HomeMy WebLinkAbout2020-07-14 AgendaClarington
Audit Committee
Agenda
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Date: July 14, 2020
Time: 2:00 pm
Place: Held Virtually via Microsoft Teams
1. Call to Order
2. Declarations of Pecuniary Interest
3. Adoption of Minutes of Previous Meeting(s)
3.1. None
4. Presentations
4.1. Melanie Dugard, Principal, Grant Thornton
5. Delegations
M w0.rem
6. Communications — Receive for Information
6.1. Letter from Melanie Dugard, CPA, CA — Principal, Grant Thornton LLP "Report
to the Audit Committee strategy and results" dated July 9, 2020
7. Items for Direction
7.1. Terms of Reference
Recommendation: That the Committee recommends to Council that the Terms
of Reference for the Audit and Accountability Committee be approved
7.2.2019 Consolidated Financial Statements for the Municipality of Clarington
Recommendation: That the Consolidated Financial Statements for the
Municipality of Clarington for the year ending December 31, 2019 be approved
7.3.2019 Financial Statements for the Municipality of Clarington Trusts
Recommendation: That the Financial Statements for the Municipality of
Clarington Trusts for the year ending December 31, 2019 be approved
Page 12
7.4.2019 Financial Statements for the Board of Management for Historic
Downtown Bowmanville Business Improvement Area
Recommendation: That the Financial Statements for the Board of Management
for Historic Downtown Bowmanville Business Improvement Area for the year
ending December 31, 2019 be approved
7.5.2019 Financial Statements for the Board of Management for the Newcastle
Central Business District Improvement Area
Recommendation: That the Financial Statements for the Board of Management
for the Newcastle Central Business District Improvement Area for the year
ending December 31, 2019 be approved
7.6.2019 Financial Statements for the Orono Central Business District
Improvement Area
Recommendation: That the Financial Statements for the Board of Management
for the Orono Central Business District Improvement Area for the year ending
December 31, 2019 be approved
7.7. Internal Audit Policy
Recommendation: That Staff report back to the Audit and Accountability
Committee with an updated Internal Audit Policy for the role of the internal audit
function.
8. Other Business
9. Adjournment
7.1
The Corporation of the Municipality of
Clarington
For the year ended December 31, 2019
Report to the Audit Committee
Audit strategy and results
July 9, 2020
Melanie Dugard, CPA, CA
Principal
T 416-607-7303
E Melanie.Dugard@ca.gt.com
Jordan Stroll, CPA, CA
Manager
T 416-777-7210
E Jordan.Stroll@ca.gt.com
Page 3 of 122
Contents
Executive summary
Audit risks and results
Adjustments and uncorrected misstatements
Other reportable matters
Technical updates — highlights
Thought leadership
Appendices
1
Appendix A —
Draft management representation letter
2
Appendix B —
Overview and approach
6
Appendix C —
Audit plan and risk assessment
7
Appendix D —
Cybersecurity
9
Appendix E —
PSAS accounting developments
10
Appendix F —
Assurance developments
Page 4 of 122
Executive summary
Purpose of report and scope
The purpose of this report is to engage in an open dialogue with you regarding our
audit of the financial statements of The Corporation of the Municipality of
Clarington, Bowmanville Central Business District Improvement Area, Newcastle
Central Business District Improvement Area, Orono Central Business District
Improvement Area and Municipality of Clarington Trust Funds (together the
"Municipality") for the year ended December 31, 2019. This communication will
assist the Audit Committee in understanding our overall audit strategy and results
of audit procedures and includes comments on misstatements, significant
accounting policies, sensitive estimates and other matters.
The information in this document is intended solely for the information and use of
Audit Committee, Council and management. It is not intended to be distributed or
used by anyone other than these specified parties.
We have obtained our engagement letter dated May 16, 2019, which outlines our
responsibilities and the responsibilities of management. Our engagement letter will
be in effect for a three-year period unless there is a significant change to the terms
of the engagement. We were engaged to provide the following deliverables:
Deliverable
Discussions and communications regarding audit planning
Report on the December 31, 2019 financial statements
Communication of audit strategy and results
Status of our audit
We have substantially completed our audit of the financial statements of the
Municipality and the results of that audit are included in this report.
We will finalize our report upon resolution of the following items that were
outstanding as at July 9, 2020:
• Approval of the financial statements by Council;
• Receipt of bank confirmation responses;
• Receipt of legal confirmation responses (to be dated within 7 days of when the
financial statements are approved by Council);
• Receipt of signed management representation letter to be dated on the day the
financial statements are approved by Council (a draft has been included in
Appendix A); and
• Completions of procedures regarding subsequent events between the date of
this report and the date the financial statements are approved by Council;
Approach
Our audit approach requires that we establish an overall strategy that focuses on
risk areas. We identify and assess risks of material misstatement of the financial
statements, whether due to fraud or error. The greater the risk of material
misstatement associated with an area of the financial statements, including
disclosures, the greater the audit emphasis placed on it in terms of audit verification
and analysis. Where the nature of a risk of material misstatement is such that it
requires special audit consideration, it is classified as a significant risk. Our
approach is discussed further in the Appendix B.
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Audit risks and results
We have executed our audit in accordance with our approach summarized in Appendices B and C. We highlight our significant findings in respect of COVID-19 impacts on audit
risks and responses, significant transactions, significant risks, accounting practices and other areas of focus.
COVID-19 impact on audit risks and responses
Area of focus Matter Our response and findings
Subsequent events
The COVID-19 virus became widespread in January 2020 and the
magnitude of its impact increased thereafter.
In determining whether the impact of COVID-19 requires adjustments to the
Municipality's financial statements, management must first determine
whether the impact occurred during the fiscal year, or subsequent to year-
end. Entities are required to distinguish between subsequent events that
are adjusting (provide further evidence of conditions that existed at the
statement of financial position date) and non -adjusting (indicate conditions
that arose after the statement of financial position date). Adjusting
subsequent events are reflected in the recognition and measurement of
amounts reported in the financial statements, while the impact of non -
adjusting subsequent events may be required to be disclosed in the notes
to the financial statements. Significant subsequent events that may require
adjustment or disclosure include items such as: waivers or modifications of
contractual terms in lending arrangements or other contractual
arrangements, and/or announcing or commencing the implementation of a
major restructuring or downsizing.
Management has determined that the financial effects of the spread of
COVID-19 represents a non -adjusting subsequent event. This is because
the virus became widespread subsequent to year-end and the magnitude of
its impact remains uncertain.
Note disclosure in the financial statements fairly represents the material
uncertainty of the impact of COVID-19.
Page 6 of 122
Area of focus
Matter
Our response and findings
Going concern
The preparation of the financial statements on a going concern basis is
We have reviewed management's going concern assessment, considering
appropriate if management has determined that the Municipality has the
all events that have occurred subsequent to year end and the wide-ranging
ability to continue as a going concern for a period of at least twelve months
impact of COVID-19 (including employee future benefits, asset
from the statement of financial position date. Management's assessment
impairments, debt repayments, etc). In other words, everything that
generally takes into consideration all available information about the future,
happens during the subsequent events period must be considered in
including events that have occurred after the year-end. Current
determining if there is substantial doubt regarding the Municipality's ability
circumstances related to COVID-19 have resulted in many entities
to continue as a going concern, even if those events are otherwise
encountering financial difficulties, which could call into question use of the
considered non -adjusting.
going concern assumption.
We have determined that it remains appropriate to present the financial
If there is material uncertainty about the Municipality's ability to continue as
statements on a going concern basis.
a going concern, the Municipality should include going concern disclosure in
the notes to its financial statements and there will be an impact on the
auditor's report.
Significant risks
Area of focus
Why there is a risk
Our response and findings
Fraud risk from revenue
There is a presumed risk of fraud in revenue.
• Performed analytical review related to user charges revenue and
recognition
The risk primarily relates to User Charges and other fee revenue
corroborated explanations as required.
• Performed tests of details on user charges and other fee revenues.
recognized.
No issues noted.
Risk from management override
Manipulation to financial results can occur through journal entries.
• Tested the appropriateness of journal entries recorded in the general
ledger and other adjustments made in the preparation of the financial
statements
• Reviewed accounting estimates for biases
• Evaluate the business rationale for significant transactions that are or
appear to be outside the normal course of business
No issues noted.
Page 7 of 122
Accounting practices and other areas of focus
Area of focus
Matter
Sensitive accounting estimates The preparation of financial statements in accordance with Canadian public
and disclosures sector accounting standards requires management to make estimates and
assumptions that affect the amounts reported in the financial statements.
The estimates made by management relate to the:
• liability for employee benefits and other obligations,
• allowance for uncollectible receivables, and,
• amortization of tangible capital assets.
Our response and findings
Liability for employee benefits and other obligations
The Municipality has recognized liabilities in the financial statements
for future employee benefits and Workplace Safety and Insurance
Board Obligations. Employee benefits include vested sick leave,
workers safety and insurance, long term disability, vacation pay and
retiree health and dental benefits.
The objective is to recognize a liability in the reporting period in which
employees have provided the services that gives rise to the benefits.
The amounts recorded by the Municipality are determined based on
actual entitlements less usage and an actuarial valuation for post -
employment benefits. The calculation of the liability for employee
benefits requires management to make certain estimates, including
rate of annual compensation increase, inflation rate and discount rate.
The liability is determined through actuarial valuation. As part of our
audit, we review the reasonability of the assumptions used by the
actuary and communicate with the actuary with respect to their
independence and ability to provide information in accordance with
the CPA Canada's Public Sector Handbook. The accrued benefit
obligation at December 31, 2019 and the changes in the accrued
benefit obligation for the 2019 fiscal year was determined by an
actuarial valuation performed as at December 31, 2019.
Based on our review, we have determined that the liability for
employee benefits and other obligations is reasonable.
Allowance for uncollectible receivables
For tax revenue and other revenues, amounts are billed but may not
be collected as of December 31, 2019. For uncollected accounts,
management estimates the collectability of these receivables based
on their age and takes into consideration the success of efforts to -
date in communicating with the taxpayer or customer. As part of our
audit, we review the age of the receivables and search for any
subsequent receipts or relevant communications to assess
management's estimate for reasonability.
Our analysis showed that ageing of the taxes receivable (including
penalties) has remained relatively low as the amount outstanding for 3
or more years is $0.136 million as at December 31, 2019, a slight
decrease from $0.090 million as at December 31, 2018.
We further noted that the method of calculating allowance for doubtful
accounts was unchanged from prior years and was based on
Page 8 of 122
Area of focus Matter Our response and findings
Fraud and illegal acts Our audit procedures were performed for the purpose of forming an opinion
of the financial statements and although these procedures might bring
possible fraudulent or illegal activities to our attention, our audit procedures
are less likely to detect material misstatements arising from fraud or other
illegal acts because such acts are usually accompanied by acts designed to
conceal their existence.
historical trend analysis of tax losses for the Municipality as a result of
property re -assessments through appeals. The total allowance for
doubtful accounts at December 31, 2019 of $0.750 million was based
on assessment losses in fiscal 2018 and 2019.
Based on our analysis of taxes receivable and the rationale of the
provision calculation, we have determined that management's
allowance for uncollectible receivables is reasonable.
Amortization of tangible capital assets
For tangible capital assets, we review the rates and methods of
amortization for consistency with other public sector organizations
and for reasonability. Changes to estimated useful lives would impact
the annual amortization expense, as well as the net book value of
tangible capital assets. We recalculate annual amortization expense.
Based on our review, we have determined that rates and methods of
amortization are reasonable.
We did not detect any fraudulent or illegal activities or material
misstatements resulting from fraudulent or illegal activities during our audit.
Litigation proceedings We are required to ensure that all litigation and contingencies are identified We are in the process of communicating with the Municipality's legal
and appropriately accounted for in the financial statements. counsel. Based on management representations and our audit procedures,
there are no claims or possible claims against the Municipality that have
been identified. Should the response from the Municipality's legal counsel
indicate otherwise, we will notify the Audit Committee accordingly.
Page 9 of 122
Adjustments and uncorrected
misstatements
Adjustments
There were no adjustments required in the consolidated financial statements of the Municipality. Minor entries were made to the BIAs and Trust Funds and these have been
reviewed with management.
Uncorrected misstatements
We have no non -trivial unadjusted misstatements to report.
Summary of disclosure matters
Our audit did not identify any non -trivial disclosure matters.
Page 10 of 122
Other reportable matters
Internal control
The audit is designed to express an opinion on the financial statements. We obtain
an understanding of internal control over financial reporting to the extent necessary
to plan the audit and to determine the nature, timing and extent of our work.
Accordingly, we do not express an opinion on the effectiveness of internal control.
If we become aware of a deficiency in your internal control over financial reporting,
the auditing standards require us to communicate to the Audit Committee those
deficiencies we consider significant. However, a financial statement audit is not
designed to provide assurance on internal control.
Based on the results of our audit, we noted the following internal control
observations during our audit:
Segregation of Duties
Inherent in organizations of the Municipality's size is the possibility of
management override due to the absence of complete segregation of duties.
While we perform tests in this regard, our testing is not sufficient to conclude that
management override has not occurred. Without proper segregation of duties
between incompatible functions, there is an increased risk that errors (whether
unintentional or intentional), or fraud could go undetected.
We noted that the Deputy Treasurer, Manager of Accounting Services, Manager
of Capital Assets, Manager of Taxation and Revenue Coordinator can all
technically review, approve and post General Ledger journal entries.
Furthermore, the Director of Finance/Treasurer can review, approve and post to
the GL all journal entries but cannot initiate.
As best practice, we recommend that approval rights be limited to those without
initiating capabilities.
We do note that compensating controls include the ongoing involvement and
development of operating budgets and review of interim financial information by
Counsel and its related committees which are paramount to the overall control
environment.
We also note that we performed testing of journal entries during the year and did
not identify any issues with journal entries posted.
Access Rights
We noted that the Treasurer and Deputy Treasurer have administrator access
rights and are also involved with the financial reporting process which creates a
separate Segregation of Duties deficiency.
As best practice, we recommend that administrative rights be limited to those
without financial reporting responsibilities and therefore, if practicable, the
administrative right for these positions be removed.
We do note that compensating controls include the financial statements being
reviewed by Counsel and the Audit Committee to identify any unusual or material
variations from the budget.
Page 11 of 122
Cybersecurity
Cybersecurity is the practice of protecting computers, data and other electronic
systems from malicious attacks. As organizations become increasingly dependent
on digital technology, the opportunities for cyber-criminals continue to grow. The
explosion of data generated by digital technology, combined with a new degree of
connectedness among organizations, means there is ripe opportunity for the
technologically savvy and criminally minded to take advantage. This can not only
create a reputational risk to you, it can also create financial liabilities.
Based on discussions with members of the Municipality, precautions have been
taken against the risk of cybersecurity threats. In Appendix D, we examine the
nature of the threat and how organizations can go about further improving
cybersecurity.
Independence
We have a rigorous process where we continually monitor and maintain our
independence. The process of maintaining our independence includes, but is not
limited to:
Identification of threats to our independence and putting into place safeguards to
mitigate those threats. For example, we evaluate the independence threat of any
non -audit services provided to the Municipality; and
Confirming the independence of our engagement team members
We have identified no information regarding our independence that in our judgment
should be brought to your attention.
Page 12 of 122
Technical updates - highlights
Accounting
Accounting standards issued by the Accounting Standards Board that may affect
the Municipality in future years include:
• Section PS 3400 Revenues
• Section PS 3280 Asset retirement obligations
• Section PS 3450 Financial instruments, Section PS 2601 Foreign
currency translation, Section PS 1201 Financial statement presentation,
and PS 3041 Portfolio investments
We would highlight to you that Section PS 3280 Asset retirement obligations will
take effect for fiscal years beginning on or after April 1, 2021, although earlier
adoption is permitted. We note that a number of our public sector clients are
starting to invest time in establishing a plan for implementation of this standard.
This section establishes standards on how to account for and report a liability for
asset retirement obligations, which are legal obligations associated with the
retirement of a tangible capital asset.
Asset retirement costs associated with a tangible capital asset increase the
carrying amount of the related tangible capital asset and are expensed in a rational
and systematic manner, while asset retirement costs associated with an asset no
longer in productive use are expensed. Measurement of the liability for an asset
retirement obligation should result in the best estimate of the amount required to
retire a tangible capital asset at the financial statement date. A present value
technique is often the best method to estimate the liability. Subsequent
measurement of the liability can result in either a change in the carrying amount of
the related tangible capital asset, or an expense, depending on the nature of the
remeasurement or whether the asset remains in productive use.
Assurance
Auditing standards issued by the AASB that may change the nature, timing and
extent of our audit procedures on the Municipality and our communication with the
Audit Committee include:
Revisions to CAS 540 Auditing Accounting Estimates, including Fair
Value Accounting Estimates and Related Disclosures
Revisions to CAS 315 Identifying and Assessing Risks of Material
Misstatement
Further details of the changes to assurance standards are included in Appendix F.
If you have any questions about these changes, we invite you to raise them during
our next meeting. We will be pleased to address your concerns.
Page 13 of 122
Thought leadership
On our GrantThornton.ca website, we have a hub devoted to COVID 19. Below are some of the publications that may be of interest.
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Page 14 of 122
Appendix A - Draft management
representation letter
[audit report date]
Grant Thornton LLP
Suite 200
15 Allstate Parkway
Markham, ON
UR 5134
Dear Sir/Madam:
We are providing this letter in connection with your audit of the consolidated financial statements of Corporation of the Municipality of Clarington ("the Municipality") as of
December 31, 2019, and for the year then ended, for the purpose of expressing an opinion as to whether the consolidated financial statements present fairly, in all material
respects, the financial position, results of operations, and cash flows of the Municipality in accordance with Canadian public sector accounting standards.
We acknowledge that we have fulfilled our responsibilities for the preparation of the consolidated financial statements in accordance with Canadian public sector accounting
standards and for the design and implementation of internal controls to prevent and detect fraud and error. We have assessed the risk that the consolidated financial
statements may be materially misstated as a result of fraud and have determined such risk to be low. Further, we acknowledge that your examination was planned and
conducted in accordance with Canadian generally accepted auditing standards (GARS) so as to enable you to express an opinion on the consolidated financial statements. We
understand that while your work includes an examination of the accounting system, internal controls and related data to the extent you considered necessary in the
circumstances, it is not designed to identify, nor can it necessarily be expected to disclose, fraud, shortages, errors and other irregularities, should any exist.
Certain representations in this letter are described as being limited to matters that are material. An item is considered material, regardless of its monetary value, if it is probable
that its omission from or misstatement in the consolidated financial statements would influence the decision of a reasonable person relying on the consolidated financial
statements.
We confirm, to the best of our knowledge and belief, as of [audit report date], the following representations made to you during your audit.
Page 15 of 122
Financial statements
1 The consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Municipality as at December 31, 2019 and the
results of its operations and its cash flows for the year then ended in accordance with Canadian public sector accounting standards, as agreed to in the terms of the audit
engagement.
Completeness of information
2 We have made available to you all financial records and related data and all minutes of the meetings of directors, and committees of directors, as agreed in the terms of the
audit engagement. Summaries of actions of recent meetings for which minutes have not yet been prepared have been provided to you. All significant board and committee
actions are included in the summaries.
3 We have provided you with unrestricted access to persons within the Municipality from whom you determined it necessary to obtain audit evidence.
4 There are no material transactions that have not been properly recorded in the accounting records underlying the consolidated financial statements.
5 There were no restatements made to correct a material misstatement in the prior period consolidated financial statements that affect the comparative information other than
a reclassification between cash and cash equivalents and investments.
6 We are unaware of any known or probable instances of non-compliance with the requirements of regulatory or governmental authorities, including their financial reporting
requirements.
7 We are unaware of any violations or possible violations of laws or regulations the effects of which should be considered for disclosure in the consolidated financial
statements or as the basis of recording a contingent loss.
8 We have disclosed to you all known deficiencies in the design or operation of internal control over financial reporting of which we are aware.
9 We have identified to you all known related parties and related party transactions, including sales, purchases, loans, transfers of assets, liabilities and services, leasing
arrangements guarantees, non -monetary transactions and transactions for no consideration.
