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HomeMy WebLinkAboutCS 01-02 Cilt¡ o~ REPORT TO COUNCIL FROM: Gillis A. Paterson Director, Corporate Services & Treasurer DATE: January 15, 2002 REPORT NUMBER: CS 01-02 - SUB] ECT: External Auditing Services Request for Proposal- RFP 6-2001 RECOMMENDATION: 1. It is recommended that the Audit Committee approve Report CS 01-02 of the Director, Corporate Services & Treasurer; 2a) That the Audit Committee recommend to Council that the proposal submitted by Deloitte & Touche for external audit services be accepted; OR b) Phase 2 interviews be calTied out by Members of the Audit Committee and the Treasurer to interview representatives of the recommended firm, Deloitte & Touche, and/or any of the four remaining candidates they may wish to consider; 3. That this report and the Audit Committee recommendations be forwarded to the Ajax/Pickering Transit Authority for their consideration at their January 29, 2002 meeting; and, , - 4. The appropriate officials of the City of Pickering be given authority to give effect thereto. ORIGIN: Report CS 18-01 AUTHORITY: The Municipal Act, RS.O. 1990, as amended, Section 86 and any Regulations thereunder FINANCIAL IMPLICATIONS: - The fee for the 2000 audit was $34,500; $31,800 for 1999; and $31,100 for 1998. If the recommended firrn is adopted by Council, this will result in an increase of $7,000 for the 2001 audit. Fees for 2001 contained in the five proposals ranged from $24,500 to $50,000. Considering the increasing demands put on Auditors to fulfill provincially mandated reporting requirements, such as implementing the recommendations to the Public Sector Auditing Board (PSAB) and the expanding nature of the Corporation and the increasing complexity of taxation and reporting thereon, the selection of Deloitte & Touche represents, in our opinion, the best value for our audit dollars. Report to Council 01-02 Date: January 15, 2002 Subject: External Auditing Services Request for Proposal- RFP 6-2001 Page 2 EXECUTIVE SUMMARY: - The current finn, Hurren, Flett, Sinclair was originally appointed by Council in 1995 for a two year tenn and reappointed in 1997 for a 3 year tenn. In June 2001, Council approved the calling of a Request for Proposal for Auditing Services for a term of five years commencing with the 2001 audit. Request for Proposal RFP 6-2001 was issued and five firms, BDO Dunwoody LLP, Deloitte & Touche LLP, Ernst & Young LLP, Hurren, Flett, Sinclair and KPMG LLP were invited to submit Proposals and all firms responded. These finns were also invited to make a presentation to the Selection Committee and based upon that and the Proposals submitted, each [11m was scored against pre-established evaluation criteria. The firm of Deloitte & Touche scored highest over all and in our opinion has the resources to fully meet the City's current and future needs. References were checked and proved satisfactory. Value will be added for the money spent on audit services through the engagement of a large firm with particular expertise in Ontario municipalities, The selection of an auditor is a business decision that is made following a thorough process geared towards determining the correct solution for the right reasons, BACKGROUND: Section 86(1) of the Municipal Act, RS.O. 1990 as amended states: ~ "The council of every municipality shall by by-law appoint for a term of five years or less one or more auditors who are licensed under the Public Accountancy act, and every person so appointed shall, in addition to his or her duties in respect of the corporation, audit the accounts and transactionß of every local board as defined in the Municipal Affairs Act. R.SO. 1980, c. 302, s. 88(1); 1991, Vol. 2, c. 15, s. 3; 1997, c. 31, s. 155(1)." The recent term for the current auditors, Hurren, Flett, Sinclair, had expired with the 2000 audit. At its meeting of June 25, 2001 Council approved Report CS 18-01 of the Director, Corporate Services and Treasurer which contained the following recommendations: 1. That a Request for Proposal (RFP) be called for Audit services for the City of Pickering, the Public Library, and the Transit Authority for the purpose of undertaking the annual audit and other assignments for the fiscal years 2001 to 2005 inclusive; and 2. That the appropriate officials for the City of Pickering be given authority to give effect thereto. In order to carry out the recommendations of Council, a Selection Committee was established comprising of the Treasurer, Manager, Accounting Services, Manager, Financial Services, Manager, Supply & Services and the Solicitor for the City, The composition of the Committee represented the best interests of the City in this regard. - Five finns were invited to submit Proposals and all responded. They were also invited to make a presentation to the Selection Committee on November 14, 2001. (Unfortunately, the Solicitor was unable to attend due to another priority). The Proposals and Presentations made by each of the finns were scored against pre-selected evaluation criteria (see Attachment 1), that were assigned point values to reflect the importance of each one. Unlike the purchase of hard goods such as vehicles or computers the selection of services is based on firstly fulfilling the demand or need and then the principle of "best value for dollar spent". Therefore, the selection criteria placed a higher value on factors such as knowledge of the new reporting requirements, depth of audit and overall level of service in contrast to annual audit fee cost. This method assists in the selection of the fiill1 representing the best overall service and value. Report to Council 01-02 Date: January 15, 2002 Subject: External Auditing Services Request for Proposal- RFP 6-2001 Page 3 The Selection Committee (including the Solicitor) total score for each