Loading...
HomeMy WebLinkAboutFND-023-03 Cl~-!lJglOn REPORT FINANCE DEPARTMENT Meeting: GENERAL PURPOSE AND ADMINISTRATION COMMITTEE /1 ' Date: MONDAY, OCTOBER 6, 2003 r- Resolution #: Gffi.-~.'J<t-03 Report #: FND-023-03 File#: By-law #: oh:>:3 ~ I totl Subject: APPOINTMENT OF AUDITORS AND AUDIT MANAGEMENT RECOMMENDATION LETTER Recommendations: It is respectfully recommended that the General Purpose and Administration Committee recommend to Council the following: 1. THAT FND-023-03 be received; 2. THAT the firm of Deloitte and Touche be appointed as the Municipality's auditors for the 2003 year end audit; 3. THAT the audit management recommendation letter be referred back to staff for review and comment; 4. THAT a Request for Proposal be issued for the Municipality's 2004 audit; and 5. THAT the attached By-Law be executed by the Mayor and Clerk. Submitted by: Nancy ylor .BA, CA, Director of Finance Reviewed by, _ ) (..o(.,~( - (:,,----,(.. t Franklin Wu, Chief Administrative Officer. NT/hjl 13 G 1 REPORT NO.: FND-023-03 PAGE 2 BACKGROUND AND COMMENT: The 2002 year end audit is now complete. The Partner and Senior Manager from Deloitte and Touche met with the Municipality's Audit Committee on October 2 to discuss the 2002 year end audit and review the auditor's management recommendation letter (Attachment "A"). The Audit Committee is comprised of Frank Wu, Chief Administrative Officer and Nancy Taylor, Director of FinancelTreasurer. The 2002 Financial Statements will be distributed under separate cover to Council for information, as well as publicly advertised, as required under the Municipal Act. Please refer to Attachment "A" for a copy of the auditor's management recommendation letter. Staff will report back with comments regarding the recommendations in the auditor's management recommendation letter. When the report was approved recommending the auditors for the 2002 year end, staff were asked that a Request for Proposal for 2003 onwards for the Municipality's annual audit be investigated. An informal survey of annual audit costs was done in 2003 of the area municipalities by a neighbouring municipality. The Municipality of Clarington's annual audit costs are comparable to the other lakeshore area municipalities. Due to staffing constraints, as well as the results of the survey, staff are recommending that Deloitte and Touche be appointed as the Municipality's auditors for the 2003 year end audit. This is necessary at this time because the 2003 audit should commence in January 2004. The Municipality formerly has requested the opinion of the Ministry of Municipal Affairs and Housing, who had indicated that the cost of the audit services should not be the determining factor in a decision to change auditors. The Ministry indicated that other criteria, such as level of service available, reputation, timing and audit services, etc. should be considered. However, in order to ensure that the Municipality continues to receive a high level of service for dollars spent, it is recommended that the 2004 audit be issued for a Request for Proposal early in 2004. This will allow an appropriate amount of lead time in the event that there is a change in auditors. Attachments: Attachment "A" - Auditor's Management Recommendation Letter Attachment "B" - By-law to Appointment Auditors for 2003 Year End CORPORATION OF THE MUNICIPALITY OF CLARINGTON 40 TEMPERANCE STREET, BOWMANVILLE, ONTARIO L 1 C 3A6 T (905)623-3379 F (905)623-4169 1302 Deloitte & Touche LLP 5140 Yonge Street. Suite 1700 Toronto, ON M2N 6L7 Canada Attachment "A" Tel: (416) 6016150 Fax: (416) 229 2524 www.deloitle.ca Deloitte & Touche August 28, 2003 Mr. John Mutton Chief Executive Officer Corporation of the Municipality ofClarington Municipal Offices 40 Temperance Street Bowmanville ON LlC 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 ended December 31, 2002. In addition to our audit report on the financial statements, we would like to provide the attached management comments for your consideration. These comments were reviewed with management. As part of our examination, we reviewed the Municipality's systems and internal accounting controls to the extent we considered necessary to make an evaluation of such systems and procedures in accordance with Canadian generally accepted auditing standards. Under these standards, the fundamental purpose of the evaluation is to establish a basis for reliance on the internal accounting controls in determining the nature, extent, and timing of other auditing procedures which are necessary for the expression of an opinion on the financial statements; it is not to determine whether internal controls are adequate for management's purposes. While the audit did not include an in-depth evaluation of all systems or all aspects of any individual system, we undertake to report any internal control matters which come to our attention during the audit. Our comments and recommendations are set out in the attached report. We would be pleased to discuss our recommendations and provide any assistance you may wish in their implementation. We would also like to take this opportunity to thank your staff for their excellent co-operation and assistance throughout the audit. Yours very truly, ~~Jtt 0/ /Mld...t /..LfJ Chartered Accountants Enclosure Delcine Touche Tohmatsu 13J3 CORPORATION OF THE MUNICIPALITY OF CLARINGTON Management Letter For the year ended December 31, 2002 Page 1 of2 1. Financial Statement Preparationl Audit Preparedness Observation: The fmancial statements for the Municipality and related audit working papers were well prepared and substantially completed this year when we commenced the final audit. Although a few late changes were required to be made to enhance financial statement disclosure, we noted a significant improvement in the efficiency of executing the related year-end audit. We commend you on your progress and urge you to continue to streamline the year-end reporting process in future years. 