AGENDA - Special General Committee - 20070627Aui:t,oRA
SPECIAL GENERAL
COMMITTEE -
AUDIT COMMITTEE
AGENDA
NO, 07-29
WEDNESDAY, JUNE 27,2007
6:00 P.M.
COUNCIL CNAMBERS
AURORA TOWN NALL
PUBLIC RELEASE
22/06/07
Aumoi A
TOWN OF AURORA
SPECIAL GENERAL COMMITTEE MEETING
AUDIT COMMITTEE
AGENDA
NO. 07-29
Monday, June 27, 2007
6:00 p.m.
Council Chambers
Mayor Morris in the Chair
I DECLARATIONS OF PECUNIARY INTEREST
11 APPROVAL OFAGENDA
RECOMMENDED:
THAT the agenda as circulated by the Corporate Services Department be
approved.
111 DELEGATIONS
(a) Mr. John Gutteridge, Director of Financial Services/Treasurer pg. 1
Re: 2007 Budget Review and 2008 Timetable
Special General Committee - Audit Committee Meeting No. 07-29 Page 2 of 2
Monday, June 27, 2007
IV CONSIDERATION OF ITEM REQUIRING SEPARATE DISCUSSION
1. AC07-003
Internal Audit Reports
RECOMMENDED:
pg. 39
THAT the Leisure Complex Audit Report and the Procurement & Accounts
Payable Audit Report be received; and
THAT appropriate action be taken to resolve all the issues identified and
outstanding.
2. AC07-001 pg.58
Audit Committee Terms of Reference
3. AC07-002 pg.64
2007 Budget Process Review
4. Proposed 2008 Budget Timetable pg. 70
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SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - 7, 200
AGENDA ITEM #
�- TOWN OF AURORA
AURORA AUDIT COMMITTEE REPORT No. AC07-003
SUBJECT: Internal Audit Reports
FROM: L. John Gutteridge, Director of Finance/Treasurer
DATE: June 18, 2007
RECOMMENDATIONS
That the Leisure Complex Audit Report and the Procurement & Accounts Payable
Audit Report be received and
That appropriate action be taken to resolve all the issues iden dried and outstanding.
BACKGROUND
In 2006 the Town entered into an agreement with the Region of York to provide internal
Audit Services to the Town of Aurora. The attached reports on "Leisure Complex Audit
Report' and "Procurement and Accounts Payable Audit Report" are the first two report
completed and presented to the Town.
We are presenting these to the Audit Committee for your information.
We have invited Mr. Paul Duggan, Director -Audit Services,
Foster our Regional Auditor to this meeting to explain the p
areas for review and to answer any questions you may hav
their engagement with the Town.
OPTIONS
MOT
FINANCIAL IMPLICATIONS
Some of the recommendations have a cost to implement.
CONCLUSIONS
e
As can be seen in the reports they have identified the issue and made recommendations
-39-
SPECIAL GENERAL COMMITTEE — AUDIT COMMITTEE — JUNE 27, 2007
June 18 2007 - 2 - Report No. AC07-003
for correction, this is followed by management's comments and timeline for resolution.
LINK TO STRATEGIC PLAN
Goal D: Ensure transparent, accountable and open governance in concert with informed
and involved citizens
Objective D1: Continue the commitment of fiscal responsibility and accountability
Objective 132: Enhance customer service
Objective D3: Be accountable and transparent to residents by ensuring open and
accessible information flow and accessible decision -making
Objective D4: Create a respectful environment that fosters team work and open dialogue,
consistent with a Character Community. These Objectives acknowledge the responsibilities
required by governance that contribute to informed and involved citizens.
ATTACHMENTS
Attachment #1 — Leisure Complex Audit Report
Attachment #2 — Procurement & Accounts Payable Audit Report
PRE -SUBMISSION REVIEW
Prepared by:1,L. John Gutteridge, Director of Finance/Treasurer -Ext. #4111
of Finance/Treasurer
John S. Rogers
Chief Administrative Officer
__!
SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - JUNE 27, 20&fTACHMENT#1
Town of Aurora - Leisure Complex r UUiL MUNV„ n
April 2006
own of
Aurora -Leisure r . •
Audit
Internal Audit Report
-41-
SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - JUNE 27, 2007
Town of Aurora — Leisure Complex Audit Report
April 2006
TABLE OF CONTENTS
Section Page No.
1.0 MANAGEMENT SUMMARY
2.0 INTRODUCTION..........................................................................................................................................2
3.0 OBJECTIVES AND SCOPE
4.0 DETAILED OBSERVATIONS AND RECOMMENDATIONS................................................................4
4.1
CASH HANDLING PROCEDURES AT RECEPTION.....................................................................................4
4.2
CASH BALANCING/CLOSRJG PROCEDURES...........................................................................................5
4.3
TICKETS/MEMBERSHIP PASSES.............................................................................................................6
4.4
CLASS SYSTEM....................................................................................................................................7
4.5
AQUATICS COMPLIANCE.......................................................................................................................
8
Infernal Audit Report
-42-
Page 1
SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - JUNE 27, 2007
Town of Aurora — Leisure Complex Audit Report
April 2006
1.0 Management Summary
Audit Services has completed a review of the operations at the Town of Aurora's Leisure
Complex (ALC),
Based on the work performed, we were able to highlight opportunities to introduce or enhance
management internal controls relating to:
• Cash handling procedures at the reception desks.
• Pay as You Go tickets and memberships passes.
• Processing of cancellations/withdrawals in the Class system.
• Compliance with Ministry of Health regulations pertaining to operation of the pool.
