Loading...
HomeMy WebLinkAboutTR-71-95 THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON REPORT Meeting: GENERAL PURPOSE AND ADMINISTRATION COMMITTEE File# �U Date: October 23, 1995 Res. #G= - 52,3 By-Law# Report#:-�._.1795 File#: Subject: 1994 AUDIT REPORT AND MANAGEMENT LETTER Recommendations: It is respectfully recommended that the General Purpose and Administration Committee recommend to Council the following: 1. THAT Report TR-71-95 be received; and 2. THAT the recommendations and actions identified in the body of Report TR-71-95 be endorsed. i BACKGROUND AND COMMENT: The 1994 Audit Report and Management letter, received from Deloitte and Touche, contains some recommendations to improve upon certain internal control areas within the Municipality. A copy of the Audit Management letter is attached as Schedule "A". The Audit Manager letter states the following: "We have noticed continuing improvement in the records and accounts of the Municipality and are pleased to see that many of the comments in our prior year's management letter have been acted upon. We feel the attached suggestions will further enhance the accounting procedures, internal controls and operations of the Corporation. However, they should be considered in context with the Municipality's overall system of internal controls and accounting procedures which we consider, based on our review, to be good." The Treasury staff has contacted Departments affected by the Audit Management letter comments to determine what steps have been taken to implement these recommendations. Their comments have been incorporated into this report. I oA EflC RECYCLt MS IS PPMEDO RECYCLED—ER 7 TR-71-95 Page - 2 - CAPITAL FUND ACCOUNTING PROCEDURES Staff have discussed this with the auditors, who agree that because the municipality's capital expenditures are tracked through the Reserve Funds in a manner similar to that of a capital fund, the change to a full capital fund accounting process is not essential at this time. The establishment of a capital fund accounting process is a major undertaking involving both the general ledger recording system as well as the format of the budget process. Staff will work towards implementing this for future budget years. In conjunction with the year end audit, Staff have implemented the recording of reserve fund commitments in each reserve fund in order to reflect the balance of the reserve fund available for future uses. USER FEES The auditors have recommended that a review be undertaken of all "user fee" type services with a view to charging user fees in all potential areas. They are also recommending that these fees be increased annually based on the Consumer Price Index. Each Department will endeavour to identify potential new revenue sources in conjunction with the 1996 budget process. This may be one of the only areas of untapped revenue available to the municipality as a measure to cushion the ongoing Provincial impact. Any recommended changes would be identified for Council approval through the budget process or by separate report. DEVELOPMENT CHARGES / LOT LEVIES ACCOUNTS RECEIVABLE SYSTEM This project is still underway. The programming required to accommodate this system encompasses a large number of manual systems. Currently, the Municipality does not have a computerized accounts receivable system. Staff feel that it would be appropriate at this time to establish a fully integrated accounts receivable system and have made preliminary moves toward developing the process. This component will be incorporated as development of the system progresses. LAND SALE DEPOSITS i The aged detail of road closure deposits has been reviewed and will be monitored on a regular basis. The Clerk's Department will formally notify Treasury of all land transactions, in order that appropriate adjustments may be posted to revenue accounts. i 705 TR-71-95 Page - 3 - GOODS AND SERVICES TAX CONSIDERATIONS The Municipality traditionally has very few bad debt write-offs. The 1994 bad debt write-offs, totalling $956 have been reviewed and an adjustment made to the G.S.T. remittance. This process will now be done as bad debt write-offs occur, as the auditors have recommended. TAXES RECEIVABLE Staff, where possible, have made every effort to improve the taxes receivable situation, as is evident by the Cash Activity reports recording a reduced outstanding taxes as a percent or taxes levied. The variety of payment methods has greatly improved collection of current amounts and staff are continually following up innovative new payment options. The Tax Department has also undergone a review by the Auditors with a view to modernized and improve procedures. A separate report dealing with the results of this review will be forthcoming. The goal of this review is to improve efficiency in order to allow the Tax Collector and Revenue Clerk II greater time to follow up on delinquent accounts. It should be noted that there are several properties at various stages of the registration process that are on hold due to litigation. This is slowing down process of proceeding with the registration process and clearing up these outstanding tax accounts, however, staff will continue to register and collect taxes as aggressively as possible. MUNICIPAL INVESTMENT POLICY To clarify, as mentioned in Report TR-3-95, the following limits are in place under the current policy: i Government of Canada no limit Provinces of Canada each maximum 30% of portfolio Schedule "A" Banks each maximum 30% of portfolio Schedule "B" Banks each maximum 10% of portfolio Ontario Municipal Governments total maximum 20% of portfolio Municipal Investment Pools total maximum 30% of portfolio These percentages are based upon the issuer of the investment instrument not where they are purchased. For example, a Bank