of the finns compared to the total possible scoring of 450 (5 x 90) is shown below. - Firm Deloitte & Touche KPMG BDO Dunwoody Ernst & Young Hurren, Flett, Sinclair Total Score 386 368.5 342.5 342 234 The external audit partnership makes a significant contribution to the overall administration and financial well being of the City. The role of the external auditor has changed significantly over the past few years. It has evolved from the traditional basic financial audit into a multi-faceted responsibility, encompassing a wide range of financial and non-financial areas. In addition, the Finance function in the municipal environment has become increasingly complex over the past few years, and based on Provincial initiatives, will continue to change significantly within the next few years. Some examples of recent changes that have contributed to the complexity include: . Accounting requirements resulting from the implementation of Current Value Assessment, followed by the capping legislation, Bill 79. . The redesign of the standard Financial Infonnation Return (FIR). . Implementation of Province wide bench marking standards. - Also, for the 2000 fiscal year, all municipalities in Ontario were required to implement the accounting recommendations and disclosure requirements, as prescribed by the Public Sector Accounting Board (PSAB) of the Canadian Institute of Chartered Accountants. While these recommendations will provide more accurate, useful accounting/financial infonnation and fuller disclosure, they represented a significant change in financial statement reporting requirements. We foresee PSAB recommendations for changes to financial reporting to be an ongoing requirement. - It is essential the City's external auditors have significant experience in the municipal sector, offer services beyond the traditional audit role and have the resources necessary to meet the varied requirements of the City, including finance and non-finance issues, The basic audit function is not sufficient in today's environment. A Corporation the size of Pickering with expenditures approaching $50 million annually demands this level of expertise and capability. Todays needs by the Corporation, Council, the public and the Province, place previously unheard of demands on a municipality's finance staff. This has had a very serious effect on workloads. Moreover, the City raises an additional $75 million in property taxes for the Region and School Boards. This tax funding must be billed to over 25,000 properties, accounted for, tracked, reconciled and forwarded to the requisitioning bodies, This infonnation is subject to audit not only by our auditors but those of the other authorities and is reported in the annual Financial Infonnation Return submitted to the Province. In financial terms and responsibilities the City is a $125 million corporation. Without the expertise and resources of a large auditing finn, finance staff will not be able to continue without significant additional resources to deal with accounting matters, financial reporting and internal control and audit. The primary criteria, which were used in evaluating the finns, are summarized below: . The completeness of the proposal, which reflects an understanding of the requested service and compliance with the submission requirements. Date: January 15, 2002 Report to Council 01-02 Subject: External Auditing Services Request for Proposal- RFP 6-2001 Page 4 - . . . ent its Boards or Commissions. This ,:~uld Knowledge of mumclpal governm : d knowledge of provincial mumclpal 1 d f statutory reqUlrements an t encompass know e ge 0 . . 1 d' the Municipal Perfonnance Measuremen financial reporting reqmrements mc ~ ll1g Program and the Public Sector Accountmg Board. :~:: :e:'~~C::~:':~g::,::~i::V~: : ~~:fi~:~:~~~~a~ti~~O~d~~~;:~~ Size. . . Staffs qualification and expertise such that have experience in providing audit services to other municipalities of comparable size, .' . Knowledge of new legislation relevant to the municipal operating env1fo~ent mcludmg Bill 79 "Fairness to Property Taxpayers Act", Bill 140 "Continued ProtectIOn for Property Taxpayers Act", etc. . . Well developed professional auditing techniques and a sound system of control and review of audit work perfonned. . Advisory and support services available including matters such as GST, income taxes, internal audit, financial systems development, new or proposed legislation and support capabilities for computer systems and. programs. In addition, fees and overall presentation and compatibility with staff were evaluated. The recommended finn, Deloitte & Touche, meets or exceeds all of the eligibility and evaluation criteria as summarized below. -. - . Currently audit approximately 30 Ontario municipalities and provide related services to another 70 Ontario municipalities, Existing clients include the Town of Markham, Town of Richmond Hill, Region of Durham, Town of Whitby, MUIlicipality of Clarington, . Utilize up to date auditing techniques/methodologies, including specially developed software that will integrate with the City's financial systems for sampling and testing financial infoffi1ation for audit purposes. . As an integral part of the audit a "Computer Control Assurance Specialist" will be part of the team to perform early audit work on our general computer environment such as: review of physical and logical security access controls; review of policies and procedures for the information systems themselves (mainly financial) and the processing of information thereon; and, review of support systems for operations, databases and communication networks. Disaster recovery measures are also reviewed. . Have substantial resources and support services available with over 40 professionals specializing in this sector located in the servicing office. . Based on their experience with existing clients, they have a comprehensive knowledge of municipal financial reporting requirements and an understanding of the legislation relevant to municipalities and their Boards. . The senior staff assigned to the City's audit have significant audit and other experience working mainly with urban municipalities in the Greater Toronto Area. . Senior staff have a solid knowledge of issues facing municipalities through their involvement with municipal associations and Provincial and professional taskforces mainly dealing with accounting, audit and financial reporting matters. .