10 You provided a non -audit service by assisting us with drafting the consolidated financial statements and related notes. In connection with this non -audit service, we confirm
that we have made all management decisions and performed all management functions, have the knowledge to evaluate the accuracy and completeness of the
consolidated financial statements, and accept responsibility for such consolidated financial statements.
Page 16 of 122
Fraud and error
11 We have no knowledge of fraud or suspected fraud affecting the Municipality involving management; employees who have significant roles in internal control; or others,
where the fraud could have a non -trivial effect on the consolidated financial statements.
12 We have no knowledge of any allegations of fraud or suspected fraud affecting the Municipality's consolidated financial statements communicated by employees, former
employees, analysts, regulators or others.
13 We acknowledge our responsibility for the design, implementation and maintenance of internal control to prevent and detect fraud.
Recognition, measurement and disclosure
14 We believe that the significant assumptions used by us in making accounting estimates, including those used in arriving at the fair values of financial instruments as
measured and disclosed in the consolidated financial statements, are reasonable and appropriate in the circumstances.
15 We have no plans or intentions that may materially affect the carrying value or classification of assets and liabilities, both financial and non -financial, reflected in the
consolidated financial statements.
16 All related party transactions have been appropriately measured and disclosed in the consolidated financial statements.
17 The nature of all material measurement uncertainties has been appropriately disclosed in the consolidated financial statements, including all estimates where it is
reasonably possible that the estimate will change in the near term and the effect of the change could be material to the consolidated financial statements.
18 All outstanding and possible claims, whether or not they have been discussed with legal counsel, have been disclosed to you and are appropriately reflected in the
consolidated financial statements.
19 All liabilities and contingencies, including those associated with guarantees, whether written or oral, have been disclosed to you and are appropriately reflected in the
consolidated financial statements.
20 All "off -balance sheet" financial instruments have been properly recorded or disclosed in the consolidated financial statements.
21 With respect to environmental matters:
a) at year end, there were no liabilities or contingencies that have not already been disclosed to you;
b) liabilities or contingencies have been recognized, measured and disclosed, as appropriate, in the consolidated financial statements; and
C) commitments have been measured and disclosed, as appropriate, in the consolidated financial statements.
Page 17 of 122
22 The Municipality has satisfactory title to (or lease interest in) all assets, and there are no liens or encumbrances on the Municipality's assets nor has any been pledged as
collateral.
23 We have disclosed to you, and the Municipality has complied with, all aspects of contractual agreements that could have a material effect on the consolidated financial
statements in the event of non-compliance, including all covenants, conditions or other requirements of all outstanding debt.
24 The Harmonized Sales Tax (HST) transactions recorded by the Municipality are in accordance with the federal and provincial regulations. The HST liability/receivable
amounts recorded by the Municipality are considered complete.
25 Employee future benefit costs, assets, and obligations have been determined, accounted for and disclosed in accordance with the requirements of Section PS 3255 Post -
employment benefits, compensated absences and termination benefits of the Chartered Professional Accountants of Canada (CPA Canada) Public Sector Accounting
Handbook.
26 There have been no events subsequent to the consolidated statement of financial position date up to the date hereof that would require recognition or disclosure in the
consolidated financial statements, beyond those already communicated to you and disclosed in the consolidated financial statements. Further, there have been no events
subsequent to the date of the comparative consolidated financial statements that would require adjustment of those consolidated financial statements and related notes,
including those related to COVID-19 and its impact on the Municipality.
Other
27 We have considered whether or not events have occurred, or conditions exist which may cast significant doubt on the Municipality's ability to continue as a going concern,
including those related to COVID-19 and its impact on the Municipality, and have concluded that no such events or conditions are evident.
Yours very truly,
Andrew Allison, B. Comm., LL.B.
Chief Administrative Officer
Page 18 of 122
Date
Trevor Pinn, CPA, CA
Director of Finance, Treasurer
Date
Page 19 of 122
Appendix B - Overview and approach
Our audit is planned with the objective of obtaining reasonable assurance about whether the financial statements as a whole are free from material misstatement, so that we
are able to express an opinion on whether the financial statements are prepared, in all material respects, in accordance with Canadian Public Sector Accounting Standards.
The following outlines key concepts that are applicable to the audit, including the responsibilities of parties involved, our general audit approach and other considerations.
Roles and responsibilities
Role of the Audit Committee Help set the tone for the organization by emphasizing honesty, ethical behaviour and fraud prevention
and Council Oversee management, including ensuring that management establishes and maintains internal controls to provide reasonable assurance regarding
reliability of financial reporting
Oversee the work of the external auditors
• Review annual financial statements and recommend approval
Role of management Prepare financial statements in accordance with Canadian Public Sector Accounting Standards
Design, implement and maintain effective internal controls over financial reporting processes, including controls to prevent and detect fraud
Exercise sound judgment in selecting and applying accounting policies
• Prevent, detect and correct errors, including those caused by fraud
Provide representations to external auditors
• Assess quantitative and qualitative impact of misstatements discovered during the audit on fair presentation of the financial statements
Role of Grant Thornton LLP Provide an audit opinion that the financial statements are in accordance with Canadian Public Sector Accounting Standards
• Conduct our audit in accordance with Canadian Generally Accepted Auditing Standards (GAAS)
Maintain independence and objectivity
Be a resource to management and to those charged with governance
• Communicate matters of interest to those charged with governance
• Establish an effective two-way communication with those charged with governance, to report matters of interest to them and obtain their comments on
audit risk matters
Page 20 of 122
Audit approach
Our understanding of the Municipality and its operations drives our audit approach, which is risk based and specifically tailored to The Corporation of the Municipality of
Clarington.
The five key phases of our audit approach
Evaluating Testing
Assessing internal accounts and Concluding
risk and reporting
controls transactions
Phase Our approach
1. Planning We obtain our understanding of your operations, internal controls and information systems
We plan the audit timetable together
2. Assessing risk We use our knowledge gained from the planning phase to assess financial reporting risks
We customize our audit approach to focus our efforts on key areas
3. Evaluating internal controls We evaluate the design of controls you have implemented over financial reporting risks
We identify areas where our audit could be more effective or efficient by taking an approach that includes testing the controls
We provide you with information about the areas where you could potentially improve your controls
4. Testing accounts and We perform tests of balances and transactions
transactions We use technology and tools, including data interrogation tools, to perform this process in a way that enhances effectiveness and efficiency
5. Concluding and reporting We conclude on the sufficiency and appropriateness of our testing
We finalize our report and provide you with our observations and recommendations
Our tailored audit approach results in procedures designed to respond to an identified risk. The greater the risk of material misstatement associated with the account, class of
transactions or balance, the greater the audit emphasis placed on it in terms of audit verification and analysis.
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Throughout the execution of our audit approach, we maintained our professional skepticism, recognizing the possibility that a material misstatement due to fraud could exist
notwithstanding our past experiences with the entity and our beliefs about management's honesty and integrity.
Materiality
The purpose of our audit is to provide an opinion as to whether the financial statements are prepared, in all material respects, in accordance with Canadian Public Sector
Accounting Standards as at December 31, 2019. Therefore, materiality is a critical auditing concept and as such we apply it in all stages of our engagement.
The concept of materiality recognizes that an auditor cannot verify every balance, transaction orjudgment made in the financial reporting process. During audit planning, we
made a preliminary assessment of materiality for the purpose of developing our audit strategy, including the determination of the extent of our audit procedures. During the
completion stage, we consider not only the quantitative assessment of materiality, but also qualitative factors, in assessing the impact on the financial statements, our audit
opinion and whether the matters should be brought to your attention.
Fraud risk factor considerations
We are responsible for planning and performing the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement caused by
error or by fraud. Our responsibility includes:
The identification and assessment of the risks of material misstatement of the financial statements due to fraud through procedures including discussions amongst the audit
team and specific inquiries of management
Obtaining sufficient appropriate audit evidence to respond to the fraud risks noted
Responding appropriately to any fraud or suspected fraud identified during the audit
Due to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements may not be detected, and this is particularly true in relation to fraud.
The primary responsibility for the prevention and detection of fraud rests with those charged with governance and management.
We are required to communicate with you on fraud -related matters, including:
• Obtaining an understanding of how you exercise oversight of management's processes for identifying and responding to the risks of fraud in the entity and the internal control
that management has established to mitigate these risks
• Inquiring as to whether you have knowledge of any actual, suspected or alleged fraud affecting the entity
The following provides a summary of some of the fraud related procedures that are performed during the audit:
Testing the appropriateness of journal entries recorded in the general ledger and other adjustments made in the preparation of the financial statements
Reviewing accounting estimates for biases
Evaluating the business rationale (or the lack thereof) for significant transactions that are or appear to be outside the normal course of operations
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Quality control
We have a robust quality control program that forms a core part of our client service. We combine internationally developed audit methodology, advanced audit technology,
rigorous review procedures, mandatory professional development requirements, and the use of specialists to deliver high quality audit services to our clients. In addition to our
internal processes, we are subject to inspection and oversight by standard setting and regulatory bodies. We are proud of our firm's approach to quality control and would be
pleased to discuss any aspect with you at your convenience.
Audit Technology
We apply our audit methodology using advanced software tools:
IDEA Data Analysis Software - A powerful analysis tool that allows audit teams to read, display, analyze, manipulate, sample and extract data from almost any electronic
source. The tool has the advantages of enabling the audit team to perform data analytics on very large data sets in a very short space of time, while providing the checks,
balances and audit trail necessary to ensure that the data is not corrupted and that the work can be easily reviewed. SmartAnalyzer, an add -on to IDEA, further improves
the efficiency and effectiveness of the audit by providing automated routines for certain common analytical tasks, such as identifying unusual and potentially fraudulent
journal entries. Grant Thornton continues to invest in developing industry -leading audit data analytical tools.
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Appendix C — Audit plan and risk
assessment
We have executed our audit in accordance with our plan outlined below. We continually reassess the need for changes to our planned audit approach throughout the audit.
Risk assessment
Our risk assessment process identified certain significant risks, which are included under "Audit risks and results" in our report. In addition, we identified certain other areas
where we focused our attention as follows:
Risk area Why it is a risk area
Audit procedures and findings
Taxation Recorded tax revenues and receivables may not be valid due
Tested the existence of taxation and other receivables at
to fraud or error.
December 31, 2019.
• Recalculated the net taxable assessment based on verified
assessment rolls and approved levies.
• Assessed the adequacy of allowance for doubtful accounts
by testing subsequent receipts, reviewing management
estimates and examining support for the value of the
underlying property.
No errors found.
User charges and other revenue Recorded user charges and other revenues and receivables
Tested the existence of receivables at December 31, 2019.
may not be valid due to fraud or error.
Verified the completeness of revenue and receivables by
reviewing management's estimate for the year-end accrual.
• Performed analytical review related to user charges and
other revenue and corroborate explanations as required.
Performed test of details on user charges and other
revenue.
No errors found.
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Risk area Why it is a risk area Audit procedures and findings
Completeness and existence of operating expenses and The operating expenses and accrued liabilities may be • Review of accrued liabilities compared to prior year,
accrued liabilities understated due to inaccurate estimates. detailed analytical review of expenses compared to prior
year/budget.
. Testing of a sample of expenses.
No errors found.
Tangible capital assets Valuation of additions, including contributed assets, as well as Reviewed supporting documentation for capital asset
appropriateness of amortization. additions with respect to the validity of the additions, on a
test basis.
• Reviewed disposals to determine if any gain/loss is
calculated appropriately.
• Recalculated depreciation expense.
• Reviewed capital project costs to determine if any
additional costs should be capitalized.
No errors found.
Completeness of employee compensation expenses Accrued liabilities may be understated for payroll -related
Review of supporting documentation and management
costs, as well as actuarial -determined liabilities.
estimates with respect to completeness and accuracy of
significant payroll -related accruals, analysis of payroll
expenses by department compared to expectations, and
review of actuarial reports and key inputs that would impact
the post -employment benefit liability.
No errors found.
Grants and subsidies Allocation of grants may not be appropriate and recognition of
• Reviewed the allocation of funds between fiscal periods to
revenue may not meet grant conditions.
determine if it is appropriate and teste of revenue
recognition in accordance with grant terms and conditions.
. Reviewed grant terms to determine if any deferrals,
receivables or payables are appropriate.
No errors found.
Commitments and contingencies Commitments and contingencies may be understated due to
Verify accuracy and reasonableness of amounts and
lack of relevant information causing inaccurate estimates.
disclosures, with reference to correspondence with
lawyers. Examination of supporting documentation and
discussion with management.
No errors found.
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Appendix D - Cybersecurity
Cybersecurity is the practice of protecting computers, data, networks and other electronic systems from malicious attacks. Below, we summarize the cybersecurity threat
and how we can help you manage that threat.
Cybersecurity risk How Grant Thornton can help
As organizations become increasingly dependent on digital technology, storing valuable
information in multiple places, the opportunities for cyber criminals continue to grow. Cyber-
attacks today are more focused, skilful and ambitious, and geographical borders are
meaningless. Regulators and stakeholders, including customers, are increasing the pressure on
organizations to manage these risks. In order to properly protect themselves, organizations
must understand what weaknesses attackers could exploit, how to respond to security incidents
and how areas such as access to confidential data should be managed.
Management should continue to respond to these risks by:
Assessing the people, processes and technology associated with their cybersecurity
program, including management of the program, data security, cybersecurity awareness and
training, and assessment of external risks
Improving the cybersecurity function by remediating identified vulnerabilities, developing new
strategies, enhancing existing facilities, and establishing policies, controls and processes
Developing a cybersecurity breach or attack response plan, which involves providing training
for the people who will execute the response, determining the procedures that will be
followed, and securing external resources to support the process as needed
Our cybersecurity solutions address a variety of complex security requirements, helping you
build a resilient business that is prepared for cyber-attacks.
We can help you:
. Prepare
We help you understand your current exposure to cybersecurity risk and support you to
develop an effective security capability. Our services include cybersecurity risk and threat
assessments; security policy development; security process or technical assessments; and
third -party cybersecurity assurance.
. Protect
We develop and implement the technical framework and broader processes required to
protect. We can help you with security architecture; security technology implementations;
security process design and implementation; identity and access management; privacy and
data protection; data classification; enterprise application integrity; business continuity and
disaster recovery; and penetration testing.
. React
We work with you to support and monitor your cybersecurity operations, and help you to
respond rapidly and forensically in the event of a security or data breach.
. Change
We can help you improve and better manage your cybersecurity capability. Our services
include security program strategy and planning, security governance; and security
awareness.
If you would like to discuss cybersecurity risks in more detail or learn more about how Grant
Thornton can help your organization respond to cybersecurity risks, we would be happy to
arrange a meeting to discuss this topic with you in detail or, alternatively, you may contact our
cybersecurity team directly at +1-844-40-CYBER (+1-844-402-9237).
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Appendix E - PSAS
accounting developments
Public Sector Accounting Standards Effective date
Section PS 3400 Revenues
New Section PS 3400 Revenue establishes standards on how to account for and report on revenue. It does not apply to revenues for which specific Fiscal years beginning on or after
standards already exist, such as government transfers, tax revenue or restricted revenues. The Section distinguishes between revenue that arises from April 1, 2022.
transactions that include performance obligations (i.e., exchange transactions) and transactions that do not have performance obligations (i.e., non- Earlier adoption is permitted.
exchange transactions). The main features of the new Section are:
Performance obligations are defined as enforceable promises to provide specific goods or services to a specific payer
• Revenue from transactions with performance obligations will be recognized when (or as) the performance obligation is satisfied by providing the
promised goods or services to the payer
• Revenue from transactions with no performance obligations will be recognized when a public sector entity has the authority to claim or retain the
revenue and identifies a past transaction or event that gives rise to an asset
Section PS 3280 Asset retirement obligations
New Section PS 3280 Asset Retirement Obligations establishes standards on how to account for and report a liability for asset retirement obligations. An Fiscal years beginning on or after
asset retirement obligation is a legal obligation associated with the retirement of a tangible capital asset. April 1, 2021.
Asset retirement costs associated with a tangible capital asset increase the carrying amount of the related tangible capital asset and are expensed in a Earlier adoption is permitted.
rational and systematic manner, while asset retirement costs associated with an asset no longer in productive use are expensed. Measurement of the
liability for an asset retirement obligation should result in the best estimate of the amount required to retire a tangible capital asset at the financial
statement date. A present value technique is often the best method to estimate the liability. Subsequent measurement of the liability can result in either a
change in the carrying amount of the related tangible capital asset, or an expense, depending on the nature of the remeasurement or whether the asset
remains in productive use.
As a result of the issuance of Section PS 3280, the Public Sector Accounting Board (PSAB) approved the withdrawal of Section PS 3270 Solid waste
landfill closure and post -closure liability as asset retirement obligations associated with landfills will be within the scope of PS 3280. PS 3280 does not
address costs related to remediation of contaminated sites, which will continue to be addressed in Section PS 3260 Liability for contaminated sites.
Some consequential amendments have been made to PS 3260 to conform with PS 3280 and further clarify the scope of each standard.
Section PS 3450 Financial instruments, Section PS 2601 Foreign currency translation, Section PS 1201 Financial statement presentation, and
PS 3041 Portfolio investments
PS 3450 Financial instruments is a new Section that establishes standards for recognizing and measuring financial assets, financial liabilities and non- The new requirements are all
financial derivatives. Some highlights of the requirements include: required to be applied at the
a public sector entity should recognize a financial asset or a financial liability on its statement of financial position when it becomes a party to the same time.
contractual provisions of the instrument For governments - Fiscal years
• financial instruments within the scope of the Section are assigned to one of two measurement categories: fair value, or cost / amortized cost beginning on or after April 1,
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Public Sector Accounting Standards Effective date
• almost all derivatives are measured at fair value 2021. This effective date was
• fair value measurement is required for portfolio investments in equity instruments that are quoted in an active market amended in March 2018.
• other financial assets and financial liabilities are generally measured at cost or amortized cost For government organizations
• until an item is derecognized, gains and losses arising due to fair value remeasurement are reported in the statement of remeasurement gains and that applied the CPA Canada
losses when the public sector entity defines and implements a risk management or investment strategy to manage and evaluate the performance of a Handbook —Accounting prior to
group of financial assets, financial liabilities or both on a fair value basis, the entity may elect to include these items in the fair value category their adoption of the CPA
• additional disclosures with respect to financial instruments will be required, including the nature and extent of risks arising from a public sector entity's Canada Public Sector Accounting
financial instruments
PS 2601 Foreign currency translation revises and replaces Section PS 2600 Foreign currency translation. Some highlights of the requirements include:
• the deferral and amortization of foreign exchange gains and losses relating to long-term foreign currency denominated monetary items is discontinued
• until the period of settlement, foreign exchange gains and losses are recognized in the statement of remeasurement gains and losses rather than the
statement of operations
PS 1201 Financial statement presentation revises and replaces Section PS 1200 Financial statement presentation. The main amendment to this Section
is the addition of the statement of remeasurement gains and losses.
PS 3041 Portfolio investments revises and replaces Section PS 3040 Portfolio investments.
The issuance of these new sections also includes consequential amendments to:
Introduction to accounting standards that apply only to government not -for -profit organizations
PS 1000 Financial statement concepts
PS 1100 Financial statement objectives
PS 2125 First-time adoption by government organizations
PS 2500 Basic principles of consolidation
PS 2510 Additional areas of consolidation
PS 3050 Loans receivable
PS 3060 Government partnerships
PS 3070 Investments in government business enterprises
PS 3230 Long-term debt
PS 3310 Loan guarantees
PS 4200 Financial statement presentation by not -for -profit organizations
PSG-6 Including results of organizations and partnerships applying fair value measurement was withdrawn as a result of the issuance of these sections.
In April 2020, the PSAB issued amendments to clarify aspects of the Section's application and add new guidance to the transitional provisions of Section
PS 3450.
The amendments introduce changes to the accounting treatment for bond repurchase transactions. Specifically, the amendments no longer require bond
repurchase transactions to be treated as extinguishments, unless they are discharged or legally released from the obligation or the transactions meet
certain criteria to be considered an exchange of debt.
