagement prior to its completion, the Client will pay for time and expenses incurred by
De10itte up to the termination or resignation date together with reasonable time and expenses incurred
to bring the services to a close in a prompt and orderly manner. Deloitte will not be responsible for
any loss, cost or expense resulting from such termination or resignation. Should the Client not fulfill
its obligations set out herein or in the engagement letter, and in the absence of rectification by the
Client within thirty (30) days of notification in writing by De1oitte, upon written notification Deloitte
may terminate its services immediately and will not be responsible for any loss, cost or expense
resulting from such early termination.
3. Fees and taxes - Any fee estimates take into account the agreed-upon level of preparation and
assistance from Client personnel. De10itte undertakes to advise management of the Client on a timely
basis should this preparation and assistance not be provided or should any other circumstances arise
which cause actual time to exceed that estimate. The Client is responsible for the payment of any
applicable federal, provincial or other goods and services or sales taxes, or any other taxes or duties,
in connection with the services provided by Deloitte.
4. Expenses - In addition to professional fees, the Client will reimburse Deloitte for its reasonable out-
of-pocket expenses including travel, meals and hotels incurred in connection with this engagement.
5. Billing - Invoices will be rendered periodically as agreed in advance. All invoices shall be due and
payable when rendered. Interest shall be calculated at a simple daily rate of 0.0493% (equivalent to
18% per annum). Interest shall be charged and payable at this rate on any part of an invoice which
remains unpaid from thirty (30) days after the invoice date to the date on which the outstanding
invoice is paid. To the extent that as part of the services to be performed by De10itte as described in
the engagement letter, Deloitte personnel are required to perform the services in the United States of
America ("U.S. Business"), the Client and Deloitte agree to assign performance of the U.S. Business
to De10itte Canada LLP, an affiliate ofDeloitte. All services performed by De10itte Canada LLP
shall be performed under the direction of De10itte which shall remain responsible to the Client for
such services. De10itte Canada LLP shall invoice the Client with respect to the U.S. Business and
Deloitte will invoice for services performed in Canada ("Canadian Business"). Payment for U.S.
Business and/or Canadian Business can be settled with one payment to Deloitte.
6. Governing law - The engagement will be governed by the laws of the Province where De1oitte's
principal office performing the engagement is located and all disputes related to the engagement shall
be subject to the exclusive jurisdiction of the courts of such Province.
7. Working papers - All working papers, files and other internal materials created or produced by
De10itte related to the engagement are the property of De10itte. In the event that Deloitte is requested
by the Client or required by subpoena or other legal process to produce its files related to this
engagement in proceedings to which De10itte is not a party, the Client will reimburse De10itte for its
professional time and expenses, including legal fees, incurred in dealing with such matters. De10itte
will not return or provide records or information obtained in the course of the engagement to the
'1 1 1
Appendix E
Client if it is illegal to do so or if Deloitte is requested to withhold the records or information by law
enforcement or other public or regulatory authorities (regardless of whether the engagement has been
terminated).
8. Privacy - Deloitte and the Client acknowledge and agree that, during the course of this engagement,
Deloitte may collect personal information about identifiable individuals ("Personal Information"),
either from the Client or from third parties. The Client and Deloitte agree that Deloitte will collect,
use and disclose Personal Information on behalf of the Client solely for purposes related to
completing this engagement, providing services to the Client, and in a manner consistent with section
10 below. Deloitte shall not collect, use and disclose such Personal Information for Deloitte's own
behalf or for its own purposes.
9. Third parties - Deloitte's engagemerit is not planned or conducted in contemplation of or for the
purpose of reliance by any third party (other than the Client and any party to whom Deloitte's audit
report is addressed) or with respect to any specific transaction. Therefore, items of possible interest
to a third party will not be addressed and matters may exist that would be assessed differently by a
third party, possibly in connection with a specific transaction.
10. Confidentiality - To the extent that, in connection with this engagement, Deloitte comes into
possession of any proprietary or confidential information of the Client, (including Personal
Information as defined in section 8 above), Deloitte will not disclose such information to any third
party without the Client's consent, except:
(a) as may be required or permitted by legal authority, the rules of professional conduct/code of
ethics.
(b) to the extent that such information shall have otherwise become publicly available.
Except as instructed otherwise in writing, each party may assume that the other approves of properly
addressed fax, e-mail (including e-mail exchanged via internet media) and voice mail communication
of both sensitive and non-sensitive documents and other communications concerning this
engagement, as well as other means of communication used or accepted by the other.
11. Survival of terms - The agreements and undertakings of the Client contained in the engagement
letter, together with the appendices to the engagement letter including these Terms, will survive the
completion or termination of this engagement.
12. Proportionate liability - The Client and Deloitte acknowledge where the audit is conducted pursuant
to a statute governing the Client that contains proportionate liability provisions that apply to an
auditor, such as the Canada Business Corporations Act, the terms of the statute shall apply to this
engagement. In the event that the Client and Deloitte are not subject to such statutory provisions
regarding proportionate liability, the Client agrees that in any action, claim, loss or damage arising
out of the engagement, Deloitte's liability will be several and not joint and several and the Client may
only claim payment from Deloitte of Deloitte' s proportionate share of the total liability based on the
degree of fault of Deloitte as finally determined by a court of competent jurisdiction.
13. Client misrepresentation - Deloitte shall not be liable to the Client, and the Client releases Deloitte,
for all liabilities, claims, damages, costs, charges and expenses incurred or suffered by the Client
related to or in any way associated with the engagement that arise from or are based on any deliberate
misstatement or omission in any material information or representation provided by or approved by
any member of management of the Client, officer of the Client or member of the Council ofthe
Client.