-.. - .-.. Report to Council 01-02 Date: January 15,2002 Subject: External Auditing Services Request for Proposal- RFP 6-2001 Page 5 . Deloitte & Touche staff regularly attend internal municipal training courses that focus on municipal accounting issues, current issues facing the sector and audit techniques for municipalities. . Provide a wide range of additional and advisory services, including commodity taxes, information technology consulting, income taxes, operational reviews and performance measurement. The appointment of Deloitte & Touche LLP as the City's auditors for a five year term will establish a partnership with a national accounting firm that has a wealth of knowledge and experience in the municipal sector, substantial resources and support services and a wide range of advisory service in addition to the traditional audit services. ATTACHMENTS: 1. Selection Committee Evaluation Criteria Endorsed By: Prepared / Approved / Endorsed By: / ,"-'" / ! \ ---. I /i I ~-l-' 1'--1" '-. ' '. :0 IJ? ~~l J/J.l1t istine Senior Manager, Accounting Services ~---~ . -,- ~ -"- ------- ,. - "-- Gillis A. Paterson Director, Corporate Services & Treasurer Endorsed By: .~~ Stan Karwowski Manager, Finance & Taxation c:::::< Endorsed t: \ (':-:>t \'t~.. Vera Felgemaéher Manager, Supply & Services Endorsed By: ,/'" ) '-.._, John Reble Solicitor GAP:vw Attachment Copy: Chief Administrative Officer Recommended for the consideration of Pickering City Council ~ ,Þ ¡~TTACHMENT#L TOREPORT#LS 01- O;l AUDIT RFP PRESENTATION SELECTION COMMITTEE EVALUATION NOVEMBER 14, 2001 Firm: Selection Committee Member: - EVALUATION PROCEDURE Evaluation Committee: . Gil Paterson, Director of Corporate Services/Treasurer . Kristine Senior, Manager, Accounting Services . John Reble, City's Solicitor . Stan Karwowski, Manager, Financial Services . Vera Felgemacher, Manager, Supply & Services Process: The Selection Committee will use a point formula during the review process to score proposals, Each member of the Selection Committee will first score each technical proposal by each of the criteria described below. Following interviews, the "full Selection Committee will then convene to review and discuss these evaluations and to combine the individual scores to arrive at a composite technical score for each firm, Proposal Evaluation Criteria: ,.. 1. Completeness of the proposal: A logical, well documented proposal designed with the City's RFP guidelines is indicative of firm that should be able to proceed with a minimum of delay, Content should be succinct yet substantial, with little or "no guesswork" or further clarification required of the City, Points assigned: 10 Score: 2, Estimate of Fees: Cost estimates would be evaluated from 0 for highest estimate to 5 for lowest. The £inn shall commit a Project Budget Amount including any contingency. Points assigned: 5 Score: - .' - 4. - 5. 6. Proposal/Presentation Evaluation Criteria: 1. Firm's qualifications and' expertise: Consideration should be given to the number of recent similar projects completed, the manner in which they were undertaken, their success, etc,. Points assigned: 10 Score: 2a. Staff qualification and expertise: Consideration should be given that the assigned staffs have experience in providing similar audit services to comparable sized municipalities. Points assigned: 10 Score: 2b. Staff Continuity: Ability of finn to provide staff that can work on the audit consistently from one year to the next. Points assigned: 5 Score: 3. Knowledge of Municipal Government its B.oards or Commissions: Comprehensive knowledge of statutory requirements and provincial municipal financial reporting such as performance measurements and public sector accounting. Points assigned: 10 Score: Knowledge of new legislations: An understanding of legislation relevant to the municipal operating environment including Bill 79, Bíll140 and Bill 46, Points assigned: 10 Score: Techniques/Methodologies: Consideration should be given to creativity, what the audit approach encompasses and automated procedures. Points assigned: 10 Score: Advisory Services: Support capabilities including computer systems and programs, Advisory services available to the City, including matters such as GST, income taxes, employee benefit plans, internal audit, financial systems development, cash management, new or proposed legislation and performance measurement issues. Points assigned: 10 Score: ".... Presentation Evaluation CIiteria: 1. Rating of the overall presentation. Points assigned: 5 Score: . 2. Perceived compatibility with City personnel. - Points assigned: 5 Score: Reference Evaluation: 1. Past Performance: Evaluation of past performance will be important in detennining the probable future ability and activities of the f1TIlland probable successful and acceptable completion of projects within the estimated time and budget limits. Client references and reputation of the consultant within the profession are very important facts of these criteria. Would the firm's past customers utilise their services again? How did the original cost estimate for projects compare with actual costs billed? Points assigned: 10 Score: TOTAL SCORE: Score /100 ~ Comments: Evaluation afFirm: Committee Member: ~