The amendments also provide clarification on the application of certain areas of Section PS 3450, these include:
• Section PS 3450 does not apply unless a contractual right or a contractual obligation underlies a receivable or payable
• how a transfer of collateral pursuant to a credit risk management mechanism in a derivative contract is accounted for and
• derecognition of a financial asset does not occur if the transferor retains substantially all the risks and benefits of ownership
Finally, the amendments have added new guidance to the transitional provisions as follows:
• controlling governments should use the carrying values of the financial assets and liabilities in the records of its government organizations when
consolidating a government organization
• any unamortized discounts, premiums, or transaction costs associated with a financial asset or financial liability in the cost/amortized cost category
should be included in the item's opening carrying value and
in cases where derivatives were not recognized or were not measured at fair value prior to adopting PS 3450, any difference between the previous
carrying value and fair value should be recognized in the opening balance of accumulated remeasurement gains and losses.
Handbook - Fiscal years
beginning on or after April 1,
2012.
For all other government
organizations - Fiscal years
beginning on or after April 1,
2021. This effective date was
amended in March 2018.
Earlier adoption is permitted
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Strategic plan for not -for -profit organizations in the public sector
Since 2012, government not -for -profit organizations (GNPOs) have been required to adopt PSAS but were given the option of applying the specific GNPO accounting
standards in PSAS. Some GNPOs have utilized those standards, while others have not. The PSAB recognized that a "one -size -fits -all" approach may not be
appropriate for all stakeholders. As a result, the PSAB's 2017-2020 Strategic Plan included plans to assess the specific needs of public sector NPO stakeholders.
PSAB's 2018-2019 Annual Plan includes the following specific objectives for implementing its strategy:
• developing a GNPO strategy that meets the public interest; and
• enhancing engagement with users of GNPO financial statements.
In 2018, PSAB consulted with over 100 GNPO stakeholders to understand their fiscal and regulatory environment, their financial reporting needs, and their financial
reporting perspectives. Diversity in the financial reporting framework, presentation of net debt and fund accounting, the impact of balanced budget requirements and
endowments were some of the items stakeholders raised.
In May 2019, the PSAB issued a Consultation Paper, Government Not -for -Profit, which articulated the results of their consultations and sought stakeholder input in
developing a strategy for GNPOs. The comment period for the Consultation Paper ended on September 30, 2019 and PSAB is currently deliberating the responses. As
part of their strategic plan for 2020 to 2021, the PSAB plans to issue a second consultation paper in the third quarter of 2020 proposing an accounting and reporting
framework for GNPOs. They also expect to approve the final GNPO strategy, based on responses to the two consultation papers, outreach, and its international strategy
decision.
International strategy
The PSAB is reviewing its current approach towards International Public Sector Accounting Standards (IPSAS) with the intent of developing options for its International
Strategy. In May 2019, it issued a second Consultation Paper Reviewing PSAB's Approach to International Public Sector Accounting Standards. The Consultation
Paper lays out 4 options it is considering:
Option I: Status Quo - This option would continue with the existing Canadian -made standard -setting process. Under this option, PSAB would continue to
establish PSAS independently from other standard setters.
Option II: Adapt IPSAS principles when developing future standards - PSAB would continue to develop PSAS, but future standards would be based on
principles in existing individual IPSAS as each is considered by PSAB. The Board would establish a "Criteria for Modifying Principles" document to provide
guidance on when departures from IPSAS principles in a standard under consideration are permitted.
Option III: Adopt IPSAS except when a departure is permitted - PSAB would adopt IPSAS as issued by the International Public Sector Accounting Standards
Board (IPSASB), other than where a departure is permitted. The Board would establish a "Criteria for Modifying Standards" document to provide guidance on
when departures from IPSAS are permitted. The Board would endorse all new IPSAS before they become part of the CPA Canada Public Sector Accounting
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(PSA) Handbook and could still develop standards when a Canadian issue is identified. This option is closest to the Accounting Standard Board's current
approach to adopting IFRS Standards for publicly accountable enterprises.
4. Option IV: Adopt IPSAS - Under this option, there would be no endorsement process as PSAB would not have the ability to modify IPSAS before they become
part of the PSA Handbook. The Board would not have the ability to develop standards independent of the IPSASB. Although PSAB has not decided on its
international strategy at this time, it does not consider Option IV to be a viable option given Canada's strong accrual -based financial reporting framework
The comment period for the Consultation Paper ended on September 30, 2019 and PSAB is currently deliberating the responses. The PSAB plans to decide on the
future of its international strategy at its meeting in April 2020.
Concepts underlying financial performance
In response to feedback from stakeholders, the PSAB is proposing changes to its conceptual framework and its reporting model with a focus on measuring the
financial performance of public sector entities. The changes will be made through the following actions:
Issuing a revised conceptual framework to replace two Sections in the PSA Handbook:
• PS 1000 Financial statement concepts
• PS 1100 Financial statement objectives
Issuing a revised financial statement presentation standard that would replace Section PS 1201 Financial statement presentation.
In May 2018, PSAB released two documents for comment related to this project:
Statement of Concepts, A Revised Conceptual Framework for the Canadian Public Sector
A conceptual framework is a clear set of related concepts that act as the foundation for the development of standards and the application of professional judgment.
The Statement of Concepts presented and explained key concepts that the PSAB expects to include in a future exposure draft. The components of the PSAB's
proposed conceptual framework were as follows:
• characteristics of public sector entities
• financial reporting objectives
• role of financial statements
• financial statement foundations
• financial statement objectives
• qualitative characteristics of information and related considerations
• elements of financial statements
• recognition and measurement
• presentation concepts
The Statement of Concepts also set the foundation for the revised reporting model in the PSAB's concurrently issued Statement of Principles below.
Statement of Principles, A Revised Reporting Model for the Canadian Public Sector
The PSAB is proposing a revised reporting model that builds on the existing reporting model in Section PS 1201 Financial statement presentation. The Statement of
Principles presented and explained key principles that the PSAB expects to include in a future exposure draft. Some of the main features of the proposals in the
Statement of Principles included:
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• In the statement of financial position:
o The net debt indicator would be removed and instead a revised net debt calculation would be moved to its own statement: the statement of net debt or net
financial assets
o The accumulated surplus (deficit) indicator would be relabelled as net assets (net liabilities)
o A new third component, accumulated other, would be added to net assets or net liabilities (existing Section PS 1201 includes two components of accumulated
surplus: accumulated operating surplus or deficit and accumulated remeasurement gains and losses)
o The structure would be amended to present financial assets, then non -financial assets, followed by liabilities, to arrive at the net assets or net liabilities position
• The statement of operations would be renamed as the statement of surplus or deficit;
• The statement of remeasurement gains and losses would be expanded to reconcile the balances of and changes in all the components of net assets or net liabilities
and it would be renamed as the statement of changes in net assets or net liabilities;
• Financing activities would be isolated in the statement of cash flows;
• The statement of changes in net debt would be removed; and
• The budget amounts on the financial statements would be presented using the same basis of accounting, following the same accounting principles, for the same
scope of activities, and using the same classifications as the actual amounts.
In March 2019, the PSAB received a high-level summary of the comments received from stakeholders on the Statement of Concepts and the Statement of Principles.
As it deliberates the feedback, PSAB is developing two exposure drafts (one for a revised conceptual framework and one for a revised reporting model), which it
expects to issue in 2020.
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Appendix F - Assurance developments
Canadian Auditing Standards (CASs) and other Canadian Standards issued by the AASB
Effective date
Revisions to CAS 540 Auditing Accounting Estimates, including Fair Value Accounting Estimates, and Related Disclosures
The revised standard is effective
In June 2018, the IAASB approved a revised version of ISA 540 Auditing Accounting Estimates and Related Disclosures. In revising the standard,
for audits of financial statements
with periods beginning on or after
the IAASB focused on improving the scalability of the ISA to very simple accounting estimates, as well as the most complex accounting estimates
December 15, 2019.
The standard was also revised to clarify the relationship between ISA 540 (revised) and the other ISAs and the requirements when using the work of
management's expert as audit evidence in testing how management made the accounting estimate. The AASB concluded that the changes to the
ISA would be adopted as CASs, with no special amendments being necessary with respect to the Canadian auditing environment.
Canadian Auditing Standards (CASs) and other Canadian Standards approved by the AASB but not issued
Effective date
Revisions to CAS 315 Identifying and Assessing Risks of Material Misstatement
Periods beginning on or after
In July 2018, the IAASB issued an Exposure Draft proposing changes to ISA 315 that could drive more consistent and effective identification and
December 15, 2021.
assessment of the risks of material misstatement by auditors. The AASB published an Exposure Draft of the equivalent Canadian standard, which
included the same proposed revisions as the ISA with no Canada -specific amendments. The revised CAS 315 has been approved and is expected to
be issued in the May 2020 CPA Canada handbook update. Key amendments to the standard include the following:
Focusing on the applicable financial reporting framework in identifying and assessing risks of material misstatement
Updating the understanding of the system of internal control, including clarifying the work effort for understanding each of the components of
internal control and "controls relevant to the audit", as well as the relationship between this understanding and the assessment of control risk
Updating aspects relating to IT, in particular to the IT environment, the applications relevant to the audit and general IT controls relevant to the
audit
Introducing the new concepts of inherent risk factors, relevant assertions, significant classes of transactions, account balances and disclosures,
and the spectrum of inherent risk
Separating the inherent risk and control risk assessments for assertion level risks, enhancing the requirements relating to financial statement level
risks, and updating the definition of "significant risks"
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If this information is required in an alternate format, please contact the Accessibility
Co-ordinator at 905-623-3379 ext. 2131
To:
Members of the Audit and Accountability Committee
From:
Trevor Pinn, CPA, CA — Director of Finance / Treasurer
Date:
July 10, 2020
Subject:
Audit and Accountability Committee Terms of Reference
File:
Staff have prepared draft terms of reference for the Audit and Accountability Committee.
These terms of reference should be provided to Council for ratification at the September
2020 Council meeting.
The terms of reference have been based on several other audit committee terms of
references, including the City of Burlington and the City of Mississauga, as a starting
point.
If there are any questions or concerns regarding the draft terms of reference, please let
me know.
Thank you,
Trevor Pinn, CPA, CA
Director of Finance / Treasurer
cc: Andrew Allison, CAO
Anne Greentree, Municipal Clerk
Catherine Carr, Manager of Internal Audit
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Audit and Accountability Committee
Terms of Reference
Committee Purpose
The Audit and Accountability Committee assists Council in fulfilling its due diligence,
fiduciary, financial reporting and audit responsibilities. The Committee approves,
monitors, evaluates and provides advice on matters affecting the external audit, internal
audit, risk management and the financial reporting and accounting control policies and
practices of the Municipality.
Committee Mandate
The Mandate of the Committee is to make recommendations directly to Council
regarding the following:
• Financial Statements;
• External Audit Function;
• Internal Audit Function;
• Corporate Control Framework;
• Risk Management.
Financial Statements
The Committee is responsible for the following recommendations regarding financial
statements:
• Review and recommend for approval the annual audited consolidated financial
statements and associated statements;
• Review quarterly actual financial performance as per Budget Policy G14;
• Review and discuss with management
o The appropriateness of accounting or other financial policies and financial
reporting practices
o Any significant proposed changes in financial reporting and accounting policies
and practices to be adopted by the Municipality
o Any new or pending developments in accounting and reporting standards that
may affect the Municipality
o Management's key estimates and judgments that may be material to financial
reporting
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External Audit Function
The Committee is responsible for the following regarding the external audit function:
• Confirm and ensure the independence of the external auditor, including the approval
and review of all additional audit, management consulting and other fees of the
external auditor;
• Recommend the selection or dismissal of the external auditor to Council as required
including participation in the selection committee with staff, approval of the selection
process and annual evaluation of the external auditor's performance;
• Review the terms of engagement, scope and performance of the external audit
services provided;
• Approve the fees for the audit;
• Review any matters brought to the committee's attention by the external auditor and
determine the appropriate disposition thereof;
• Review and discuss with the external auditor the Management Letter, agree with
management on the proper course of action, and make recommendations to
Council, where necessary;
• Discuss with the external auditor the annual evaluation of the internal control
systems, if appropriate, together with any related recommendations for
improvement;
• Meet with the external auditor to discuss all material issues and ensure any matter
the external auditor brings forth has been given adequate attention, including any
appropriate action; and
• Provide an open avenue of communication between the external auditor and
Committee, including the ability to meet in closed session, in the absence of
management, at Audit Committee meetings regarding matters deemed allowable
under the Municipal Act, 2001.
Internal Audit Function (Manager of Internal Audit)
The Committee is responsible for the following regarding the internal audit function:
• Confirm and assure the independence of the Manager of Internal Audit;
• Review and approve the annual audit work plan, and subsequent significant
changes as recommended by the Manager of Internal Audit;
• Review audit reports issued and, where required, recommend the acceptance,
amendment or rejection of the report recommendations;
• Review the adequacy of management responses to audit concerns in relation to
risks and costs involved;
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• Review reports from the Manager of Internal Audit on the status and implementation
of approved audit recommendations; and
Provide an open avenue of communication between the Manager of Internal Audit
and Committee, including the ability to meet in closed session, in the absence of
Municipal management, at Audit Committee meetings regarding matters deemed
allowable under the Municipal Act 2001, c 25.
Corporate Control Framework
The Committee is responsible for the following regarding the corporate control
framework function:
• Review and discuss with management their responsibility for:
o Reliability and integrity of financial and operating information and the processes
to identify, measure, classify and report such information,
o Internal control processes and systems to ensure compliance with policies,
plans, procedures, laws and regulations,
o Safeguarding Municipal assets, and as appropriate, verifying the existence of
those assets.
Obtain reasonable assurance on an annual basis, the information technology
systems are reliable and secure, and the systems of internal controls are adequately
designed and effectively implemented through discussions with and report from
management,
Review and discuss reports related to the investigation of significant non-
compliance, conflicts of interest, misconduct, or fraud and their resolution and
make recommendations to Council thereinunder the Municipal Act, 2001.
Risk Management
The Committee is responsible for the following regarding the risk management function:
• Review and discuss with management their responsibility for assessing and
managing the Municipality's exposure to risk,
• Review policies governing risk management,
• Review and discuss with management the Municipality's significant emerging risk
exposures.
Responsibilities and Obligations of Members
All Committee members shall abide by the Terms of Reference for the Committee as
approved by Council. Members must be willing to commit to the time required to
understand and evaluate the information provided, as well as be open-minded to
various opinions and perspectives.
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The Chair or a spokesperson appointed by the Committee may speak on behalf of the
Committee to Council or the public. Other members shall not act or speak on behalf of
the Committee without prior approval of the Committee.
The Committee or its members will not use petitions, resolutions, or position papers on
behalf of the Committee, unless specifically authorized by Council resolution.
The Chair may ask any Committee member to leave a meeting if, in the opinion of the
Chair, that person is being disruptive or disrespectful. The Committee also has the right
to censure members that, in the Committee's opinion, are misrepresenting the
Committee and may request Council to remove that person from the Committee.
Members who wish to resign shall notify the Chair in writing of their decision who, in turn
shall notify the Municipal Clerk in writing of the resignation. Council shall appoint new
members to the Committee to fill any vacancies as required.
Duty of Council
Council shall seek advice from the Committee on items within these terms of reference.
Council may assign other roles and responsibilities to the Committee; however, Council
must ensure that the Committee is still able to meet its legal responsibilities.
Committee Composition
The Committee shall be comprised of three members of Council each casting one vote
per member. Council shall appoint members to the Committee, one of which shall be
the Council liaison to the Finance Department. Where the Mayor is not appointed to the
Committee, he/she shall be an ex-officio member of the Committee.
It is important that Committee members have the following skills to effectively serve on
the Audit and Accountability Committee.
• A general understanding of the Municipality's major economic, operating and
financial risks;
• A broad awareness of the interrelationship of the Municipality's operations and its
financial reporting; and
• Understand the difference between the oversight function of the Committee and the
decision -making function of management;
Page 37 of 122
Committee Chair
The Council liaison to the Finance Department shall act as Chairperson for the
Committee. The Committee shall select Vice -Chair from among its membership.
The Chair provides leadership to the Committee, ensures that the Committee carries
out its mandate, and acts as the Primary liaison between the Committee and Staff. The
Chair shall set the agenda for each meeting in consultation with the staff liaison.
If the Chair is temporarily absent, the Vice -Chair will assume the position and
responsibilities for the Chair in the interim. If the position of Chair becomes vacant, the
Vice -Chair shall assume the responsibilities of the Chair until a new Chair can be
elected. If the Vice -Chair becomes vacant, the Chair may appoint a member of the
Committee as Interim Vice -Chair until a new Vice -Chair can be elected. Election, when
required, will be held at the next meeting of the Committee.
Length of Term
Membership aligns with the term of Council or until their successors are appointed, with
consideration given to the member's stated interest or desire to be on the committee.
Frequency of Meetings
The Committee will meet at least four times per year, with additional meetings at the call
of the Chairperson in order to properly discharge its responsibilities. Exceptions to this
may include:
• During a municipal election year.
• Where quorum is not reached
• When circumstances warrant special consideration
Committee meetings shall generally be held at in the Clarington Municipal
Administrative Centre or virtually online if deemed necessary or appropriate by the
Chair.
Quorum
A majority of voting members shall constitute a quorum. In the event that a quorum is
not met, the meeting may proceed but members cannot vote or make decisions.
Committee Resolutions
Recommendations and decisions reached by the Committee must be based on
consensus wherever possible. In the event that a consensus cannot be reached and
Page 38 of 122
there are different opinions on the issue, the Chair may call for a formal vote by show of
hands. Decisions will be carried by a simple majority of the voting members present.
Each member of the committee has one vote.
Recommendations are "carried" when supported by a majority. Only recommendations
as they appear in the adopted Minutes can be considered as officially representing the
position of the Committee.
uelegations at committee Meetings
Any person(s) wishing to appear before the Committee as a delegation must submit a
request to the Finance Department, advising of the topic or item they wish to speak. All
requests for delegations must be received at least one week before the meeting to
ensure the delegation is included in the agenda.
Any person wishing to address the Committee as a delegation, who has not previously
arranged to do so, may be granted permission to do so only by Committee resolution.
All delegations will be limited to 10 minutes.
Staff Resources, Minutes and Agendas
The Finance Department Administrative Assistant shall provide clerical and
administrative assistance to the Committee, as deemed appropriate by the Director of
Finance to ensure the proper functioning of the Committee. Specifically, the Finance
Department Administrative Assistant will provide the following resources to the
Committee:
• Preparing and forwarding meeting materials to members;
• Preparation of meeting minutes and Committee correspondence (including
assistance in drafting);
The Director of Finance and the Manager of Internal Audit will provide technical
assistance to the Committee. This will include the following resources to the
Committee.
• Professional advice on matters within the mandate of the Committee; and
• Assist the Committee in participating in events and activities related to its
mandate.
Staff resources are provided only to assist the Committee in undertaking their mandate.
Additional requests of staff resources shall be at the discretion of the Director of
Finance and within staff, time, and budget constraints.
Page 39 of 122
The minutes of each Committee meeting will be amended as necessary and approved
at the following meeting. The unapproved minutes will be included in the next regularly
scheduled Council meeting.
Committee agendas will be prepared by the Manager of Internal Audit, with input from
the Committee Chair.
If a Committee member is absent for three consecutive meetings, they have forfeited
their membership unless their absence is justifiable.
Conflict of Interest
All members of the Committee must abide by the Municipal Conflict of Interest Act.
These Terms of Reference will be reviewed by the Committee at the beginning of each
term of Council.
