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HomeMy WebLinkAboutTR-61-00 !- "'! THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON REPORT Meeting: General Purpose and Administration Committee File #: _re> 3 Res.#hPA _ttfo/-oo Date: October 2, 2000 Report #: TR-61-00 File#: By-Law #: Subject: 1999 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-61-00 be received; and / 2, THAT the recommendations and actions identified in the body of Report TR-61-00 be endorsed. Backaround and Comment: The 1999 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 Management letter states the following: "We have noted continuing improvement in the records and accounts of the Municipality and are pleased to see 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." 1.0 PSAB Requirements 1.1 The Public Sector Accounting and Auditing Board (PSAB) recommendations have now been proclaimed. However, the Province has not yet released final revisions to 847 , TR-61-00 1999 Audit Report and Management Letter Page 2 the required format for the 2000 financial year end. Treasury staff have been monitoring the situation and attending training sessions and will undertake a detailed review of the applicable PSAB handbook sections and revise the municipal financial statement format in accordance with Provincial requirements. 2.0 Cash Management 2,1 Departments that traditionally do not handle large volumes of cash will be requested to bring cash receipts to the Treasury Department more frequently than three times per week should their cash on hand exceed $1,000. 2,2 Also, effective October 1, 2000, the bank courier contract has been increased to a daily pick up from the previous three times a week. 3.0 Access to Computer Room 3.1 There are a total of four printers in the computer room, which are used for printing journals in the financial system, producing Accounts Payable cheques, printing tax bills, etc. The room is essentially used as a combination computer/printer room. Due to the size of the printers, as well as noise level, temperature control requirements, fumes, and space restriction in the Municipal Administrative Centre, it is currently not possible to relocate the printers to any area where they would be accessible to staff. 3.2 As approval has been given for the joint use facility to be constructed adjacent to the Municipal Administrative Centre, a joint computer room has been planned within the scope of this project. 4.0 Novell LAN Security 4,1 The MIS Department will maintain a file of written requests from the department heads for user profile changes. The individual staff person processing the change will initial the request as completed. 4.2 With respect to amending password expiry to every ninety (90) days, this puts an onerous burden on a very streamlined department Currently, the policy is one hundred and eighty (180) days. Given that once you are initially logged on the network, most sensitive data can only be accessed via an additional password to gain access to specialized software, it is not considered that there is sufficient cause to amend the current policy. 5.0 Capital Fund Accounting Procedures 5.1 As indicated in the 1998, 1999 and 2000 approved Capital Budgets, the Municipality is setting aside funds to replace the financial software over a three year period. At this time it is more cost effective to establish new capital fund accounting procedures in conjunction with the capabilities of any proposed new financial software. Currently, unexpended capital financing is recorded through commitments to the reserve and 848 TR-61-00 1999 Audit Report and Management Letter Page 3 reserve funds which is included in the Budget and Trial Balances. The Municipality actually maintains this information with a greater degree of detail and accuracy than is normally found in formal capital fund systems, For 1999, the total value of commitments to the Reserves and Reserves Funds was reported in the notes to the Financial Report at year end, totals are recorded in the current budget spreadsheets for Reserves and Reserve Fund balances and committed values are also separately identified in the Reserve Fund trial balance. 6.0 Information Systems Strategic Plan 6.1 As new technology is brought forward in the marketplace with municipal uses, the Systems Department reviews each request and analY2es the options available. Prioritization is then done through the Capital Budget and four year forecast process, The Municipality has also committed to a corporate geographic information system, financial system replacement and is pursuing Connect Ontario funding for other initiatives. This lays groundwork for multi-year projects, 6.2 The Systems Department considers this existing strategy to be part of the strategic plan which is part of a longer-term project. Conclusion and Recommendations: In summary, the audit recommendations made in the 1999 Audit Report and Management letter have been received as constructive comments and an effort has been made to implement the recommendations that are feasible and cost effective at this time. Traditionally, after the annual audit is completed, the Municipality's financial statements are formally presented to Council by the Municipality's auditors. This practice is not typical of other municipalities as summarized financial statements are publicized. The Municipality of Clarington publicizes condensed financial statements in the activity guide and full statements are available for inspection, upon request. It is therefore recommended that the audited financial statements no longer be formally presented to Council. Copies will be made available in the Council library and the Municipality will continue to publici2e condensed financial statements annually in conformance with the Municipal Act. Council will continue to receive the annual management letter comments, as attached. lIy submitted, Reviewed by: c)v-~~~ ~ Marie A. Marano, H.BSc"AMCT, Treasurer. Franklin Wu, M.C.I.P.,R.P,P., Chief Administrative Officer. MMfNTfhjl Attachment 849 May 24, 2000 Mr. John Mutton Chair - Finance Committee Corporation of the Municipality of Clarington Municipal Offices 40 Temperance Street Bowmanville, ON LIC 3A6 Dear Mr. Mutton: We have completed our examination of the consolidated financial statements of the Corporation of the Municipality of Clarington for the year end December 31, 1999. Our examination includes a review of the system of internal controls, accounting procedures and other matters. The attached comments should not be construed to represent the results of a detailed system review but are observations made during the nonnal course of our examination. We have noted continuing improvement in the records and accounts of the Municipality. We are pleased to see 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 be pleased to discuss any of these comments and suggestions further with you. Ifwe can be of assistance in the implementation of any of these recommendations, please do not hesitate to contact us. 