of Nova Scotia Bankers acceptance can be purchased at the Royal Bank but Bank of Nova Scotia is the issuer and therefore this would be included in theirlimit. Likewise, a Government of Canada T-Bill can be purchased at a major bank but it would be included under the Government of Canada totals. Therefore, the policy was revised in Report TR-3-95 to place limits based on issuer of the investment not the "holder" or "salesperson". i 0 TR-71-95 Page - 4 - PRIOR YEAR'S COMMENT STILL APPLICABLE TAX SALES Currently, due to cost constraints, the Municipality does not perform an environmental review of all properties being considered for tax sale. However, in the majority of properties being considered for tax sales, the notice to the property owner is often sufficient to bring about payment of tax arrears. A majority of properties being considered for tax sale are residential and therefore represent a relatively low risk of environmental contamination. For the remainder, the Treasurer can cancel any tax sale proceedings up to the point of public tender so if any doubt arose as to a potential liability, the Municipality would not risk accepting ownership. The Tax Collector also maintains close contact with our senior By-Law Enforcement Officer in order to identify any potential risks prior to tax sale. It should be noted that it is the responsibility of the Provincial Ministry of Environment to deal with environmental issues. Ultimately, should the owner of contaminated land walk away, the Ministry would be responsible (ie. litigation), however, as stated above, the municipality is attempting to be aware of any potential problem in this area. MANAGEMENT LETTER REPORT COMMENT APPLICABLE TO MUNICIPAL RECREATION BOARDS CASHFLOW This comment has been circulated to the Treasurers of the various Boards and staff will work with any of the boards requiring assistance in this area. CONCLUSION In summary, the audit recommendations made in the 1994 Audit Report and Management letter have been received as constructive comments and an effort has been made to implement the recommendations that are feasible at this time. Respectfully submitted, , Revie by, ( arie A. ara , H.BSc., A.M.C.T., H. Stockwell, Treasurer. Chief Administrative Officer. MM/hjl Attachment 707 SCHEDULE "A" Deloifte & Touche 10 Deloitte&Touche Chartered Accountants Bank of Commerce Building Telephone: (905) 579-8202 2 Simcoe Street South Toronto Area: (905) 686-8249 P.O. Box 800 Facsimile: (905) 579-3388 Oshawa, Ontario L1 H 71\11 June 14, 1995 Ms. Mary Novak Chair - Finance Committee Corporation of the Municipality of Clarington Municipal Offices 40 Temperance Street Bowmanville, Ontario L1C 3A6 Dear Ms. Novak: We have completed our examination of the consolidated financial statements of the Corporation of the Municipality of Clarington for the year ended December 31, 1994. Our examination included a review of the system of internal controls, accounting procedures and other matters. The attached comments should not be construed to represent the result of a detailed systems review but are observations made during the normal course of our examination. We have noted continuing improvement in the records and accounts of the Municipality and are pleased to see that many of the comments in our prior year's management letter have been acted upon. We feel the attached suggestions will further enhance the accounting procedures, internal controls, and operations of the Corporation. However, they should be considered in context with the Municipality's overall system of internal controls and accounting procedures which we consider, based on our review, to be good. We would like to take this opportunity to thank the staff of the Municipality of Clarington for their excellent assistance and co-operation during our audit. We would be pleased to discuss any of these comments and suggestions further with you. If we can be of assistance in the implementation of any of these recommendations, please do not hesitate to contact us. Yours very truly, (Signed) DELOITTE & TOUCHE cc: Mayor Diane Hamre and Members of Council Mr. W. Stockwell, Chief Administrative Officer Mrs. M. Marano, Treasurer Ministry of Municipal Affairs Deloittebuche Tohmatsu International 7 G8 THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON COMMENTS ON INTERNAL CONTROLS, ACCOUNTING PROCEDURES AND OTHER MATTERS FOR THE YEAR ENDED DECEMBER 31, 1994 Capital Fund Accounting Procedures At the present time the Municipality does not maintain a separate ledger to record the financing and expenditures for capital projects. These transactions have traditionally been accounted for through the Revenue Fund of the Municipality. Due to the increasing number and complexity of capital projects undertaken by the Municipality, we suggest that the Municipality consider establishing a formal Capital Fund Ledger to further improve your financial information system. Such a ledger would allow for easier monitoring of capital projects, eliminate the need to transfer unexpended capital financing to reserves/reserve funds at the end of each year, and provide for more informative reporting of unencumbered reserves and reserve fund balances. User Fees Based on discussion with staff and comparison to other area municipalities, we have noted that the Municipality currently does not charge for a number of services to which user fees could be applicable. Specific examples of such services are: • Duplicate tax receipts • Statement of prior year's taxes levied • 'Commissionerization' of documen�s • Statement of tax account transaction history In certain other instances, the Municipality is charging user fees at rates which are lower than those charged by surrounding Municipalities. Recent studies have shown a progressive move toward the more extensive