Last updated: July 14, 2020
7.2
Consolidated financial statements of
The Corporation of the
Municipality of Clarington
December 31, 2019
The Corporation of the Municipality of Clarington
December 31, 2019
Table of contents
Independent auditor's report...................................................................................... 1 - 2
Consolidated statement of financial position................................................................... 3
Consolidated statement of operations.............................................................................4
Consolidated statement of change in net financial assets ............................................... 5
Consolidated statement of cash flows............................................................................. 6
Notes to the consolidated financial statements........................................................7 - 28
Consolidated schedule of tangible capital assets — Schedule 1 .............................29 - 30
Consolidated schedule of segmented information — Schedule 2............................ 31 - 32
Page 42 of 122
0 GrantThornton
Independent auditor's report
To the Members of Council,
Inhabitants and Ratepayers of the Corporation of the Municipality of Clarington
Opinion
We have audited the consolidated financial statements of The Corporation of the Municipality of
Clarington (the "Municipality"), which comprise the consolidated statement of financial position as at
December 31, 2019, and the consolidated statements of operations, change in net financial assets
and cash flow for the year then ended, and notes to the consolidated financial statements, including a
summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly in all material
respects, the financial position of The Corporation of the Municipality of Clarington as at December 31,
2019, and its financial performance and its cash flows for the year then ended in accordance with
Canadian public sector accounting standards.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor's Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of the
Municipality in accordance with the ethical requirements that are relevant to our audit of the
consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Responsibilities of Management and Those Charged with Governance for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with Canadian public sector accounting standards, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Municipality's ability to continue as a going concern, disclosing, as applicable, matters related to a
going concern and using the going concern basis of accounting unless management either intends to
liquidate the Municipality or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Municipality's financial reporting
process.
Page 43 of 122
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to issue
an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing
standards will always detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Municipality's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Municipality's ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor's report to the related disclosures in the consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor's report. However, future events or conditions may
cause the Municipality to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
Markham, Canada
DATE, 2020
Chartered Professional Accountants
Licensed Public Accountants
Page 44 of 122
The Corporation of the Municipality of Clarington
Consolidated statement of financial position
As at December 31, 2019
2019
2018
Financial assets
Cash and cash equivalents
55,684,429
51,845,384
Investments (Note 4)
69,279,397
71,275,833
Accounts receivable
12,329,020
8,039,628
Taxes receivable (Note 5)
8,633,327
8,183,805
Inventories for resale
27,657
32,132
Land for resale
424,898
424,918
Promissory notes receivable (Note 6)
8,321,000
8,321,000
Investment in Elexicon / Veridian Corporation (Note 7)
18,563,427
19,059,094
Total financial assets
173,263,155
167,181,794
Liabilities
Accounts payable and accrued liabilities
8,243,375
8,128,542
Employee future benefits liabilities (Note 11)
8,638,138
8,660,527
Long-term liabilities (Note 12)
11,879,590
14,273,520
Deferred revenue - general
16,039,513
14,775,497
Deferred revenue - obligatory reserve funds (Note 8)
47,727,386
47,958,805
Total liabilities
92,528,002
93,796,891
Net financial assets
80,735,153
73,384,903
Non -financial assets
Tangible capital assets (Note 18) (Schedule 1)
467,499,849
452,151,792
Prepaid expenses
943,127
780,086
Inventory supplies
537,950
612,377
Total non -financial assets
468,980,926
453,544,255
Accumulated surplus (Note 19)
549,716,079
526,959,158
Contingencies (Note 14)
Contractual commitments (Note 15)
Subsequent events (Note 23)
Page 45 of 122
The Corporation of the Municipality of Clarington
Consolidated statement of operations
For the year ended December 31, 2019
2019
2019
2018
Budget
Actual
Actual
(Note 21)
Revenues
Taxation and user charges
Property taxation
61,404,737
61,553,425
58,791,091
Taxation from other governments
4,561,005
4,769,303
4,783,288
User charges
9,944,241
13,702,217
14,297,146
Grants
Government of Canada
25,500
647,219
348,138
Province of Ontario
134,481
455,498
252,161
Other
Deferred revenue earned
2,753,992
12,934,961
8,387,241
Investment income
771,550
3,451,856
3,189,226
Penalty and interest on taxes
1,200,000
1,417,469
1,274,793
Fines
398,000
571,782
471,984
Donations and contribution from others
51,127
2,743,224
1,552,559
Elexicon / Veridian Corporation
Equity share of net income
-
446,232
1,675,384
Contributed tangible capital assets
18,912,296
18,912,296
14,522,447
Other income
-
25,290
18,541
Loss on disposal of tangible capital assets
-
(2,442,330)
(2,153,379)
Total revenues
100,156,929
119,188,442
107,410,620
Expenses
General government
7,276,521
7,439,161
7,239,958
Protection to persons and property
18,912,941
18,854,337
18,300,507
Transportation services
32,328,682
32,491,413
30,097,197
Environmental services
4,333,241
4,413,890
3,533,019
Health services
354,020
383,447
397,761
Recreational and cultural services
26,503,843
26,259,737
25,413,224
Planning and development
5,233,355
6,559,536
5,332,652
Total expenses
94,942,603
96,401,521
90,314,318
Annual surplus
5,214,326
22,786,921
17,096,302
Accumulated surplus, beginning of year
526,929,158
526,929,158
509,832,856
Accumulated surplus, end of year
532,143,484
549,716,079
526,929,158
Page 46 of 122
The Corporation of the Municipality of Clarington
Consolidated statement of change in net financial assets
For the year ended December 31, 2019
2019 2019
Budget Actual
2018
Actual
Annual surplus
5,214,326
22,786,921
17,096,302
Amortization of tangible capital assets
19,948,880
20,655,339
20,277,060
Acquisition of tangible capital assets
(27,618,376)
(38,546,371)
(33,057,491)
Net book value of tangible capital assets
disposals/adjustments
-
2,542,975
2,228,199
(Increase) decrease in prepaid expenses
-
(163,041)
106,980
(Increase) decrease in inventory supplies
-
74,427
(311,749)
Increase (decrease) in net financial assets
(2,455,170)
7,350,250
6,339,301
Net financial assets, beginning of year 73,384,903 73,384,903 67,045,602
Net financial assets, end of year 70,929,733 80,735,153 73,384,903
Page 47 of 122
The Corporation of the Municipality of Clarington
Consolidated statement of cash flows
For the year ended December 31, 2019
2019
2018
Operating activities
Annual surplus
22,786,921
17,096,302
Non cash items
Amortization of tangible capital assets
20,655,339
20,277,060
Loss on disposal of tangible capital assets
2,442,330
2,153,379
Equity share of Elexicon / Veridian Corporation net income
(446,233)
(1,675,384)
Contributed tangible capital assets recorded in revenue
(18,912,296)
(14,522,447)
Change in non -cash operating items
Accounts receivable
(4,289,392)
338,020
Taxes receivable
(449,522)
(237,955)
Inventories for resale
4,475
12,368
Land for resale
20
-
Accounts payable and accrued liabilities
114,833
(2,769,495)
Employee future benefits liabilities
(22,389)
30,635
Deferred revenue - general
1,264,016
(3,842,426)
Deferred revenue - obligatory reserve funds
(231,419)
11,164,928
Prepaid expenses
(163,041)
106,980
Inventory supplies
74,427
(311,749)
22,828,069
27,820,216
Capital activities
Acquisition of tangible capital assets (net of
contributed tangible capital assets) (19,634,075) (18,535,044)
Proceeds on disposal of tangible capital assets 100,645 74,820
(19,533,430) (18,460,224)
Investing activities
Decrease (increase) in investments 1,996,436 (1,431,784)
Dividends received from Veridian Corporation 941,900 639,200
2,938,336 (792,584)
Financing activities
Repayment of long-term liabilities (2,393,930) (2,835,970)
(2,393,930) (2,835,970)
Net increase in cash and cash equivalents 3,839,045 5,731,438
Cash and cash equivalents, beginning of year 51,845,384 46,113,946
Cash and cash equivalents, end of year 55,684,429 51,845,384
Page 48 of 122
The Municipality of Clarington (the "Municipality") is a municipality in the Province of Ontario,
Canada. It conducts its operations guided by the provisions of provincial statues such as the
Municipal Act, the Municipal Affairs Act and related legislation.
1. Significant accounting policies
The consolidated financial statements of the Municipality are the representations of
management prepared in accordance with Canadian Public Sector Accounting Standards
("PSAS").
Significant accounting policies adopted are as follows:
(a) (i) Reporting entity
These consolidated financial statements reflect financial assets, liabilities,
operating revenues and expenses, and changes in investment in tangible capital
assets of the Municipality of Clarington. The reporting entity is comprised of all
organizations, local boards and committees controlled by the Municipality,
including the following:
- Board of Management for the
Historic Downtown
Bowmanville Business
Improvement Area
- Board of Management for the
Newcastle Central Business
District Improvement Area
- Board of Management for the Orono
Orono Central Business
District Improvement Area
- Clarington Public Library
Board
- Clarington Museums and
Archives
- Newcastle Arena Board
- Newcastle Community Hall Board
- Solina Hall Board
- Tyrone Community Hall Board
- Clarington Heritage Committee
- Bowmanville Santa Claus Parade
Committee
- Orono Cemetery Board*
All material inter -entity transactions and balances are eliminated on consolidation.
* As of June 10, 2019, the Municipality assumed operations of the Orono Cemetery
Board. As of the reporting date, the Municipality was working in conjunction with
the Bereavement Authority of Ontario to complete the transfer of the license to the
Municipality.
(ii) Investment in Veridian Corporation / Elexicon Corporation
On April 1, 2019, Veridian Corporation and Whitby Hydro Energy Corporation
merged, forming Elexicon Corporation. As a previous shareholder of Veridian
Corporation, the Municipality of Clarington, along with the City of Pickering, the
Town of Ajax, and the City of Belleville now own 68% of Elexicon Corporation.
The Town of Whitby owns the remaining 32% of Elexicon Corporation. The
Municipality of Clarington holds a 9.248% share of ownership. For the 2019
fiscal year, the Municipality's investment in Elexicon Corporation, Veridian
Corporation and its subsidiaries is accounted for on a modified equity basis,
consistent with generally accepted accounting principles as recommended by
Page 49 of 122
1. Significant accounting policies (continued)
(ii) Investment in Veridian Corporation / Elexicon Corporation (continued)
PSAS for investments in government business partnerships. Under the modified
equity basis of accounting, the business partnership's accounting principles are
not adjusted to conform to those of the Municipality and inter -organizational
transactions and balances are not eliminated. The Municipality recognizes its
equity interest in the annual income or loss of Elexicon Corporation and Veridian
Corporation in its consolidated statement of operations with a corresponding
increase or decrease in its investment asset account. Any dividends that the
Municipality may receive from Elexicon Corporation, Veridian Corporation and
other capital transactions will be reflected as adjustments in the investment asset
account.
(iii) Accounting for region and school board transactions
The taxation and other revenues, expenses, assets and liabilities with respect to
the operations of the school boards and the Regional Municipality of Durham are
not reflected in these consolidated financial statements.
(iv) Accounting for phase-in/capping provisions
Increases/decreases in property taxes levied as a result of the application of
phase-in/capping legislation are not reflected in the consolidated statement of
operations but are reported on the consolidated statement of financial position.
(v) Trust funds
Trust funds and their related operations administered by the Municipality are not
included in these consolidated financial statements but are reported separately
on the Trust Funds statement of operations and Trust Funds statement of
financial position.
(b) Basis of accounting
(i) Accrual basis of accounting
Revenues and expenses are reported on the accrual basis of accounting. The
accrual basis of accounting recognizes revenues in the period in which
transactions or events occurred that gave rise to the revenues; expenses are
recognized in the period the goods and services are acquired and a liability is
incurred, or transfers are due.
(ii) Cash and cash equivalents
Cash and cash equivalents are comprised of cash on hand, demand deposits
and bankers acceptances, all of which are highly liquid, subject to insignificant
risk of changes in value and have a short-term maturity of less than 90 days.
(iii) Investments
Portfolio investments are carried at cost, net of accumulated amortization on
premiums and discounts. Premiums and discounts are amortized on a straight-
line basis over the term to maturity. Interest income is recorded as it
accrues. When the value of any portfolio investment is impaired, the carrying
amount is adjusted to the estimated realizable amount and any adjustments are
included in investment income in the period the impairment is recognized.
Page 50 of 122
1. Significant accounting policies (continued)
(b) Basis of accounting (continued)
(iv) Non -financial assets
Non -financial assets are not available to discharge existing liabilities and are held
for use in the provision of services. They have useful lives extending beyond the
current year and are not intended for sale in the ordinary course of operations.
The change in non -financial assets during the year, together with the excess of
revenues over expenses, provides the changes in net financial assets for the
year.
(a) Tangible capital assets ("TCA")
Tangible capital assets are recorded at cost, which includes all amounts that
are directly attributable to acquisition, construction, development or
betterment of the asset. The cost, less residual value, of the tangible capital
assets are amortized on a straight-line basis over their estimated useful lives
as follows:
Land improvements
20-75 years
Buildings
5-75 years
Vehicles
7-20 years
Equipment
3-25 years
Linear road and related
7-75 years
Linear storm sewers
40-75 years
Amortization
The Municipality uses the straight-line method of amortization. For pooled
assets and networks such as roads and storm sewers, one half of the annual
amortization is charged in the year of acquisition or in-service date and in the
year of disposal. For individual assets, if acquired (or in-service) in the first
half of the year, the full year of the amortization is charged. If acquired (or in-
service) in the second half of the year, one half of the annual amortization is
charged. Similarly, in the year of disposal, if the asset is disposed of in the
first half of the year, one half of the amortization is charged but if disposed of
in the second half of the year the full annual amortization is charged. Assets
under construction are not amortized until the asset is available for
productive use, at which time they are capitalized.
Contribution of tangible capital assets
Tangible capital assets received as contributions are recorded at their fair
value at the date received/assumed and that fair value is also recorded as
revenue.
(b) Intangible assets
Intangible assets are not recognized in the consolidated financial statements.
Page 51 of 122
1. Significant accounting policies (continued)
(b) Basis of accounting (continued)
(iv) Non -financial assets (continued)
(c) Inventories
Inventories held for consumption are recorded at the lower of cost or
replacement cost.
(v) Reserves and reserve funds
Certain amounts, as approved by Council, are set aside in reserves and reserve
funds for future operating and capital purposes. Transfers to and/or from
reserves and reserve funds are an adjustment to the respective fund when
approved. Reserves and reserve funds form part of the Municipality's
accumulated surplus.
(vi) Deferred revenues
Government transfers, contributions and other amounts are received from third
parties pursuant to legislation, regulation or agreement and may only be used in
the conduct of certain programs, in the completion of specific work or for the
purchase of tangible capital assets. A requirement of the Public Sector
Accounting Board of the Chartered Professional Accountants of Canada is that
obligatory reserves be reported as deferred revenue. Obligatory reserves include
development charges, parkland dedication, building permits and gas tax funding.
In addition, certain user charges and fees are collected for which the related
services have yet to be performed. These are recorded under the classification
Deferred revenue - other. Revenue is recognized in the period when the related
expenses are incurred, services performed, or the tangible capital assets are
acquired.
(vii) Employee future benefits
The present value of the cost of providing employees with future benefits
programs is expensed as employees earn these entitlements through service.
The cost of the benefits earned by employees is actuarially determined using the
projected benefit method prorated on service and management's best estimate of
retirement ages of employees and expected health care and dental costs.
Actuarial gains or losses are amortized on a straight-line basis over the expected
average remaining service life of all employees covered.
(viii) Contaminated sites
Contaminated sites are the result of contamination being introduced in air, soil,
water or sediment of a chemical, organic, or radioactive material or live organism
that exceed an environmental standard. A liability for remediation of
contaminated sites is recognized, net of any expected recoveries, when all of the
following criteria are met: a) an environmental standard exists; b) contamination
exceeds the environmental standard; c) the organization is directly responsible or
accepts responsibility for the liability; d) future economic benefits will be given up;
and e) a reasonable estimate of the liability can be made. Changes in this
estimate are recorded in the Municipality's statement of operations. As of
December 31, 2019, there was no liability recorded on the statement.
Page 52 of 122
1. Significant accounting policies (continued)
(b) Basis of accounting (continued)
(ix) Revenue Recognition
Taxation
Property tax billings are prepared by the Municipality based on assessment rolls
issued by the Municipal Property Assessment Corporation ("MPAC"). Tax rates
are established annually by Council, incorporating amounts to be raised for local
services and amounts the Municipality is required to collect on behalf of the
Regional Municipality of Durham and the Province of Ontario in respect of
education taxes. Taxation revenues are recorded at the time tax billings are
issued.
A normal part of the assessment process is the issuance of supplementary
assessment rolls which provide updated information with respect to changes in
property assessment. Once a supplementary roll is received, the Municipality
determines the taxes applicable and renders supplementary tax billings.
Assessments of the related property taxes are subject to appeal. Any
supplementary billing adjustments made necessary by the determination of such
changes will be recognized in the fiscal year they are determined, and the effect
shared with the Region of Durham and school boards, as appropriate.
Government transfers
Government transfers are recognized in the period in which the events giving rise
to the transfer occur, providing the transfers are authorized, any eligibility criteria
are met and reasonable estimates of the amounts can be made.
Government transfers and developer contributions -in -kind related to capital
acquisitions are required to be recognized as revenue in the consolidated
financial statements in the period in which the tangible capital assets are
acquired.
User fees and service charges
User charges are recognized when the services are performed, or goods are
delivered and there is reasonable assurance of collection.
Other
Other revenue is recorded when it is earned and collection is reasonably
assured.
Investment income
Investment income earned on operating surplus funds and reserve funds (other
than obligatory reserve funds) are recorded as revenue in the period earned.
Investment income earned on obligatory reserve funds are recorded directly to
each respective fund balance and forms part of the deferred revenue — obligatory
reserve funds balance.
(x) Inventory for resale
Inventory for resale is valued at the lower of cost or net realizable value on an
average cost basis.
Page 53 of 122
1.
K
3
Significant accounting policies (continued)
(b) Basis of accounting (continued)
(xi) Use of estimates
Since precise determination of many assets and liabilities is dependent upon
future events, the preparation of periodic consolidated financial statements
necessarily involves the use of estimates and approximations. These have been
made using careful judgment. Actual results could differ from these estimates.
Trust funds
Trust funds administered by the Municipality amounting to $1,915,328 (2018 — $1,832,849)
have not been included in the consolidated statement of financial position nor have their
financial activities been included in the consolidated statement of operations.
Operations of school boards and The Regional Municipality of Durham
Further to Note 1(a) (iii), requisitions were made by the Regional Municipality of Durham
and School Boards requiring the Municipality of Clarington to collect property taxes and
payments in lieu of property taxes on their behalf. The amounts levied and remitted are
summarized below:
Regional
School Municipality
Boards of Durham
2019
Property taxes 32,367,970 89,346,215
Taxation from other governments 93,770 2,979,181
Total 32,461,740 92,325,396
2018
Property taxes 31,383,540 86,013,583
Taxation from other governments 97,687 3,029,478
Total 31,481,227 89,043,061
Page 54 of 122
4. Investments
5.
Total investments of $69,279,397 (2018 - $71,275,833) reported on the consolidated
statement of financial position at cost plus accrued interest, have a market value of
$72,701,584 (2018 - $74,182,523) at the end of the year. The investments consist of
investments pursuant to provisions of the Municipality's investment policy and comprise
government bonds and guaranteed investment certificates (GICs) issued by various
financial institutions. It is the Municipality's intention to hold these investments until
maturity.
2019 Market 2018 Market
2019 Cost Value 2018 Cost Value
GICs 51,895,933 54,705,469 61,138,905 63,752,135
Bonds
12,690,866
12,831,045
5,533,614
5,551,905
Pooled Funds
Equity
500,000
1,199,929
500,000
1,014,286
Pooled Funds
Bonds
4,192,598
3,965,141
4,103,314
3,864,197
Total
69,279,397
72,701,584
71,275,833
74,182,523
The Municipality holds investments with a maturity of less than 90 days, in a High Interest
Savings Account. This value is reported within cash and cash equivalents, due to the
highly liquid nature of these investments. Total investments, with a maturity of less than 90
days, have a value of $23,580,608 (2018 - $30,829,637) reported on the consolidated
statement of financial position.