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. Yours very truly, ~ rt-7~ck III Chartered Accountants Attachment IlE-~ BOO/ZOD'd 188-1 850 _waJ~ wOOI:80 OOOZ-BZ-d'S CORPORATION OF THE MUNICIPALITY OF CLARINGTON Management Letter December 31,1999 Page 1 of 4 1. NEW PUBLIC SECTOR ACCOUNTING STANDARDS (PSAB) Obse11Jotion: The authority for setting accounting and financial reporting standards is contained in the Municipal Act and, to date, Ontario municipalities have been required to follow the Municipal Financial Reporting Handbook for Ontario Municipalities. On April 12, 2000 the Ministry of Municipal Affairs and Housing announced that the accounting recommendations and disclosure requirements, as prescribed by the Public Sector Accounting Board (PSAB) of the Canadian Institute of Chartered Accountants, will be adopted for use by Ontario municipalities The Public Sector Accounting Board was created in 1981 by the Canadian Institute of Chartered Accountants (CICA). In 1989 PSAB began its local government initiative with the goal of recommending standards for good municipal accounting and financial reporting practices. The fundamental objective was to ensure that fmancial statements were complete, accurate and presented in a way that facilitated decision-making. Also, by adopting common standards, differences arising from comparing one municipality to another would not be the results of different lK:counting and reporting practices, but actual real differences in the way the municipality finances, organizes and conducts its operations and in the services provided. PSAB standards are being implemented over two years. Commencing with the reporting year 2000, municipalities will be required to prepare their financial statements in full compliance with the accounting recommendations applicable to local governments as set out in the PSAB Handbook, except as described below, For the reporting year 2001, municipalities will be required to implement the recommendations of Section PS 3270 "Solid waste landfill closure and post-closure liability". One of the significant changes required by PSAB will be the recording of all liabilities in the financial statements (i.e. sick leave liabilities). In addition, certain reserves and reserve funds will be classified as liabilities for reporting purposes. Accounting for capital assets in local governments is under further study at this time. Recommendation: We would encourage management to undertake a detailed review of the PSAB reporting standards as soon as possible. Deloitte & Touche professionals have already assisted two Ontario municipalities in converting their financial statements to conform to PSAB standards and are available to assist the Municipality as required. IlH SOO/SOO d 168-l 851 _wo'. weOl:80 OOOZ-8Z-doS CORPORATION OF THE MUNICIPALITY OF CLARlNGTON Management Letter Decembel' 31, 1999 Page 2 of 4 2. CASH MANAGEMENT Observation: During our control testing we noted that although cash is centrally managed through the TreasUI)' department, cash is not being brought in from the operating departments on a daily basis. Although departments that handle large quantities of cash do bring their deposits in on a daily basis, other departments only bring in their cash receipts to the TreasUI)' department three days a week. Recommendation: We recommended that all departments be required to bring their cash receipts to the Treasury department on a daily basis, if cash on hand in their respective department exceeds a predetermined amount. This procedure should maximize cash flow and minimize the possibility of misuse of Municipal assets. 3. ACCESS TO THE COMPUTER ROOM Observation: During discussions with client personnel it was noted that access to the computer room is not restricted to computer personnel only, as there ate a number of printers in the room that are used by various accounting staff. Although the computer room is secured by a security pass code, it is widely known amongst accounting staff. This is a weakness in controls as the risk of unauthorized access to the computer equipment is high. Recommendation: We recommend that the printers be moved to a separate location as soon as possible and that the access code be changed to only allow systems personnel access to the computer room. We understand the Municipality plans to move these printers to a new location outside the computer room during the move to a new computer facility in 2003. lLH SOO/!,OO'd 168-l 852 _WOJ, WEOI'80 OOOZ-SZ-dos CORPORATION OF THE MUNICIPALITY OF CLARlNGTON Management Letter December 31, 1999 Page 3 of4 4. NOVELL LAN SECURITY Observation: During discussions with client personnel it was noted that unique passwords are used and are changed every 180 days. In addition, the MIS department sets up users or changes existing user profiles only when instructed by the department head via written request or e- mail. However, a record of these requests is not kept and there is no record of which MIS operator has processed the changes. Recommendation: It is our understanding that the standard user profile at the municipality requires a standard 5 character password, which is forced to change every 180 days. The "unique" password utility is also enabled to ensure users do not re-use the same passwords. We suggest that all staff be required to follow this standard profile and passwords be changed every 90 days. In addition, we recommend that the MIS department keep a record of requests from department head for user profile changes. These recommendations will be increasingly important as the municipality starts to offer access to the Internet through the network. S. CAPITAL FUND ACCOUNTING PROCEDURES Observation: At the present time the Municipality accounts for capital expenditures through the Revenue Fund. A separate ledger to record the financing and expenditures for the capita! projects would be more efficient. Recommendation: Due to the increasing number and complexity of capital projects undertaken by the Municipality, we suggest that the Municipality consider establishing a formal Capita! Fund Ledger to further improve your fmancial information. Such a ledger would allow for easier monitoring of capital projects, help to eliminate the need to transfer unexpended capital financing to reserve/reserve funds at the end of each year, and provide, for more informative reporting of unencumbered reserves and reserve fund balances. IlE-, SOO/SOO'd 166-1 853 _weJ, well:SO OOOZ-SZ-doS CORPORATION OF THE MUNICIPALITY OF ~LARlNGTON Management Letter December 31,1999 Page 4 of 4 6. IS STRATEGY PLAN Observation: As in previous year management letter comments with respect to systems policies and procedures, the Municipality does not have an IS strategic plan in place for a time period of over 1 year. An Information Systems strategy is a valuable guide in plarming for the acquisition of and management of technology resources. Without such a plan, it is difficult for IS management to provide timely and cost effective support to users and to provide enabling technology that helps meet other business objectives. Recommendation: An information system strategy plan should be developed that 1inks to the overall business objectives of the municipality. The plan should include consideration and evaluation of how to improve the cutrent infrastructure to meet current and future needs. ILE-, SOO/SOO'd IB8-! 854 _WOJ, W"II:80 OOO/-s/-dos