2. Internal Audit Function-Risk Manal!ement Observation: These are challenging times for local governments. The Municipality is required to operate in an environment of constant change. In addition to the ongoing challenges provided by the devolution of services by the Province of Ontario, the Municipality finds itselffaced with challenges related to: need for urban and development planning, need for alternative service delivery mechanisms, changing demographics, a growing popula tion, small non-residential tax base, and the attraction and retention of talented staff. There is a need to deliver the service and programs demanded by residents, while demonstrating efficient, effective and accountable government. In this environment, there is a requirement to take a more proactive approach to the management of risk, ensuring that an appropriate control environment is maintained and that key business risks are identified and addressed as changes in the internal and external environment occur. An internal audit function is one response to the requirement to become more proactive in risk management activities, especially during periods of rapid change such as the Municipality is experiencing. There is value in having a strong risk management focus that is enabled through an internal audit function - a function that understands the various stakeholders and their differing needs - a function, which recognizes the necessary balance between creating stakeholder value and protecting stakeholder value. Internal audit needs to partner with management in proactively managing key business risks and providing high-quality service in a cost-effective, non-intrusive manner. Moreover, during our audit of the Municipality, we review and test the financial systems and related controls. However, our examination is performed on a test basis, and would not necessarily bring to light all weaknesses in internal control and management information which would be detected if an Internal Audit department is in operation. 1 Z' , I .J j 't CORPORATION OF THE MUNICIPALITY OF CLARINGTON Management Letter For the year ended December 31, 2002 Page 2 of 2 2. Internal Audit Function-Risk Management (continued) Recommendation: We recommend that the Municipality consider the costlbenefit relationship of establishing an Internal Audit department that can perform regular tests on internal controls and other "business risk" areas and highlight areas where improvements can be made to various aspects of the Municipality's operations. A well-positioned Internal Audit department can support the Municipality in its efforts to optimize risk management. New Financial Accounting Software 3. General Comment We understand during the 2003 fiscal year, the Municipality will be commencing a financial systems implementation project. As part of this project we encourage the Municipality's management team to ensure that focused consideration is given to leveraging the new system in the design and implementation of appropriate internal controls. Although there is no impact to the 2003 fiscal year end audit, we will include in our scope for the 2004 fiscal year end audit an assessment of all changes to the overall internal control environment and perform appropriate testing of application level security and controls, business process controls, general computer controls impacted by the implementation. Also in 2003, we will be required to perform a data conversion assurance review to assess the completeness and accuracy of the data conversion to the new system as part of our audit scope. We would be please to provide your implementation team with a listing of our audit requirements around the new system to help ensure that they are considered during the implementation process. 1 r-, ~ -' Attachment "B" THE CORPORATION OF THE MUNICIPALITY OF CLARlNGTON BY-LAW NUMBER 2003- Being a by-law to appoint an Auditor for the Corporation of the Municipality ofClarington WHEREAS Section 296(1) of the Municipal Act 2001, S.O. 2001, C.4S gives Council the authority to appoint "for a term of one year, auditors who are licensed under the Public Accountancy Act"; AND WHEREAS it is necessary to appoint an auditor for the Corporation of the Municipality of Clarington; NOW THEREFORE the Council of the Corporation of the Municipality ofClarington enacts as follows: 1. THAT Deloitte and Touche LLP is hereby appointed auditor for the Municipality of Clarington for a term of one year, for the fiscal year ending December 31, 2003, inclusive. By-Law read a first and second time this 20th day of October 2003. By-Law read a third time and finally passed this 20th day of October 2003. John Mutton, Mayor Patti L. Barrie, Municipal Clerk 13rr, )""