Taxes receivable
The balance in taxes receivable, including penalties and interest, is comprised of the
following:
2019 2018
Current year 6,992,835 6,227,011
Arrears previous years 2,390,492 2,438,220
9,383,327 8,665,231
Allowance for uncollectible taxes (750,000) (481,426)
8,633,327 8,183,805
Page 55 of 122
6. Promissory notes receivable
2019 2018
Promissory note receivable from Veridian
Corporation maturing December 31, 2019 or the
closing date and bearing interest at the greater of
6% or the Ontario Energy Board deemed long-
term debt rate on an annual basis to maturity,
transferred on April 1 to a promissory note
receivable from Elexicon Corporation due on
demand and bearing interest at the Ontario
Energy Board deemed long-term debt rate on an
annual basis to maturity (4.13% at Dec 31, 2019). 2,355,000 2,355,000
Promissory note receivable from Veridian
Connection Inc. maturing November 1, 2039 and
bearing interest at 4.47% from January 1, 2015 to
December 31, 2019 and then the Ontario Energy
Board deemed long-term debt rate for each
successive five year period thereafter, transferred
on April 1 to a promissory note receivable from
Elexicon Energy Inc. maturing November 1, 2039
and bearing interest at the Ontario Energy Board
deemed long-term debt rate on an annual basis to 5,966,000 5,966,000
maturity (4.13% at Dec 31, 2019).
8,321,000 8,321,000
Interest revenue earned from these notes receivable totaled $359,738 (2018 - $407,980).
Interest revenue earned from January 1 to March 31 on the Veridian notes totalled
$101,995. Interest revenue earned from April 1 to December 31 on the Elexicon notes
totalled $257,743. The Municipality has waived its right to demand repayment of any
portion of the principal of the promissory notes payable before the date of January 1, 2021.
7. Investment in Veridian Corporation / Elexicon Corporation
Veridian Corporation was a government business partnership which was jointly owned by
the City of Pickering, Town of Ajax, Municipality of Clarington and the City of Belleville.
The Municipality of Clarington owned 1,360 of the outstanding common shares of Veridian
Corporation. This represented a 13.6% share of ownership.
On April 1, 2019, Veridian Corporation and Whitby Hydro Energy Corporation merged,
forming Elexicon Corporation. As a previous shareholder of Veridian Corporation, the
Municipality of Clarington, along with the City of Pickering, the Town of Ajax, and the City of
Belleville now own 68% of Elexicon Corporation. The Town of Whitby owns the remaining
32% of Elexicon Corporation. The Municipality of Clarington holds a 9.248% share of
ownership.
Page 56 of 122
7. Investment in Veridian Corporation / Elexicon Corporation (continued)
(a) Veridian Corporation
The Municipality is accounting for this investment using a modified equity basis in these
consolidated financial statements. The financial impact of the amalgamation to the
Municipality of Clarington's investment and equity are reported below.
The following table provides condensed supplementary financial information of Veridian
Corporation and its subsidiaries for the year ended March 31, 2019 and December 31,
2018:
2019 — as at 2018 — as at
March 31 December 31
Financial position
Assets
Current
65,333,000
70,908,000
Capital and intangibles
296,565,000
291,057,000
Other
147,000
166,000
Regulatory balances
7,231,000
7,217,000
Total assets and regulatory balances
369,276,000
369,348,000
Liabilities
Current
155,284,000
152,979,000
Long-term debt
36,909,000
37,132,000
Other
36,569,000
33,310,000
Total liabilities
228,762,000
223,421,000
Shareholders' Equity
Share capital
67,260,000
67,260,000
Contributed capital
25,000
25,000
Retained earnings
67,960,000
70,484,000
Regulatory balances
5,269,000
8,158,000
Total shareholders' equity and regulatory balances
140,514,000
145,927,000
Total liabilities, equity and regulatory balances 369,276,000 369,348,000
Financial activities
Revenues 79,702,000 320,797,000
Other income 657,000 3,555,000
Expenses (84,348,000) (318,245,000)
Net movements in regulatory balances, net of tax 2,640,000 6,212,000
Net income (loss) for the year (1,349,000) 12,319,000
Page 57 of 122
7. Investment in Veridian Corporation / Elexicon Corporation (continued)
(b) Elexicon Corporation
The Municipality is accounting for this investment using a modified equity basis in these
consolidated financial statements. The financial impact of the amalgamation to the
Municipality of Clarington's investment and equity are reported below.
The following table provides condensed supplementary financial information of the
Elexicon Corporation and its subsidiaries for the period of April 1 to December 31:
2019 —April 1 to
December 31
Financial position
Assets
Current 84,933,000
Capital and intangibles 506,254,000
Other 256,000
Regulatory balances 15,145,000
Total assets and regulatory balances 606,588,000
Liabilities
Current
87,413,000
Long-term debt
180,360,000
Other
91,408,000
Total liabilities
359,181,000
Shareholders' Equity
Share capital
97,692,000
Contributed capital
25,000
Retained earnings
147,082,000
Regulatory balances
2,608,000
Total shareholders' equity and regulatory balances
247,407,000
Total liabilities, equity and regulatory balances 606,588,000
Financial activities
Revenues 364,204,000
Other income 1,227,000
Expenses (367,302,000)
Net movements in regulatory balances, net of tax 8,680,000
Net income for the year 6,809,000
Page 58 of 122
7. Investment in Veridian Corporation / Elexicon Corporation (continued)
(c) Municipality's equity is represented by:
2019 2018
Promissory notes receivable (Note 6) 8,321,000 8,321,000
Initial investment in shares of the Corporation 10,146,495 10,146,495
Accumulated net income 19,051,053 18,604,820
Net increase in value of investment 400,126 400,126
Accumulated dividends received (11,034,247) (10,092,347)
Total equity 26,884,427 27,380,094
Municipality of Clarington's investment represented by:
Investment in Corporation 18,563,427 19,059,094
Promissory notes receivable 8,321,000 8,321,000
26,884,427 27,380,094
(d) Contingencies and guarantees of Elexicon Corporation (the "Corporation") as disclosed
in their financial statements are as follows:
(i) Insurance claims
The Corporation is a member of the Municipal Electric Association Reciprocal
Insurance Exchange ("MEARIE"), which was created on January 1, 1987. A
reciprocal insurance exchange may be defined as a group of persons formed for
the purpose of exchanging reciprocal contracts of indemnity or inter -insurance
with each other. MEARIE provides general liability insurance to member electric
utilities. MEARIE also provides vehicle and property insurance to the
Corporation.
Insurance premiums charged to each member electric utility consist of a levy per
$1,000 of service revenue subject to a credit or surcharge based on each electric
utility's claims experience. The maximum coverage is $30,000,000 per
occurrence for liability insurance, $21,000,000 for vehicle insurance, and
$164,885,000 for property insurance; plus $10,000,000 excess coverage on top
of the regular liability and vehicle coverage.
(ii) Contractual obligation - Hydro One Networks Inc.
The Corporation's subsidiary, Elexicon Energy Inc. (EEI), is party to a connection
and cost recovery agreement with Hydro One related to the construction by
Hydro One of a transformer station designated to meet EEI's anticipated
electricity load growth. Construction of the project was completed during 2007
and EEI connected to the transformer station during 2008.
To the extent that the cost of the project is not recoverable from future
transformation connection revenues, EEI is obligated to pay a capital contribution
equal to the difference between these revenues and the construction costs
allocated to EEI. The construction costs allocated to EEI for the project are
$19,950,000.
Page 59 of 122
7. Investment in Elexicon Corporation (continued)
(ii) Contractual obligation - Hydro One Networks Inc. (continued)
Hydro One has performed a true -up based on actual load at the end of the tenth
anniversary of the in-service date and the Corporation has paid $637,000 to
Hydro One and recognized the same as an intangible asset. The Corporation
has also recorded a current liability and a corresponding intangible asset for
$1,533,000 as at December 31, 2019, based on management's best estimate of
the future transformation connection revenues shortfall. Hydro One is expected
to perform another true -up based on actual load at the end of the fifteenth
anniversary of the in-service date.
(e) Lease commitments - Elexicon Corporation
Future minimum lease payment obligations under operating leases are as follows:
;1a
2020
475,000
2021
363,000
2022
229,000
2023
179,000
2024
124,000
Thereafter
210,000
1,580,000
Page 60 of 122
8. Deferred revenue - obligatory reserve funds
The continuity of "deferred revenue - obligatory reserve funds" of the Municipality is
summarized as follows:
2019 2018
Balance, beginning of year
47,958,805
36,793,877
Contributions
Contributions from developers
3,813,009
13,803,200
Investment income
1,493,974
1,470,572
Federal Gas Tax
5,534,417
2,692,935
Provincial infrastructure
1,916,537
1,585,464
12,757,937
19,552,171
Utilization:
Transfers to operating
2,410,387
2,056,418
Acquisition of TCA - construction
10,578,969
6,330,825
12,989,356
8,387,243
Change in deferred revenue during the year
(231,419)
11,164,928
Balance, end of year
47,727,386
47,958,805
Balance, end of year - analyzed as follows:
Parkland cash -in -lieu
3,170,857
2,640,373
Federal gas tax
2,252,629
327,460
Building code act
2,607,173
3,612,814
Provincial infrastructure
1,473,168
1,016,387
Development charges (Note 9)
38,223,559
40,361,771
Total deferred revenue — obligatory reserve funds
47,727,386
47,958,805
9. Continuity of development charges reserve funds
2019 2018
Balance at the beginning of the year 40,361,771 31,141,206
Development charges collections 3,361,490 13,431,649
Investment income 1,238,551 1,286,879
Tangible capital assets acquisitions and construction (4,427,799) (2,530,563)
Operating expenses (2,310,454) (2,967,400)
Balance at the end of the year 38,223,559 40,361,771
Page 61 of 122
10. Pension agreements
The Municipality makes contributions to the Ontario Municipal Employees Retirement Fund
("OMERS"). OMERS is a multi -employer defined benefit pension plan which provides
pensions for employees of Ontario municipalities, local boards, public utilities and school
boards. The pension plan is financed by equal contributions from participating employers
and employees, and by the investment earnings of the fund. The most recent actuarial
valuation of the Plan was conducted at December 31, 2019. The results of this valuation
disclosed total actuarial liabilities of $107,687 million with respect to benefits accrued for
service with actuarial assets at that date of $104,290 million indicating an actuarial deficit of
$3,397 million. Because OMERS is a multi -employer plan, any Plan surpluses or deficits
are joint responsibility of Ontario municipal organizations and their employees. As a result,
the Municipality does not recognize any share of the Plan surplus or deficit.
The Municipality recognizes the expense related to this plan as contributions are made.
The contribution rate was 9% for wages up to $57,400 (2018 — 9%) and 14.6% for wages in
excess of CPP earning limit $57,400 (2018 — 14.6%). The amount contributed to OMERS
for 2019 was $3,323,567 (2018 - $3,233,344) for current services and is included as an
expense on the statement of operations.
11. Employee future benefits liabilities
(a) Accumulated sick leave entitlement
(i) Firefighters
The Municipality provides two sick leave accumulation plans for firefighters. Plan A
accumulates at the rate of one day per month of completed years of service to a
maximum of 182 days. These employees may become entitled to a cash payment
on retirement, early retirement, termination or death, at the rate of 50% of the
accumulated credit, to a maximum of one-half a year's salary. Plan B —
accumulates at the rate of one day per month once the employees complete five
years of service. The estimated liability at December 31, 2019 was $1,023,710
(2018 - $1,044,288).
(ii) Other
During the 1993 fiscal year, the Municipality negotiated an agreement with all
employees (except firefighters) to terminate the sick leave benefit plan which had
been in effect for many years. The Municipality agreed to pay to those employees
covered by the plan and who had at least five -years' service with the Municipality a
cash equivalent of 50% of sick leave days accumulated to July 1, 1993 to a
maximum of 120 days of salary. Remuneration for the buying out of sick days
identified will be available to the employee at any time up to the time that the
employee either leaves the Corporation or retires, at the rate of remuneration in
effect at July 31, 1993. The estimated liability at December 31, 2019 amounted to
$18,298 (2018 - $12,270).
(b) Post -employment benefits - other
The Municipality makes available to qualifying employees who retire before the age of
65 (firefighters - age 60) the opportunity of continuing their coverage for benefits such
as medical (extended health), dental, and life insurance benefits. Coverage ceases at
age 65.
Page 62 of 122
11. Employee future benefits liabilities (continued)
(b) Post -employment benefits — other (continued)
Dependent upon the eligibility, the cost of this coverage may be a shared responsibility
between the Municipality and the retired employees.
An actuarial valuation was performed as at December 31, 2019 based on data as at
the valuation date and plan provisions. The accrued benefit obligation and net benefit
costs (i.e. the expense) for the 2019 fiscal year end was determined by this valuation.
The significant actuarial assumptions employed for the valuation are as follows:
(i) Discount rate will be 3.20% per annum.
(ii) Future inflation rates will be 2.00%.
(iii) Dental cost trend rates will increase to 3.00% in fiscal 2019 and remain stable
at that level until 2024.
(iv) Extended health care trend rates will decrease to 5.37% in fiscal 2019 and
remain stable at that level until 2024.
(c) Information about the Municipality's employee future benefits liabilities is as follows:
2019 2018
Accrued benefit obligation
Balance, beginning of year
7,321,218
6,670,528
Employer current service cost
414,861
363,071
Interest cost
236,833
272,247
Benefits paid
(626,106)
(515,832)
Actuarial loss
2,551,283
531,204
Balance, end of year
9,898,089
7,321,218
Unamortized net actuarial gains (losses)
(1,259,951)
1,339,309
Employee future benefits liabilities, end of year
8,638,138
8,660,527
Page 63 of 122
12. Long-term liabilities
The net long term liabilities consist of several debentures that mature in the years 2021 to
2032.
(a) At the end of the year, the outstanding principal amount of this liability is $11,879,590
(2018 - $14,273,520).
Regional
Maturity date
Interest rate
By-law #
2019
2018
Note (i)
July 12, 2021
5.12
52-2006
201,115
294,300
August 21, 2022
4.65 to 4.75
07-2007
3,500,000
5,083,000
July 2, 2024
2.25 to 3.35
38-2014
755,000
896,000
July 2, 2029
2.25 to 3.80
38-2014
4,573,600
4,958,600
October 17, 2031
1.32 to 2.80
48-2016
811,000
871,000
April 13, 2032
1.90 to 3.30
56-2017
893,002
950,705
April 13, 2032
1.90 to 3.30
56-2017
1,145,873
1,219,915
11, 879, 590
14,273,520
Note (i) Interest rates gradually increase to the upper limits noted in the table.
(b) Of the municipal debt reported in (a) of this note, principal payments are payable from
general municipal revenues follows:
2020
2,334,033
2021
1,858,842
2022
1,775,923
2023
797,103
2024
818,737
Thereafter
4,294,952
11,879,590
(c) The annual principal and interest payments required to service these liabilities are
within the annual debt repayment limit prescribed by the Ministry of Municipal Affairs
and Housing.
(d) Total interest expense related to the net long-term liabilities amounted to $580,706
(2018 - $561,988) and is reported on the consolidated statement of operations.
13. Internal loans
As a means of funding various capital acquisitions, funds are borrowed from the Municipal
Capital Reserve Fund. These funds are secured by promissory notes with interest rates
ranging from 2.20% to 3.30% and payment terms of 15 years. The financing arrangements
and ultimate repayment are approved by Council through the budget process.
Page 64 of 122
13. Internal loans (continued)
(a) The following is a summary of the individual loans:
Major Parking Lot Rehabilitation 1,659,472
LED Street lighting Conversion 2,466,528
4,126,000
(b) Of the internal loans reported in (a) of this note, principal payments are as follows:
�
�Ja
2020
245,000
2021
250,000
2022
257,000
2023
263,000
2024
271,000
Thereafter
2,840,000
4,126,000
14. Contingencies
Various legal actions and claims have been initiated by and against the Municipality, the
outcomes of which cannot be determined at the time of reporting. Accordingly, no
provision has been made in these consolidated financial statements for any liability which
may result. Should any gain or loss occur as a result of the above legal actions the
Municipality will account for the gain/loss when it is likely that such a gain/loss will occur,
and the amount is measurable.
15. Contractual commitments
During the year the Municipality had work done on several major projects with contract
values totaling approximately $49,923,822 (2018 - $35,170,058). These contracts relate to
the construction and expansion of certain permanent facilities. As at December 31, 2019,
$5,313,275 (2018 - $5,512,926) relating to these contracts had not been expended.
16. Related party transactions and balances - Veridian Corporation / Elexicon
Corporation
2019
2018
Transactions
Dividends received
941,900
639,200
Interest earned on promissory notes
359,738
407,980
Property taxes
33,728
34,686
Energy and services purchases
764,974
975,147
Balances
Promissory notes receivable
8,321,000
8,321,000
Accounts payable and accrued liabilities
57,426
80,425
Page 65 of 122
17. Guarantees
In the normal course of business, the Municipality enters into agreements which contain
guarantees. The Municipality's primary guarantees are as follows:
(a) The Municipality has provided indemnities under lease agreements for the use of
various facilities or land. Under the terms of these agreements the Municipality agrees
to indemnify the counterparties for various items including, but not limited to, all
liabilities, losses, suits, and damages arising during, on or after the term of the
agreement. The maximum amount of any potential future payment cannot be
reasonably estimated.
(b) The Municipality indemnifies employees and elected officials for various items
including, but not limited to, all costs to settle suits or actions due to association with
the Municipality, subject to certain restrictions. The Municipality has purchased liability
insurance to mitigate the cost of any potential future suits or actions. The term of the
indemnification is not explicitly defined but is limited to the period over which the
indemnified party served as an employee or elected official of the Municipality. The
maximum amount of any potential future payment cannot be reasonably estimated.
(c) The Municipality has entered into agreements that may include indemnities in favour of
third parties, such as purchase and sale agreements, confidentiality agreements,
engagement letters with advisors and consultants, outsourcing agreements, leasing
contracts, information technology agreements and service agreements. These
indemnification agreements may require the Municipality to compensate counterparties
for losses incurred by the counterparties as a result of breaches in representation and
regulations or as a result of litigation claims or statutory sanctions that may be suffered
by the counterparty as a consequence of the transaction. The terms of these
indemnities are not explicitly defined, and the maximum amount of any potential
reimbursement cannot be reasonably estimated.
The nature of these indemnification agreements prevents the Municipality from making a
reasonable estimate of the maximum exposure due to the difficulties in assessing the
amount of liability which stems from the unpredictability of future events and the unlimited
coverage offered to counterparties. Historically, the Municipality has not made any
significant payments under such or similar indemnification agreements and therefore no
amount has been accrued in these consolidated financial statements with respect to these
agreements.
18. Tangible capital assets
The continuity of the historical cost and accumulated amortization for various categories of
tangible capital assets can be found in Schedule 1.
Further information relating to tangible capital assets is as follows:
(a) Contributed tangible capital assets
The Municipality of Clarington records all tangible assets contributed by an
external party at fair value on the earlier of the date received or of the transfer of
risk and responsibility. Typical examples are roadways, parks, land and storm
sewers installed by a developer as part of a subdivision agreement. For
subdivision assets, the recorded date is considered to be the date of acceptance
Page 66 of 122
18. Tangible capital assets (continued)
(a) Contributed tangible capital assets (continued)
with the exclusion of streetlights and storm sewers with the recorded date as the
date of completion. In 2019, there were contributed assets of $18,912,296 (2018 -
$14,522,447).
(b) Works of Art and Historical Treasures
The Municipality has one historical collection. The Clarington Museums and
Archives collection is currently insured for $350,000. Also included in historical
treasures are the cenotaphs located in Bowmanville, Newcastle, Orono and
Newtonville. Due to the rural history, there are several abandoned cemeteries
located throughout the Municipality. The land is included in the Land asset
account; however, all associated physical items are considered a historical
treasure. This includes historical signs and cairns, or concrete structures built for
old headstones.