use of user fees to help offset declining senior level government grant revenues. We recommend a review be undertaken of all "user fee" type services and rates be set at levels comparable to those charged by other municipalities. In addition, Council should consider establishing a policy of automatically increasing all user fees annually at the same rate as the consumer price index. Variance from these automatic increases could be made by Council on a "specific instance" basis if deemed appropriate. Development Charges/Lot Levies Accounts Receivable System The Municipality has recently started the process of developing a formal accounts receivable system to better monitor and control the collection of development charges/lot levies. We understand the development of this accounting system has been delayed in order to incorporate a wider range of departments and other sources of revenue. We commend you on the progress made to date on the preliminary development of the new development charges/lot levies receivable system and encourage you to complete this project as soon as possible. JUNE 14, 1995 PAGE I of 4 1709 THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON COMMENTS ON INTERNAL CONTROLS, ACCOUNTING PROCEDURES AND OTHER MATTERS FOR THE YEAR ENDED DECEMBER 31, 1994 Lund Sale Deposits We noted a number of situations where deposits pertaining to land sales (ie: road right-of-way parcels, etc.) were not transferred from the "Deposits" account to the applicable revenue account when the related sale was finalized. These transfers to the respective revenue accounts were made at a later date when a review of the "Road Closure Deposits" account was undertaken by the Treasury staff. The delay in processing the entries related to the above-noted transactions was due to the lack of formal notification of the completion of these sales being given by the operating departments to the Treasury Department. We recommend in future the Clerk's Department forward a "notification of land sale closing" document to the Treasury Department, formally advising them of the related details including which deposit(s) should be transferred to revenue. We also recommend that the aged detail of deposit and other deferred revenue accounts continue to be reviewed on a timely basis and any old amounts investigated promptly. Goods and Services Tax Considerations Based on review of policies and procedures relating to the recording of GST, we noted that the Municipality is not deducting the GST applicable to bad debt write offs when the original invoice was in respect of a taxable service. We recommend that all future write offs of bad debts incorporate this GST aspect and the GST remittance be adjusted accordingly. As deductions from the GST remittance can be claimed within four years of the debt write off, we also recommend the Municipality review prior bad debt write offs and adjust their remittance accordingly. Taxes Receivable Taxes receivable have been steadily increasing over the past four years as follows: 1994 1993 1992 1991 Taxes Receivable $8,099,030 $7,801,336 $6,328,599 $4,854,862 Increase $297,694 $1,472,737 $1,473,737 %Increase 3.8% 23.7% 30.3% Although we realize current economic conditions have contributed to these significant increases, we suggest the Township take more aggressive collection procedures with respect to delinquent accounts. JUNE 14, 1995 7 1 0 Pncs 2 oP 4 ,/ I THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON COMMENTS ON INTERNAL CONTROLS, ACCOUNTING PROCEDURES AND OTHER MATTERS FOR THE YEAR ENDED DECEMBER 31, 1994 Taxes Receivable (CONTINUED) Such procedures should continue to include prompt registration (under the Municipal Tax Sales Act) of properties which have taxes owing for greater than three years(two years for undeveloped land), and continue with regular follow up by both mail and personal calls. Municipal Investment Policy Based on our review of the Municipality's updated investment policy (Treasurer's Report TR-3-95), we noted that there is no stated maximum of funds the Municipality is permitted to invest with a single investee. Although there has been informal adherence to the previous policy's stated maximum of no more than 30% of the portfolio being invested with one investee, we recommend that the policy be revised and consideration be given to limiting the maximum amount that is invested with one investee. Prior Year's Comment Still Applicable Tax Sales Currently, the Municipality does not perform any environmental review of properties which are being considered for tax sale under the Municipal Tax Sales Act. This lack of review leaves the Municipality vulnerable for the assumption of any environmental liability should the property remain unsold and the title subsequently revert to the Municipality. We recommend the Municipality consider carefully the potential hidden environmental liability associated with any property listed for tax sale; particularly, in situations where the Municipality could eventually become the legal land owner. Should there be any doubt as to environmental contamination in these instances a thorough environmental review should be carried out before assuming title. JUNE 14, 1995 7 l 1 PAGE 3 oP 4 I THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON COMMENTS ON INTERNAL CONTROLS, ACCOUNTING PROCEDURES AND OTHER MATTERS FOR THE YEAR ENDED DECEMBER 31, 1994 Comment Applicable to Municipal Recreation Boards Cashflow We noted that in certain instances large sums of cash are being held in low-interest savings accounts. We recommend that the respective Board Treasurers estimate cashflow requirements and that all excess funds be placed in short-term investments which earn interest while allowing the funds to be accessed on a timely basis. JUNE 14, 1995 PAGE 4 op 4 712