Page 67 of 122
19. Accumulated surplus
Accumulated surplus is comprised of the following:
Invested in tangible capital assets
General surplus
Capital surplus
Inventory - surplus land
Long-term liabilities to be recovered from future
revenue
Unfunded employee benefits and post -employment
liabilities
Reserves set aside for specific purposes by Council:
Acquisition of capital assets
Legal/consulting issues
Election expenses
Fire prevention
Burketon park improvements
Samuel Wilmot nature area
Clarington Heritage Committee Board
2019 2018
467,499,849 452,151,792
2,784,428 4,236,776
18,429,199 16, 247, 518
424,898 424,918
(11,879,590) (14,273,520)
(3,053,553)
3,788,124
1,173,485
147,338
304,552
7,569
492
6,981
(3,572,535)
3,668,929
1,296,357
22,338
69,253
7,569
49
7,946
Reserve funds set aside for specific purposes by
Council:
General municipal purposes
5,989,031
5,090,356
Rate stabilization
6,782,242
5,443,762
Strategic capital
10,447,856
10,080,693
Recreation programs and facilities
443,886
589,834
Debenture repayment
445,810
269,907
Industrial development
510,612
522,742
Other cultural
119,367
110,324
Acquisition of capital assets
7,820,127
7,427,244
Newcastle Waterfront study
3,803
204,537
Municipal capital works
4,730,824
3,515,048
Other capital - unspecified
980,319
968,171
Road contributions
3,872,058
3,981,937
Westside Bridge/Bowmanville Marsh
(2,019)
8,532
Port Granby LLRW
186,648
181,849
Community Improvement Plan
124,154
111,207
Business Improvement Areas
165,154
202,714
Hampton Union Cemetery
103,385
104,340
Community Emergency Management
474,623
348,020
Equity in Elexicon / Veridian Corporation
26,884,427
27,380,094
Reserve funds Clarington Museum and Archives
-
100,457
Accumulated surplus 549,716,079 526,929,158
Page 68 of 122
20. Segmented information
The Municipality provides a wide range of services to its residents. Distinguishable
functional segments have been separately reported on Schedule 2. For each segment,
revenues and expenses represent amounts that are directly attributable to each segment.
Tax revenues are reported as part of general government.
The nature of the segments and the activities they encompass are as follows:
(a) General government
General government is comprised of all departments that support the corporate
governance, management and program support for the Municipality.
(b) Protection to persons and property
Protection to persons and property is comprised of Emergency Services, Municipal Law
Enforcement, Animal Services and Building inspection / enforcement services.
Emergency Services includes responsibility for emergency management, fire prevention
and public education, fire suppression, communication, and training.
(c) Transportation services
Transportation services includes services provided by the Engineering services and
Operations departments. The primary responsibilities include the inspection, planning and
maintenance of the roads, bridges, sidewalks, streetlights, roadsides, winter snow
clearing, subdivision planning, traffic engineering, development and municipal servicing
reviews. Other services include fleet maintenance, parking and school crossing guards.
(d) Environmental services
Environmental services includes stormwater management, erosion control and resale of
waste diversion goods.
(e) Health services
Health services includes the maintenance and operation of the Municipality's active and
abandoned cemeteries and crematorium, cemetery records management and the sale of
cemetery plots, permits and headstones.
(f) Recreation and cultural services
Recreation and cultural services include the administration, operation and maintenance of
all recreational, aquatic, arena, community recreational facilities, parks and trails.
Clarington Libraries, Museums and other external cultural agencies are also included in
this segment.
(g) Planning and development
Planning and development includes the development of planning policies, urban design,
development approvals, heritage preservation, real estate services and geomatics. This
segment further includes business improvement areas and tourism activities.
Page 69 of 122
21. Budget amounts
The budget figures reflected in these consolidated statements are those approved by
Council on February 25, 2019. Budget figures have been translated to reflect Public Sector
Accounting Board standards (PSAS).
22. Comparative figures
Certain comparative figures have been reclassified to conform to the consolidated financial
statement presentation adopted in the current year.
23. Subsequent events
Since January 1, 2020, the spread of COVID-19 has severely impacted many local
economies around the globe. In many countries, including Canada, organizations and
businesses are being forced to cease or limit operations for long or indefinite periods of
time. Measures taken to contain the spread of the virus, including travel bans, quarantines,
social distancing, and closures of non -essential services have triggered significant
disruptions to organizations worldwide, resulting in an economic slowdown. Global stock
markets have also experienced great volatility and a significant weakening. Governments
and central banks have responded with monetary and fiscal interventions to stabilize
economic conditions.
The Municipality has determined that these events are non -adjusting subsequent events.
Accordingly, the financial position and results of operations as of and for the year ended
December 31, 2019 have not been adjusted to reflect their impact. The duration and impact
of the COVID-19 pandemic, as well as the effectiveness of government and central bank
responses, remains unclear at this time. It is not possible to reliably estimate the duration
and severity of these consequences, as well as their impact on the financial position and
results of the Municipality for future periods.
Subsequent to December 31, 2019, the Clarington Museum and Archives merged with the
Clarington Public Library to become the Clarington Public Library, Museum and Archives.
As both entities are consolidated with the Municipality, there is no expected financial
reporting impact.
Page 70 of 122
The Corporation of the Municipality of Clarington
Consolidated schedule of tangible capital assets — Schedule 1
For the year ended December 31, 2019
2019
General
Infrastructure
Land
Linear Road
Linear Storm
Assets under
Land
Improvements
Buildings
Vehicles
Equipment
Land
& Related
Sewers
Buildings
Vehicles
Equipment
construction
Total
$
$
$
$
$
$
$
$
$
$
$
$
$
Cost
Balance, beginning of year
70,601,885
33,653,769
106,281,872
9,802,323
13,703,409
3,042,876
395,270,886
90,583,364
2,360,968
11,417,048
32,524
15,149,857
751,900,781
Add: additions during the year
-
6,297,135
1,635,615
-
1,113,209
2,964,474
17,680,939
5,526,988
-
2,949,328
35,653
11,186,297
49,389,638
Less: disposals during the year
(354,768)
(405,937)
(481,158)
(148,525)
(726,424)
-
(7,310,641)
(22,641)
-
(422,323)
(5,672)
(10,843,267)
(20,721,356)
Balance, end transfers of year
70,247,117
39,544,967
107,436,329
9,653,798
14,090,194
6,007,350
405,641,184
96,087,711
2,360,968
13,944,053
62,505
15,492,887
780,569,063
Accumulated amortization
Balance, beginning of year
- 13,744,636
47,131,979
6,040,673
7,703,205
- 197,073,396
18,816,611 1,467,342
7,746,863
24,283
- 299,748,988
Add: amortization during the year
- 1,115,658
3,150,331
563,658
1,262,285
- 12,331,344
1,280,284 84,785
860,840
6,154
- 20,655,339
Less: accumulated amortization
- (405,937)
(318,119)
(148,525)
(720,567)
- (5,308,883)
(5,087) -
(422,323)
(5,672)
- (7,335,113)
on disposals
Balance, end of year
- 14,454,357
49,964,191
6,455,806
8,244,923
- 204,095,857
20,091,808 1,552,127
8,185,380
24,765
- 313,069,214
Net book value of tangible
capital assets 70,247,117 25,090,610 57,472,138 3,197,992 5,845,271 6,007,350 201,545,327 75,995,903 808,841 5,758,673 37,740 15,492,887 467,499,849
Page 71 of 122
The Corporation of the Municipality of Clarington
Consolidated schedule of tangible capital assets — Schedule 1
For the year ended December 31, 2019
2018
General
Infrastructure
Land
Linear Road
Linear Storm
Assets under
Land
Improvements
Buildings
Vehicles
Equipment
Land
& Related
Sewers
Buildings
Vehicles
Equipment
construction
Total
$
$
$
$
$
$
$
$
$
$
$
$
$
Cost
Balance, beginning of year
66,296,291
31,822,986
106,915,111
9,722,196
12,161,894
3,042,876
391,551,977
81,385,588
2,394,965
11,261,174
32,525
11,940,406
728,527,989
Add: additions during the year
5,315,594
2,915,196
754,573
268,294
2,462,229
-
7,790,041
12,023,492
-
679,012
--
13,200,394
45,408,826
Less: disposals during the year
(1,010,000)
(1,084,413)
(1,387,812)
(188,167)
(920,715)
-
(4,071,132)
(2,825,717)
(33,997)
(523,138)
-
(9,990,942)
(22,036,033)
Balance, end transfers of year
70,601,885
33,653,769
106,281,872
9,802,323
13,703,409
3,042,876
395,270,886
90,583,364
2,360,968
11,417,048
32,525
15,149,857
751,900,781
Accumulated amortization
Balance, beginning of year
- 11,532,962
47,108,786
5,580,534
7,024,800
- 188,685,664
18,080,067 1,416,555
7,476,787 22,275
- 286,928,430
Add: amortization during the year
- 2,534,798
1,394,881
648,306
1,410,424
- 12,267,643
1,179,945 50,787
788,266 2,009
- 20,277,059
Less: accumulated amortization
- (323,124)
(1,371,688)
(188,167)
(732,019)
- (3,879,912)
(443,401) -
(518,190) -
- (7,456,500)
on disposals
Balance, end of year
- 13,744,636
47,131,979
6,040,673
7,703,205
- 197,073,396
18,816,611 1,467,342
7,746,863 24,284
- 299,748,989
Net book value of tangible
capital assets 70,601,885 19,909,133 59,149,893 3,761,650 6,000,204 3,042,876 198,197,490 71,766,753 893,626 3,670,185 8,241 15,149,857 452,151,792
Page 72 of 122
The Corporation of the Municipality of Clarington
Consolidated schedule of segmented information - Schedule 2
For the year ended December 31, 2019
2019
Protection
Recreation
General
to persons
Transportation
Environmental
Health
and cultural
Planning and
Government
and property
services
services
services
services
development
Total
Operating revenue
Grants
221,761
35,445
63,210
378,340
-
386,886
17,075
1,102,717
Tax revenues
66,322,728
-
-
-
-
-
-
66,322,728
Other revenues
6,557,509
3,884,835
12,062,046
121,022
376,840
7,388,389
2,460,060
32,850,701
Contributed tangible capital assets
-
-
9,166,467
7,015,346
-
2,730,483
-
18,912,296
Total operating revenue
73,101,998
3,920,280
21,291,723
7,514,708
376,840
10,505,758
2,477,135
119,188,442
Operating expenditures
Salaries and wages
4,462,653
15,726,287
9,253,874
673,744
213,946
13,949,715
3,749,494
48,029,713
Operating materials and supplies
658,332
1,031,245
7,104,345
1,731,811
159,194
5,492,040
446,116
16,623,083
Contracted services
655,415
1,075,972
2,603,287
425,437
1,508
1,745,771
2,359,086
8,866,476
Rent and financial expenses
636,105
-
-
-
171
43,496
1,977
681,749
External transfers to others
-
10,000
-
-
5,647
948,808
-
964,455
Amortization expense
992,731
1,010,833
13,238,184
1,582,898
2,981
3,824,849
2,863
20,655,339
Interest on long-term liabilities
33,925
-
291,723
-
-
255,058
-
580,706
Total operating expenditures
7,439,161
18,854,337
32,491,413
4,413,890
383,447
26,259,737
6,559,536
96,401,521
Annual surplus (deficit) 65,662,837 (14,934,057) (11,199,690) 3,100,818 (6,607) (15,753,979) (4,082,401) 22,786,921
Page 73 of 122
The Corporation of the Municipality of Clarington
Consolidated schedule of segmented information - Schedule 2
For the year ended December 31, 2019
2018
Protection Recreation
to persons and Planning
General and Transportation Environmental Health cultural and
Government property services services services services development Consolidated
Operating revenue
Grants
53,396 25,738
29,810
164,701
- 316,065
10,589 600,299
Tax revenues
63,574,379 -
-
-
- -
- 63,574,379
Other revenues
7,357,776 2,973,364
9,560,538
(572,018)
377,887 7,655,793
1,360,155 28,713,495
Contributed tangible capital assets
- -
1,004,703
8,543,686
- 4,974,058
- 14,522,447
Total operating revenue
70,985,551 2,999,102
10,595,051
8,136,369
377,887 12,945,916
1,370,744 107,410,620
Operating expenses
Salaries and wages
4,488,902
15,264,949
8,625,545
805,207
230,345
13,431,602
3,622,975
46,469,525
Operating materials and supplies
1,041,946
1,024,439
5,303,316
876,710
158,710
5,664,645
522,063
14,591,829
Contracted services
493,413
1,037,494
2,802,925
396,339
5,237
1,496,717
1,178,080
7,410,205
Rent and financial expenses
187,998
-
-
-
488
34,008
6,671
229,165
External transfers to others
-
10,000
-
-
-
726,322
-
736,322
Amortization expense
992,456
963,625
13,162,415
1,454,763
2,981
3,697,957
2,863
20,277,060
Interest on long-term liabilities
35,243
-
202,996
-
-
361,973
-
600,212
Total operating expenses
7,239,958
18,300,507
30,097,197
3,533,019
397,761
25,413,224
5,322,652
90,314,318
Annual surplus (deficit) 63,745,592 (15,301,405) (19,502,146) 4,603,350 (19,874) (12,467,308) (3,961,908) 17,096,302
Page 74 of 122
Financial statements of
The Corporation of the
Municipality of Clarington
Trust Funds
December 31, 2019
Page 75 of 122
The Corporation of the Municipality of Clarington
Trust Funds
December 31, 2019
Table of contents
Independent auditor's report........................................................................................1-2
Statement of financial position........................................................................................ 3
Statement of operations and accumulated surplus........................................................ 4
Notes to the financial statements................................................................................. 5-6
Page 76 of 122
0 GrantThornton
Independent auditor's report
To the Board Members, Members of Council,
Inhabitants and Ratepayers of the Municipality of Clarington
Opinion
We have audited the financial statements of the Corporation of the Municipality of Clarington Trust
Funds (the "Trust"), which comprise the statement of financial position as at December 31, 2019, and
the statements of operations, change in net debt and cash flow for the year then ended, and notes to
the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly in all material respects, the
financial position of Corporation of the Municipality of Clarington Trust Funds as at December 31,
2019, and its results of operations, its changes in its net debt, and its cash flows for the year then
ended in accordance with Canadian public sector accounting standards.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor's Responsibilities for the
Audit of the Financial Statements section of our report. We are independent of the Trust in accordance
with the ethical requirements that are relevant to our audit of the financial statements in Canada, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Responsibilities of Management and Those Charged with Governance for the Financial
Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with Canadian public sector accounting standards, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Trust's ability to
continue as a going concern, disclosing, as applicable, matters related to a going concern and using
the going concern basis of accounting unless management either intends to liquidate the Trust or to
cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Trust's financial reporting process.
Page 77 of 122
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with Canadian generally accepted auditing standards will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Trust's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Trust's ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's
report to the related disclosures in the financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditor's report. However, future events or conditions may cause the Trust to cease to
continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
Markham, Canada
DATE, 2020
Chartered Professional Accountants
Licensed Public Accountants
Page 78 of 122
The Corporation of the Municipality of Clarington Trust Funds
Statement of financial position
as at December 31, 2019
Due (to) Net Financial
from Assets and
Investments Interest revenue Municipality of Accumulated
Cash (Note 3) receivable Clarington Surplus
Advent Cemetery
78
918
22
(99)
919
Bondhead Cemetery
39,977
143,283
787
7,607
191,654
Bowmanville Cemetery
68,785
1,133,009
19,977
(36,610)
1,185,161
Hampton Cemetery
47,599
-
133
(3,416)
44,316
Lovekin Cemetery
934
10,000
46
(771)
10,209
Orono Cemetery
69,542
200,886
7,625
(5,488)
272,565
St. George's Cemetery
10,321
45,341
213
(9,895)
45,980
Trulls Cemetery
140
1,774
43
(155)
1,802
Vanderveer Legacy Trust
117
1,000
5
(121)
1,001
237,493
1,536,211
28,851
(48,948)
1,753,607
Estate of Irene Rinch/Newcastle Community Hall
-
133,537
6,144
9,698
149,379
Montague Trust
-
5,228
563
6,551
12,342
Total - 2019
237,493
1,674,976
35,558
(32,699)
1,915,328
Total - 2018 112,131 1,748,875 33,866 (62,023) 1,832,849
Subsequent event (Note 5)
Page 79 of 122
The Corporation of the Municipality of Clarington Trust Funds
Statement of operations and accumulated surplus
as at December 31, 2019
Advent Cemetery
Bondhead Cemetery
Bowmanville Cemetery
Hampton Cemetery
Lovekin Cemetery
Orono Cemetery
St. George's Cemetery
Trulls Cemetery
Vanderveer Legacy Trust
Estate of Irene Rinch
Montague Trust
Total - 2019
Total - 2018
Revenues
Care and
Balance
maintenance
Less:
Excess (shortfall)
Accumulated
beginning of
receipts Interest
Contribution
Investments
of revenues over
surplus, end
year
Note 4 earned Total
to cemeteries
in Capital
expenses
of ear
913
- 24 24
24
-
-
913
177,013
13,320 3,532 16,852
2,509
-
14,343
191,356
1,124,980
40,878 22,613 63,491
6,393
-
57,098
1,182,078
45,660
50 970 1,020
1,885
-
(865)
44,795
9,651
- 216 216
24
-
192
9,843
268,570
8,120 1,702 9,822
2,809
-
7,013
275,583
44,117
920 1,110 2,030
(101)
-
2,131
46,248
1,758
- 46 46
(23)
-
69
1,827
963
- 22 22
22
-
-
963
1,673,625
63,288 30,235 93,523
13,542
-
79,981
1,753,606
147,910
- 2,404 2,404
-
-
2,404
150,314
11,314
- 94 94
-
-
94
11,408
1,832,849
63,288 32,733 96,021
13,542
-
82,479
1,915,328
1,762,374
53,330 31,969 85,299
23,829
9,005
70,475
1,832,849
Page 80 of 122
Significant accounting policies
The financial statements of the Corporation of Municipality of Clarington Trust
Funds (the "Trust") are the representations of management prepared in accordance
with Canadian public sector accounting standards ("PSAS") and reflect the following
policies:
Basis of accounting
Revenues are recorded in the period in which the transactions or events occurred
that gave rise to the revenue.
Expenditures are recorded in the period the goods and services are acquired and a
liability is incurred. Refunds are reported in the period issued.
Investments
Investments are recorded at cost which approximates fair value.
Use of estimates
The preparation of the financial statements in conformity with Canadian public
sector accounting standards, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the
reported amount of revenues and expenditures during the year. Actual results
could differ from these estimates.
2. Statement of cash flows
A statement of cash flows has not been included in these financial statements as
the information is readily determinable from the financial statements presented.
3. Investments
The total investments held by the trust funds of $1,674,976 (2018 — $1,748,875)
reported on the statement of financial position at cost have a fair value of
$1,710,860 (2018 - $1,783,478) at the end of the year. The investments consist of
holdings pursuant to the provisions of the Municipality's investment policy and
comprise government bonds and guaranteed investment certificates (GICs) issued
by various financial institutions. It is the Municipality's intention to hold these
investments until maturity.
Page 81 of 122
4. Care and maintenance funds
The care and maintenance funds administered by the Municipality are funded by
the sale of cemetery plots. These funds are invested, and the interest earned is
used to perform care and maintenance to the Municipality's cemeteries. The
operations and investments of the Funds are undertaken by the Municipality in
accordance with the regulations of the Cemeteries Act.
5. Subsequent event
Since January 1, 2020, the spread of COVID-19 has severely impacted many local
economies around the globe. In many countries, including Canada, organizations
and businesses are being forced to cease or limit operations for long or indefinite
periods of time. Measures taken to contain the spread of the virus, including travel
bans, quarantines, social distancing, and closures of non -essential services have
triggered significant disruptions to organizations worldwide, resulting in an
economic slowdown. Global stock markets have also experienced great volatility
and a significant weakening. Governments and central banks have responded with
monetary and fiscal interventions to stabilize economic conditions.
The Trust has determined that these events are non -adjusting subsequent events.
Accordingly, the financial position and results of operations as of and for the year
ended December 31, 2019 have not been adjusted to reflect their impact. The
duration and impact of the COVID-19 pandemic, as well as the effectiveness of
government and central bank responses, remains unclear at this time. It is not
possible to reliably estimate the duration and severity of these consequences, as
well as their impact on the financial position and results of the Trust for future
periods.
Page 82 of 122
Financial statements of
The Corporation of the
Municipality of Clarington
Board of Management for
Historic Downtown Bowmanvi Ile
Business Improvement Area
December 31, 2019
Page 83 of 122
Table of contents
Independent auditor's report........................................................................................1-2
Statement of financial position........................................................................................ 3
Statement of operations................................................................................................. 4
Statement of change in net financial assets................................................................... 5
Notes to the financial statements................................................................................. 6-7
Page 84 of 122
0 GrantThornton
Independent auditor's report
To the Board Members, Members of Council,
Inhabitants and Ratepayers of the Corporation of the Municipality of Clarington
Qualified Opinion
We have audited the financial statements of The Corporation of the Municipality of Clarington Board of
Management for Historic Downtown Bowmanville Business Improvement Area ("Bowmanville BIA") which
comprise the statement of financial position as at December 31, 2019, and the statements of operations
and change in net financial assets for the year then ended, and notes to the financial statements, including
a summary of significant accounting policies.
In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion
paragraph, the financial statements present fairly, in all material respects, the financial position of The
Corporation of the Municipality of Clarington Board of Management for Historic Downtown Bowmanville
Business Improvement Area as at December 31, 2019, and the results of its operations and change in net
financial assets for the year then ended in accordance with Canadian public sector accounting standards.
Basis for Qualified Opinion
In common with many BIAs, the Bowmanville BIA derives revenues from fundraising activities and
donations, the completeness of which is not susceptible to satisfactory audit verification. Accordingly, our
verification of these revenues was limited to the amounts recorded in the records of Bowmanville BIA and
we were not able to determine whether any adjustments might be necessary to fundraising and donation
revenue, annual surplus and accumulated surplus for the years ended December 31, 2019 and December
31, 2018.
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of
the Financial Statements section of our report. We are independent of the Organization in accordance with
the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with Canadian public sector accounting standards, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Bowmanville BIA's
ability to continue as a going concern, disclosing, as applicable, matters related to a going concern and
using the going concern basis of accounting unless management either intends to liquidate the
Bowmanville BIA or to cease operations, or has no realistic alternative but to do so.
Page 85 of 122
Those charged with governance are responsible for overseeing the Bowmanville BIA's financial reporting
process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor's report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with Canadian generally accepted auditing standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Bowmanville BIA's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Bowmanville BIA's ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor's report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor's report. However, future events or conditions may cause the Bowmanville BIA
to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in
a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
Markham, Canada
July XX, 2020
Chartered Professional Accountants
Licensed Public Accountants
Page 86 of 122
The Corporation of the Municipality of Clarington
Board of Management for Historic Downtown
Bowmanville Business Improvement Area
Statement of financial position
as at December 31
2019
2018
Financial assets
Cash and cash equivalents
24,484
15,275
Accounts receivable
-
140
HST receivable
8,250
-
Total financial assets
32,734
15,415
Liabilities
Accounts payable
4,592
25
Total liabilities
4,592
25
Net financial assets
28,142
15,390
Accumulated surplus
28,142
15,390
Subsequent events (Note 3)
Page 87 of 122
The Corporation of the Municipality of Clarington
Board of Management for Historic Downtown
Bowmanville Business Improvement Area
Statement of operations
year ended December 31, 2019
Budget 2019 2018
Revenues
Taxation - Municipality of Clarington
174,200
174,200
170,820
Interest
-
816
901
Fundraising
-
61,797
46,208
Total revenues
174,200
236,813
217,929
Expenses
Administration
6,300
1,876
6,478
Events and promotion
72,500
118,202
122,303
Salaries and wages
47,700
47,700
62,467
Streetscape
33,000
24,014
3,627
Capital works
31,000
32,269
20,498
Total expenses
190,500
224,061
215,373
Annual surplus (deficit)
(16,300)
12,752
2,556
Accumulated surplus, beginning of year
15,390
15,390
12,834
Accumulated surplus (deficit), end of year
(910)
28,142
15,390
Page 88 of 122
The Corporation of the Municipality of Clarington
Board of Management for Historic Downtown
Bowmanville Business Improvement Area
Statement of change in net financial assets
as at December 31, 2019
Annual surplus (deficit)
Change in prepaid expenses
Budget 2019 2018
(16,300) 12,752 2,556
- 346
Change in net financial assets
(16,300)
12,752
2,902
Net financial assets, beginning of year
15,390
15,390
12,488
Net financial assets (net debt), end of year
(910)
28,142
15,390
Page 89 of 122
The Corporation of the Municipality of Clarington Board of Management for Historic
Downtown Bowmanville Business Improvement Area ("Bowmanville BIX) is a Municipal
Local Board (the "Board") in the Province of Ontario, Canada. It conducts its operations
guided by the provisions of provincial statutes such as the Municipal Act and related
legislation.
Significant accounting policies
The financial statements of the Board are the representations of management
prepared in accordance with Canadian public sector accounting standards
("PSAS").
The focus of the financial statements is on the financial position of the Board and
the changes thereto. The Statement of Financial Position includes the assets and
liabilities of the Board.
Financial assets are those assets which could provide resources to discharge
existing liabilities or finance future operations.
Non -financial assets are not available to discharge existing liabilities and are held
for use in the provision of services. They have useful lives extending beyond the
current year and are not intended for sale in the ordinary course of operations.
Accumulated surplus represents the difference between assets and liabilities of
the Board. This provides information about the Board's overall future revenue
requirements and its ability to finance operations and meet its obligations.
a) Revenue recognition
Taxation revenue is recorded when earned and is based on a special
assessment. Other revenues are recorded in the period in which transactions
or events occurred that gave rise to the revenues.
b) Use of estimates
The preparation of financial statements in conformity with PSAS requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the year. Actual results could differ from those
estimates.
c) Cash and cash equivalents
Cash and cash equivalents are made up of cash held in financial institutions as
well as temporary investments with maturities of 90 days or less.
Page 90 of 122
2. Statement of cash flows
A statement of cash flows has not been prepared, as the information is readily
determinable from the financial statements presented.
3. Subsequent events
Since January 1, 2020, the spread of COVID-19 has severely impacted many local
economies around the globe. In many countries, including Canada, organizations
and businesses are being forced to cease or limit operations for long or indefinite
periods of time. Measures taken to contain the spread of the virus, including travel
bans, quarantines, social distancing, and closures of non -essential services have
triggered significant disruptions to organizations worldwide, resulting in an
economic slowdown. Global stock markets have also experienced great volatility
and a significant weakening. Governments and central banks have responded
with monetary and fiscal interventions to stabilize economic conditions.
Bowmanville BIA has determined that these events are non -adjusting
subsequent events. Accordingly, the financial position and results of operations as
of and for the year ended December 31, 2019 have not been adjusted to reflect
their impact. The duration and impact of the COVID-19 pandemic, as well as the
effectiveness of government and central bank responses, remains unclear at this
time. It is not possible to reliably estimate the duration and severity of these
consequences, as well as their impact on the financial position and results of
Bowmanville BIA for future periods.
Page 91 of 122
Financial statements of
The Corporation of the
Municipality of Clarington
Board of Management for the
Newcastle Central Business
District Improvement Area
December 31, 2019
Page 92 of 122
Table of contents
Independent auditor's report........................................................................................1-2
Statement of financial position........................................................................................ 3
Statementof operations................................................................................................. 4
Statement of change in net financial assets................................................................... 5
Notes to the financial statements................................................................................. 6-7
Page 93 of 122
0 GrantThornton
Independent auditor's report
To the Board Members, Members of Council,
Inhabitants and Ratepayers of the Corporation of the Municipality of Clarington
Qualified Opinion
We have audited the financial statements of The Corporation of the Municipality of Clarington Board of
Management for the Newcastle Central Business District Improvement Area ("Newcastle BIA"), which
comprise the statement of financial position as at December 31, 2019, and the statements of operations
and change in net debt for the year then ended, and notes to the financial statements, including a
summary of significant accounting policies.
In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion
paragraph, the financial statements present fairly, in all material respects, the financial position of The
Corporation of the Municipality of Clarington Board of Management for the Newcastle Central Business
District Improvement Area as at December 31, 2019, and the results of its operations and change in net
financial assets for the year then ended in accordance with Canadian public sector accounting standards.
Basis for Qualified Opinion
In common with many BIAs, the Newcastle BIA derives revenues from fundraising activities and donations,
the completeness of which is not susceptible to satisfactory audit verification. Accordingly, our verification
of these revenues was limited to the amounts recorded in the records of Newcastle BIA and we were not
able to determine whether any adjustments might be necessary to fundraising and donation revenue,
annual surplus and accumulated surplus for the years ended December 31, 2019 and December 31, 2018.
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of
the Financial Statements section of our report. We are independent of the Organization in accordance with
the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.
Responsibilities of Management and Those Charged with Governance for the Financial
Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with Canadian public sector accounting standards, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Newcastle BIA's ability
to continue as a going concern, disclosing, as applicable, matters related to a going concern and using the
going concern basis of accounting unless management either intends to liquidate the Newcastle BIA or to
cease operations, or has no realistic alternative but to do so. Those charged with governance are
responsible for overseeing the Newcastle BIA's financial reporting process.
Page 94 of 122
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor's report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with Canadian generally accepted auditing standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Newcastle BIA's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Newcastle BIA's ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor's report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor's report. However, future events or conditions may cause the Newcastle BIA to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in
a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
Markham, Canada
July XX, 2020
Chartered Professional Accountants
Licensed Public Accountants
Page 95 of 122
The Corporation of the Municipality of Clarington
Board of Management for the Newcastle Central
Business District Improvement Area
Statement of financial position
as at December 31 2019 2018
Financial assets
Cash 13,034 56
Accounts receivable 7,781 500
Total financial assets 20,815 556
Liabilities
Accounts payable 2,562 5,046
Total liabilities 2,562 5,046
Net financial assets (net debt) 18,253 (4,490)
Accumulated surplus (deficit) 18,253 (4,490)
Subsequent event (Note 3)
Page 96 of 122
The Corporation of the Municipality of Clarington
Board of Management for the Newcastle Central
Business District Improvement Area
Statement of operations
year ended December 31, 2019
Budget 2019 2018
Revenues
Taxation - Municipality of Clarington
35,000
35,000
35,000
Grant - Municipality of Clarington
-
2,000
2,000
Grant - Government of Canada
-
5,000
-
Fundraising
-
28,738
27,649
Transfer from Municipality of Clarington
-
10,000
-
Miscellaneous
-
200
420
Total revenues
35,000
80,938
65,069
Expenses
Administration
2,000
1,407
1,359
Advertising
10,000
10,810
9,470
Events
10,000
28,736
44,740
Downtown safety and decor
13,000
17,242
24,913
Total expenses
35,000
58,195
80,482
Annual surplus (deficit)
-
22,743
(15,413)
Accumulated surplus (deficit), beginning of year
(4,490)
(4,490)
10,923
Accumulated surplus (deficit), end of year
(4,490)
18,253
(4,490)
Page 97 of 122
The Corporation of the Municipality of Clarington
Board of Management for the Newcastle Central
Business District Improvement Area
Statement of change in net financial assets
as at December 31, 2019
Annual surplus (deficit)
Budget 2019 2018
22,743 (15,413)
Change in net financial assets - 22,743 (15,413)
Net financial assets (net debt), beginning of year (4,490) (4,490) 10,923
Net financial assets (net debt), end of year (4,490) 18,253 (4,490)
Page 98 of 122
The Corporation of the Municipality of Clarington Board of Management for the
Newcastle Central Business District Improvement Area ("Newcastle BIX) is a Municipal
Local Board (the "Board") in the Province of Ontario, Canada. It conducts its operations
guided by the provisions of provincial statutes such as the Municipal Act and related
legislation.
1. Significant accounting policies
The financial statements of the Board are the representations of management
prepared in accordance with Canadian public sector accounting standards
("PSAS").
The focus of the financial statements is on the financial position of the Board and
the changes thereto. The Statement of Financial Position includes the assets and
liabilities of the Board.
Financial assets are those assets which could provide resources to discharge
existing liabilities or finance future operations.
Non -financial assets are not available to discharge existing liabilities and are held
for use in the provision of services. They have useful lives extending beyond the
current year and are not intended for sale in the ordinary course of operations.
Accumulated surplus represents the difference between assets and liabilities of
the Board. This provides information about the Board's overall future revenue
requirements and its ability to finance operations and meet its obligations.
a) Revenue recognition
Taxation revenue is recorded when earned and is based on a special
assessment. Other revenues are recorded in the period in which transactions
or events occurred that gave rise to the revenues.
b) Use of estimates
The preparation of financial statements in conformity with Canadian generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
year. Actual results could differ from those estimates.
2. Statement of cash flows
A statement of cash flows has not been prepared, as the information is readily
determinable from the financial statements presented.
Page 99 of 122
3. Subsequent event
Since January 1, 2020, the spread of COVID-19 has severely impacted many local
economies around the globe. In many countries, including Canada, organizations
and businesses are being forced to cease or limit operations for long or indefinite
periods of time. Measures taken to contain the spread of the virus, including travel
bans, quarantines, social distancing, and closures of non -essential services have
triggered significant disruptions to organizations worldwide, resulting in an
economic slowdown. Global stock markets have also experienced great volatility
and a significant weakening. Governments and central banks have responded
with monetary and fiscal interventions to stabilize economic conditions.
Newcastle BIA has determined that these events are non -adjusting subsequent
events. Accordingly, the financial position and results of operations as of and for
the year ended December 31, 2019 have not been adjusted to reflect their impact.
The duration and impact of the COVID-19 pandemic, as well as the effectiveness
of government and central bank responses, remains unclear at this time. It is not
possible to reliably estimate the duration and severity of these consequences, as
well as their impact on the financial position and results of Newcastle BIA for future
periods.
Page 100 of 122
Financial statements of
The Corporation of the
Municipality of Clarington
Board of Management for the
Orono Central Business
District Improvement Area
December 31, 2019
Page 101 of 122
Table of contents
Independent auditor's report........................................................................................1-2
Statement of financial position........................................................................................ 3
Statementof operations................................................................................................. 4
Statement of change in net financial assets................................................................... 5
Notes to the financial statements................................................................................. 6-7
Page 102 of 122
0 GrantThornton
Independent auditor's report
To the Board Members, Members of Council,
Inhabitants and Ratepayers of the Corporation of the Municipality of Clarington
Qualified Opinion
We have audited the financial statements of The Corporation of the Municipality of Clarington Board of
Management for the Orono Central Business District Improvement Area ("Orono BIA"), which comprise the
statement of financial position as at December 31, 2019, and the statements of operations and change in
net financial assets for the year then ended, and notes to the financial statements, including a summary of
significant accounting policies.
In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion
paragraph, the financial statements present fairly, in all material respects, the financial position of The
Corporation of the Municipality of Clarington Board of Management for Orono Central Business District
Improvement Area as at December 31, 2019, and the results of its operations and change in net financial
assets for the year then ended in accordance with Canadian public sector accounting standards.
Basis for Qualified Opinion
In common with many BIAs, the Orono BIA derives revenues from fundraising activities and donations, the
completeness of which is not susceptible to satisfactory audit verification. Accordingly, our verification of
these revenues was limited to the amounts recorded in the records of Orono BIA and we were not able to
determine whether any adjustments might be necessary to fundraising and donation revenue, annual
surplus and accumulated surplus for the years ended December 31, 2019 and December 31, 2018.
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of
the Financial Statements section of our report. We are independent of the Organization in accordance with
the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.
Responsibilities of Management and Those Charged with Governance for the Financial
Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with Canadian public sector accounting standards, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing Orono BIA's ability to
continue as a going concern, disclosing, as applicable, matters related to a going concern and using the
going concern basis of accounting unless management either intends to liquidate Orono BIA or to cease
operations, or has no realistic alternative but to do so.
Page 103 of 122
Those charged with governance are responsible for overseeing the Orono BIA's financial reporting
process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor's report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with Canadian generally accepted auditing standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Orono BIA's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on Orono BIA's ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to
the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's
report. However, future events or conditions may cause the Orono BIA to cease to continue as a
going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in
a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
Markham, Canada
XX, 2020
Chartered Professional Accountants
Licensed Public Accountants
Page 104 of 122
The Corporation of the Municipality of Clarington
Board of Management for the Orono Central
Business District Improvement Area
Statement of financial position
as at December 31 2019 2018
Financial assets
Cash and cash equivalents
Accounts receivable
36,501
401
15,455
600
Total financial assets
36,902
16,055
Liabilities
Accounts payable
408
303
Total liabilities
408
303
Net financial assets
36,494
15,752
Accumulated surplus
36,494
15,752
Subsequent events (Note 3)
Page 105 of 122
The Corporation of the Municipality of Clarington
Board of Management for the Orono Central
Business District Improvement Area
Statement of operations
year ended December 31, 2019
Budget
2019
2018
Revenues
Taxation - Municipality of Clarington (Note 1)
6,000
6,000
6,000
Grants - Municipality of Clarington
-
22,141
-
Donations/fundraising/miscellaneous
4,100
21,158
34,365
Total revenues
10,100
49,299
40,365
Expenses
Advertising and promotion
3,630
17,789
21,508
Landscaping
3,400
3,856
3,372
Miscellaneous
2,370
6,912
2,197
Total expenses
9,400
28,557
27,077
Annual surplus
700
20,742
13,287
Accumulated surplus, beginning of year
15,752
15,752
2,465
Accumulated surplus, end of year
16,452
36,494
15,752
Page 106 of 122
The Corporation of the Municipality of Clarington
Board of Management for the Orono Central
Business District Improvement Area
Statement of change in net financial assets
as at December 31, 2019
Annual surplus
Budget 2019 2018
700 20,742 13,287
Net financial assets, beginning of year 15,752 15,752 2,465
Net financial assets, end of year 16,452 36,494 15,752
Page 107 of 122
The Corporation of the Municipality of Clarington Board of Management for the Orono
Central Business District Improvement Area ("Orono BIX) is a Municipal Local Board
(the "Board") in the Province of Ontario, Canada. It conducts its operations guided by
the provisions of provincial statutes such as the Municipal Act and related legislation.
Significant accounting policies
The financial statements of the Board are the representations of management
prepared in accordance with Canadian public sector accounting standards
("PSAS").
The focus of the financial statements is on the financial position of the Board and
the changes thereto. The Statement of Financial Position includes the assets and
liabilities of the Board.
Financial assets are those assets which could provide resources to discharge
existing liabilities or finance future operations.
Non -financial assets are not available to discharge existing liabilities and are held
for use in the provision of services. They have useful lives extending beyond the
current year and are not intended for sale in the ordinary course of operations.
Accumulated surplus represents the difference between assets and liabilities of
the Board. This provides information about the Board's overall future revenue
requirements and its ability to finance operations and meet its obligations.
a) Revenue recognition
Taxation revenue is recorded when earned and is based on a special
assessment. Other revenues are recorded in the period in which transactions
or events occurred that gave rise to the revenues.
b) Use of estimates
The preparation of financial statements in conformity with PSAS requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the year. Actual results could differ from those
estimates.
2. Statement of cash flows
A statement of cash flows has not been prepared, as the information is readily
determinable from the financial statements presented.
Page 108 of 122
3. Subsequent events
Since January 1, 2020, the spread of COVID-19 has severely impacted many local
economies around the globe. In many countries, including Canada, organizations
and businesses are being forced to cease or limit operations for long or indefinite
periods of time. Measures taken to contain the spread of the virus, including travel
bans, quarantines, social distancing, and closures of non -essential services have
triggered significant disruptions to organizations worldwide, resulting in an
economic slowdown. Global stock markets have also experienced great volatility
and a significant weakening. Governments and central banks have responded
with monetary and fiscal interventions to stabilize economic conditions.
Orono BIA has determined that these events are non -adjusting subsequent
events. Accordingly, the financial position and results of operations as of and for
the year ended December 31, 2019 have not been adjusted to reflect their impact.
The duration and impact of the COVID-19 pandemic, as well as the effectiveness
of government and central bank responses, remains unclear at this time. It is not
possible to reliably estimate the duration and severity of these consequences, as
well as their impact on the financial position and results of Orono BIA for future
periods.
Page 109 of 122
If this information is required in an alternate format, please contact the Accessibility
Co-ordinator at 905-623-3379 ext. 2131
To:
Members of the Audit and Accountability Committee
From:
Trevor Pinn, CPA, CA — Director of Finance / Treasurer
Date:
July 10, 2020
Subject:
Internal Audit Policy
File:
The Municipality of Clarington passed resolution #GPA-303-08 establishing an internal
audit framework and charter.
As this framework and charter are over 12 years old, staff feel that it is appropriate to
review the framework and charter to establish a policy for the internal audit function.
This policy will begin to bring us in compliance with the standards of the Institute of
Internal Auditors as well as best practices.
A copy of FND-011-08 Internal Audit Charter and Blueprint for Operations, is attached
to this memo.
Recommendation:
That staff be directed to create an Internal Audit Policy to replace the current framework
and report back to committee at the next meeting.
Thank you,
Trevor Pinn, CPA, CA
Director of Finance / Treasurer
cc: Andrew Allison, CAO
Anne Greentree, Municipal Clerk
Catherine Carr, Manager of Internal Audit
Page 110 of 122
Qrb6izing Ontario
REPORT
FINANCE DEPARTMENT
Meeting: GENERAL PURPOSE AND ADMINISTRATION COMMITTEE
Date: MONDAY APRIL 28, 2008
Report #: FND-011-08 File #:
Resolution #:[�
By-law #:
Subject: INTERNAL AUDIT CHARTER AND BLUEPRINT FOR OPERATIONS
Recommendations:
It is respectfully recommended that the General Purpose and Administration Committee
recommend to Council the following:
1. THAT Report FND-011-08 be received; and
2. THAT the Internal Audit Charter and Blueprint for Operations be approved.
Submitted by: Reviewed by:
Franklin Wu,
Director of Finance/Treasurer Chief Administrative Officer.
NT/LB/hjl
Page 111 of 122
FN D-011-08
Background and Comment:
PAGE 2
On March 25, 2008, the Audit Review Group met to review and subsequently endorse
the Internal Audit Charter and Blueprint for Operation as detailed in the attached report,
marked Schedule "A".
It is recommended by the Audit Review Group that the Charter and the Blueprint be
approved.
Attachment:
Schedule "A" — Audit Review Group report, including Internal Audit Charter and
Blueprint for Operation
CORPORATION OF THE MUNICIPALITY OF CLARINGTON
40 TEMPERANCE STREET, BOWMANVILLE, ONTARIO L1 C 3A6 T (905)623-3379 F (905)623-4169
Page 112 of 122
Schedule " A"
hnergfzfng Untarfu
Meeting: AUDIT REVIEW GROUP
Date: March 25, 2008
REPORT
FINANCE DEPARTMENT
Subject: INTERNAL AUDIT CHARTER AND BLUEPRINT FOR OPERATION
Recommendations:
It is respectfully recommended that the Audit Review Group endorse the Internal Audit
Charter and Blueprint for Operation and that this report be forwarded to the General
Purpose and Administration Committee for approval.
Background:
1.0 On August 2, 2007 the Municipality's auditors, Deloitte & Touche issued their
annual Audit Management Recommendation Letter after completing the audit for
the year ended December 31, 2006. As part of this letter they made the following
recommendation:
"We recommend that the Municipality considers developing a formally
documented overall risk management policy. The new internal audit function
could be one method used to help mitigate risk at the entity level, as well as
monitor compliance with documented risk management policies."
Staff had the following response to the recommendation:
"it is within the new Internal Auditor's scope to draft policies to cover the
Municipality's evolving and growing business. The risk management policy will
be considered along with any policies resulting from the Municipality's Corporate
Strategic Business Plan, PSAB 3150 — Tangible Capital Assets and other
business processes."
Resolution #GPA-630-07 received report FND-022-07 and endorsed the
recommendations.
Page 113 of 122
Report to Audit Review Group
Page 2
1.1 The Internal Audit Charter (see Attachment #1) was developed to provide the
frame of reference for the Internal Audit function within the Municipality of
Clarington. It focuses on key operational aspects of the Internal Audit function
including the Authority, Independence and Responsibility of the auditor.
1.2 The Blueprint for Operations (Attachment #2) provides detail on the types of
audits that may be undertaken, along with the recommended reporting structure
and follow-up necessary to complete the process. The types of audit
assignments include Compliance Reviews; Operational Reviews; Consulting
Reviews; and Investigations. The reporting requirements for each type of audit
will vary greatly depending on the specific reason for the review.
1.3 The Internal Audit Charter and Blueprint for Operation have been developed as a
basis for the Internal Audit position. As stated in the charter preamble:
"Management staff are responsible for ensuring the efficient and effective
operation of Municipal program and activities. In order to manage the operations
of the Municipality, staff plan, organize, direct, and control programs and
activities in a manner designed to achieve outcomes and objectives defined by
management. Internal Audit provides independent and objective assurance and
consulting services designed to add value and improve the Municipality's
operations."
1.4 For the Internal Audit position to be effective, the Internal Audit Charter and
Blueprint for Operation need to be applied through all Municipal activities. The
function is not restricted to Finance issues and for this reason it is important to
ensure the auditor has the authority to access all operating departments.
1.5 The purpose of this report is to seek the Audit Review Group's endorsement of
the Internal Audit Charter and Blueprint for Operation.
Conclusion:
2.0 In summary, the Municipality is now in a position to implement the Internal Audit
function throughout the Municipality of Clarington's operating departments as
recommended by our auditors Deloitte and Touche. The function as detailed in
the Internal Audit Charter and Blueprint for Operation has been presented for
review by the Audit Review Group.
Attachments:
Attachment #1 — Internal Audit Charter
Attachment #2 — Blueprint for Operations — Form and Function
CORPORATION OF THE MUNICIPALITY OF CLARINGTON
40 TEMPERANCE STREET, BOWMANVILLE, ONTARIO L1C 3A6 T (905)623-3379 F (905)623-4169
Page 114 of 122
MUNICIPALITY OF CLARINGTON
INTERNAL AUDIT CHARTER
1.0 Preamble:
Attachment #1
1.1 Management staff are responsible for ensuring the efficient and effective operation of
Municipal programs and activities. In order to manage the operations of the
Municipality, staff plan, organize, direct and control programs and activities in a manner
designed to achieve outcomes and objectives defined by management. Internal Audit
provides independent and objective assurance and consulting services designed to add
value and improve the Municipality's operations. Internal Audit uses a systematic
approach to assess risk and evaluate the effectiveness of controls and organizational
processes used to achieve objectives.
2.0 Objective:
2.1 To contribute to the overall efficiency and effectiveness of the Municipality's operations
and use of resources:
Identify, assess, measure, and report on key risks faced by the Municipality;
Examine and evaluate the adequacy, effectiveness, and efficiency of the systems of
internal control;
Identify opportunities for improvements and streamlining processes.
3.0 Authority, Independence, and Responsibility:
3.1 Authority - The Internal Auditor is authorized to direct a broad, comprehensive program
of internal auditing within the Municipality. The Internal Auditor has unrestricted access
to all records, properties, functions, and personnel necessary to effectively discharge
responsibilities with appropriate communication protocols.
3.2 Independence - The Internal Auditor reports to the Director of Finance and/or the Chief
Administrative Officer and is independent of the programs and activities of the
Municipality. In order to assure the independence of the function, the Internal Auditor
has direct access to the Audit Review Group in situations for which a conflict of interest
is present or may be reasonably inferred.
3.3 Responsibility — Internal Audit encompasses the examination and evaluation of the
adequacy, effectiveness, and efficiency of the systems of internal control and the quality
of performance in carrying out the responsibilities of the Municipality. This can include:
• Reviews and evaluations of the soundness of controls and the reliability and integrity of
financial, managerial, and operating data;
■ Assessments of compliance with legislation and policies and procedures;
■ Identification and evaluation of the methods and systems utilized for acquiring, using and
safeguarding assets; and
■ Reviews of operations and programs to assess the economy and efficiency used in
meeting objectives established by the Municipality.
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Internal Audit Charter Page 2
4.0 Objectivity:
4.1 Internal Audit will not implement procedures, prepare original records, or engage in other
activities that could reasonably be construed as compromising independence and
objectivity. Impartial and unbiased judgments essential to the conduct of internal audits
and reviews are enhanced by the independence of Internal Audit. Objectivity is not
adversely affected by the recommendation of standards or controls to be applied in
developing systems and procedures or by the evaluation of existing or planned financial
and operating system controls and procedures.
5.0 Confidentiality:
5.1 Information accessed in the course of an audit or review is used strictly for audit purposes
and is not disclosed without the appropriate authority unless there is a legal or
professional obligation to do so with appropriate communication protocols. Information
received on a confidential basis will not be disclosed to third parties without permission,
subject to applicable legislation.
6.0 Plan of Work:
6.1 Internal Audit will develop an annual work plan using appropriate risk -based
methodology and identification of concerns by senior management. The plan will be
reviewed by the Director of Finance and approved by the Audit Review Group on an
annual basis. The plan will be implemented as approved with modifications and
adjustments as appropriate given changing circumstances. The Blueprint for Operations,
amended from time to time, reflects the method and approach used by Internal Audit in
executing its plan of work.
7.0 Standards of Work:
7.1 In all its activities, Internal Audit will adhere to the code of Ethics adopted by the
Institute of Internal Auditors (Attachment A) as well as the Municipality's Code of Ethics
policy (as amended from time to time). Engagements are performed with the care and
skill expected of a reasonably prudent and competent internal auditor with consideration
given to:
■ The extent of work required to meet objectives;
• The complexity, materiality, and significance of areas under review;
■ The adequacy and effectiveness of internal controls;
■ The cost of assurance relative to potential benefits; and
■ The probability of significant errors, irregularities, or non-compliance.
8.0 Report of Work:
8.1 Internal Audit has a responsibility to inform and advise management as to significant or
substantive issues noted in the course of its activities. Following each review, Internal
Audit reports the results of it examination and makes recommendations to strengthen the
management and control of the area under review. Summary reports are available and an
Page 116 of 122
Internal Audit Charter Page 3
annual review of work performed is presented to the Audit Review Group. The Blueprint
for Operations, amended from time to time, reflects the method and approach used by
Internal Audit in reporting its work.
9.0 Co-ordination of Work:
9.1 Internal Audit will co-ordinate its efforts with those of any external auditors to ensure
that total audit resources are effectively utilized.
Page 117 of 122
The lnsdtut* of Internal! Auditors
Code of Ethics
Attachment A to Internal Audit Charter
Inil oduction r
The purpose of The Institute's Code of Ethics Is to promote an ethical culture in the profession of internal auditing.
Internal auditing is an Independent, objective assurance and consulting activity designed to add value and improve an
organization's operations. It helps an organization accomplish Its objectives by bringing a systematic, disciplined
approach to evaluate -and improve the effectiveness of risk management, control, and governance processes.
A code of ethics is necessary and appropriate for the profession of internal auditing, founded as it is on the trust placed
In its objective assurance about risk management, control, and governance. The Institute's Code of Ethics extends
beyond the definition of internal auditing to Include two essential components:
1. Principles that are relevant to the profession and practice of internal auditing;
2. Rules of Conduct that describe behavior norms expected of internal auditors. These rules are an aid to
interpreting the Principles Into practical applications and are intended to guide the ethical conduct of Internal
auditors.
The Code of Ethics together with The Instltute's Professional Practices Framework and other relevant Institute
pronouncements provide guidance to internal auditors serving others. "Internal auditors" refers to Institute members,
recipients of or candidates for HA professional certifications, and those who provide internal auditing services within the
definition of Internal auditing.
Applicability and Enforcement
This Code of Ethics applies to both Individuals and entities that provide internal auditing services.
For Institute members and recipients of or candidates for IIA professional certifications, breaches of the Code of Ethics
will be evaluated and administered according to The Institute's Bylaws and Administrative Guidelines, The fact that a
particular conduct Is not mentioned in the Rules of Conduct does not prevent it from being unacceptable or
discreditable, and therefore, the member, certification holder, or candidate can be liable for disciplinary action.
Principles
Internal auditors are expected to apply and uphold the following principles:
Integrity
The integrity of internal auditors establishes trust and thus provides the basis for reliance on their judgment.
• Objectivity
Internal auditors exhibit the highest level of professional objectivity in gathering, evaluating, and communicating
information about the activity or process being examined. Internal auditors make a balanced assessment of all the
relevant circumstances and are not unduly Influenced by their own interests or by others In forming judgments
• Confidentiality
Internal auditors respect the value and ownership of Information they receive and do not disclose information without
appropriate authority unless there is a legal or professional obligation to do so.
r Competency
Internal auditors apply the knowledge, skills, and experience needed in the performance of internal auditing services.
Page 118 of 122
Rulos of Conduct
1. Integrity
Internal auditors:
1.1. Shall perform their work with honesty, diligence, and responsibility.
1.2. Shall observe the law and make disclosures expected by the law and the profession.
1.3. Shall not knowingly be a party to any illegal activity, or engage in acts that are discreditable to the profession of
internal auditing or to the organization.
1.4. Shall respect and contribute to the legitimate and ethical objectives of the organization.
2. Objectivity
Internal auditors:
2.1. Shall not participate In any activity or relationship that may impair or be presumed to Impair their unbiased
assessment. This participation includes those activities or relationships that may be In conflict with the interests of the
organization.
2.2 Shall not accept anything that may impair or be presumed to Impair their professional judgment.
2.3 Shall disclose all material facts known to them that, if not disclosed, may distort the reporting of activities under
review.
3. Confidentiality
Internal auditors:
3.1 Shall be prudent In the use and protection of information acquired in the course of their duties.
3.2 Shall not use information for any personal gain or In any manner that would be contrary to the law or detrimental
to the legitimate and ethical objectives of the organization.
4. Competency
Internal auditors:
4.1. Shall engage only In those services for which they have the necessary knowledge, skills, and experience.
4.2 Shall perform internal auditing services in accordance with the International Standards for the Professional Practice
of Internal Auditing.
4.3 Shall continually improve their proficiency and the effectiveness and quality of their services.
Adopted by The IIA Board of Directors, June 17, 2000
Copyright m 2000 by The Institute of internal Auditors, 247 Maitland Avenue, Altamonte Springs, Florida 32701-4201.
Permission is hereby given to duplicate and translate this Code provided no substantive changes are made.
The Institute of Internal Auditors
247 Maitland Avenue, Altamonte Springs Florida, 32701
Tel. 1+407-437-1100, Fax. 1+407-937-1101
Web: http://www.thelia.org, Email: online@thelia.org
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Attachment 2
MUNICIPALITY OF CLARINGTON
INTERNAL AUDIT
BLUEPRINT FOR OPERATIONS FORM AND FUNCTION
1.0 ORGANIZATION:
■ Audit function reports directly to the Director of Finance/Treasurer;
■ Reports presented to appropriate Department Heads for information purposes and
decisions on any required action;
■ Annual summary of internal audit work presented to Audit Review Group;
■ Summary reports available to Council on request;
■ Director of Finance reviews and provides guidance for internal audit function with
input from the Chief Administrative Officer as warranted:
• Review internal audit terms of reference, goals, objectives, and audit
schedules;
n Review results of audits, consider recommendations, suggest alternatives
• Provide guidance for control enhancements and implementation.
2.0 AUDIT PLANNING & RISK ASSESSMENT:
■ Use risk -based assessment wherever possible to develop audit plans;
■ Consider the control environment within the context of:
a Protection of Municipal assets
13 Efficient use of resources
0 Compliance with policies, regulations, legislation
■ Assess the environment to identify high risk areas;
■ Criteria to include in the assessment of risk:
o Potential areas for operational audits with identification of best practice;
E3 Operational audit cycle based on assessment of prioritized need and risk;
Annual and compliance audits, based on the need to provide assurance that
there is compliance with legislation, policies, and procedures;
13 Investigations based on receipt of concerns or allegations;
• Audit cycle planning during the early part of the fiscal year;
• Audits and reviews carried out during the course of the year with reports
prepared and presented as each review is completed.
3.0 ASSIGNMENTS & TYPES OF WORK:
3.1 Compliance Reviews/Audits
■ Performed on a cyclical basis;
■ Test compliance with Municipal by-laws, procedures, and guidelines;
■ Review in context of good business practice;
■ Provide recommendations based on observations.
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BLUEPRINT FOR OPERATIONS — FORM & FUNCTION PAGE 2
3.2 Operational Reviews/Audits
As project leader, coordinate and participate in these reviews involving program
management staff, performance measurement staff, and external consultants as needed
■ Projects included as part of audit plan based on needs identified by Department Heads
and may include developmental reviews;
■ May require use of external consultants with expertise in particular service area;
■ Examine and assess area;
■ During the course of the audit:
13 Note best practice.
13 Compile this information and share with administrative staff.
13 Where appropriate, include in audit observations and recommendations
■ Identify key points, best practices, training needs;
■ Provide recommendations.
3.3 Consulting Assignments
■ Performed on an ad hoc basis as requested;
■ Review processes and procedures;
■ Provide documentation on procedures;
■ Identify key points;
■ Provide recommendations for development for review by departmental staff
3 A Investigations
■ Ad hoc reviews based on requests or allegations from or concerns identified by
councillors, staff, vendors, public; and then directed by Chief Administrative Officer or
applicable Department Head;
■ Initial discussion to determine risk associated with claim and need or ability to follow-up
based on information provided;
a Perform preliminary work, as appropriate, to review the claim and establish
potential validity,
a Pursue further if warranted;
L3 Prepare report and recommend action if appropriate.
4.0 REPORTING AND FOLLOW-UP:
4.1 Compliance and Operational Audits
■ Detailed draft report with recommendations prepared at conclusion of field work;
• Draft report and recommendations reviewed with the Director of Finance and/or the
Chief Administrative Officer, the Department Head, and the Director of program area
under review;
■ Draft report amended, if necessary, to correct factual errors or omissions and the Director
requested to review the report and provide written management responses to
recommendations within 4 weeks;
■ Draft report with management responses is presented to appropriate Department Head;
■ Department Head considers the report, recommends revisions if necessary and
appropriate and takes any action required;
■ Internal Audit prepares an executive summary of the report available to Chief
Administrative Officer.
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BLUEPRINT FOR OPERATIONS — FORM & FUNCTION PAGE 3
4.2 Consulting Assignments
■ Discussions with appropriate departmental staff as review progresses;
■ Obtain confirmation and understanding of processes and procedures;
■ Detailed draft report prepared at conclusion of review work;
■ Draft report and recommendations reviewed with Director of area under review - report
amended, if necessary, to correct factual errors or omissions;
■ Director requested to provide written responses within 4 weeks;
■ Final report issued to Director, Department Head, and Chief Administrative Officer,
where appropriate.
4.3 Investigations
■ Call record/log calls:
11 Maintain a record of calls and note information received;
• Consult with appropriate staff to determine actions to be taken;
o Explain action taken and reasons for steps taken.
■ Draft reports following investigation:
Detailed report to the Director of Human Resources, the Chief Administrative
Officer, and Director of Finance as circumstances required;
■ Content of report:
• Specify allegation or concern and Conclusion based on investigation;
• Indicate decision to investigate and actions taken;
• Identify what should be done if appropriate in the circumstances.
4.4 Follow-up (applies to all types of audits previously mentioned):
■ A follow-up report is prepared after sufficient time has elapsed for the recipient of the
report to act on the recommendations;
■ The report consists of the recommendation, management's responses, and the
implementation status;
■ The status is determined based on a questionnaire to management unless otherwise
requested by Department Heads.
4.5 Annual report
■ Summary of audits performed prepared on an annual basis;
■ Presentation to Audit Review Group in spring — April/May.
■ Presentation to External Auditors prior to Annual Municipal Financial audit.
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