A draft copy of this report has been discussed with Leisure Services Management. They have
provided us with their comments and have agreed to take the necessary action to implement the
noted recommendations.
Should the reader have any questions or require a more detailed understanding of the risk
assessment and sampling decisions made during this audit, please contact the Director, Audit
Services.
We wish to thank the Town of Aurora Treasury, and Leisure Services management and staff for
their co-operation and assistance in providing Audit Services with requested documentation and
timely responses.
2.0 Introduction
In June 2005 the Town of Aurora and York Region entered into a memorandum of understanding
for the delivery of audit services. To determine which areas would benefit most from audit
services, an Audit Plan was developed by the Audit Services Branch using a Risk Assessment
Methodology that helps to define the different risks associated with the various processes at the
town. It is one tool that Audit Services uses in assessing where best to allocate audit resources.
The Leisure Services Department is responsible for the planning, development and
general/financial management and administration of the Parks and Facilities planning,
construction, maintenance of operations, community and heritage program development and
delivery for the residents of Aurora.
The Aurora Leisure Complex provides a wide range of recreational programs and services
including fitness, pool and squash memberships, and aquatics.
Internal Audit Report
-43-
Page 2
SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - JUNE 27, 2007
Town of Aurora — Leisure Complex Audi' Report
3.0 Objectives and Scope
The objectives of this engagement included ensuring:
• Controls over cash handling are in place and adequate to ensure the completeness of
revenues and reduce the likelihood of fraud.
• Controls are in place over the completeness, existence and accuracy of the processing and
accounting of memberships/program registration,
• Compliance with Ministry of Health regulations for the pool.
The audit objectives were accomplished through:
• A review of cash handling procedures from point of sale through to the accounting and
bank records.
• A review of registrations/memberships through the Class system through to the
accounting records.
• Review of regulations, policies and procedures manuals and other related documentation.
• Interviews with appropriate personnel,
f.�
Audit Report
-44-
Page 3
SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - JUNE 27, 2007
Town of Aurora — Leisure Complex Audit Report
April 2006
4.0 Detailed Observations and Recommendations
4.1 Cash Handling Procedures at Reception
Observation
A review cash handling procedures at the front and back reception desks revealed the following
opportunities to strengthen internal controls:
• Cash and cheques received as payment for transactions processed through Class are not
adequately secured. They are placed in bag which sits on the cabinet at reception
throughout the day until closing.
• Cheques received as payment are not restrictively endorsed upon receipt. Restrictive
endorsement reduces the likelihood of misappropriation.
• Gift Certificates are not stamped "redeemed/cancelled" when redeemed. Stamping the
Gift Certificates upon redemption ensures that it cannot be presented again resulting in
loss of revenues.
• Receipts are not printed from the register and given to clients at point of sale. Issuance of
receipts is standard procedure and reduces the likelihood of manipulation of sales/cash.
Recommendation
• Cash and cheques for Class transactions should be put under the money till in the cash
register during the day to reduce the likelihood of loss.
• The front and back reception desks should be provided with a stamp "For Deposit only to
the Credit of the Town of Aurora" and cheques should be stamped upon receipt to reduce
the likelihood of misappropriation.
• The front and back desk should be provided with a "redeemed" stamp to be used when
gift certificates are presented for redemption.
• Sales receipts should be issued and given to clients for all transactions.
Management Response
• Reception desk procedures will be amended to accommodate all recommendations.
(by October, 2006)
• Cash and cheques for Class transactions will be placed under the money drawer in
the register until reconciliation at the end of each day, ( completed )
• A "for deposit only" stamp will be purchased for both the front and back reception
desks. ( by October, 2006 )
• Both desks will be provided with a "redeemed" stamp for use on the gift certificates.
( by October, 2006 )
• Staff will provide sales receipts to each customer. ( completed )
Internal Audit Report
-45-
Page 4
SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - JUNE 27, 2007
Town of Aurora — Leisure Complex Audi' Report'
April 2006
4.2 Cash Balancing/Closing Procedures
Observation
A review cash balancing and closing procedures at the front and back reception desks revealed
the following opportunities to strengthen internal controls:
• Closing procedures require staff to adjust the sales figures (i.e. put through a refund or
sale) in order to agree with the cash on hand/sales report at the end of the day, Operators
should not have access to the master register key and should not be adjusting sales to
balance. This procedure encourages manipulation of cash receipts which increases the
likelihood of theft.
• Cash is not adequately secured at the end of the day. Cash register receipts are placed in
regular envelopes and are sealed before being placed in the safe, however the envelopes
are not suited for this purpose and the seal is not signed by the person responsible for the
cash. This would allow others to open the envelope and re -seal it undetected. Reception
staff indicated that they open sealed envelopes for change if needed.
• There are no controls over the completeness of items deposited nightly in the safe. The
person emptying the safe has no idea how many envelopes are to be collected. If an
envelope was missing, it would not be discovered until the daily cash balancing was
performed.
• On April 5 during observation of closing procedures it was noted that the security camera
was not operational, and had not been for a few weeks. On April 18, Operations
indicated that they were in the process of getting it fixed. Security tapes could provide
key evidence in the event of a break-in.
Recommendation
• Overages/Shortages should be recorded on the cash sheet and tracked and investigated by
accounting personnel (Martine Legate — Secretary/Clerk — Financial) at the Town. A
record of overages/shortages by operator should be maintained to identify potential
problems.
• The master key to the registers should be held by someone other than the operator. This
person should run the closing sales reports for the register and sign the tape to reduce the
risk of manipulation of sales.
• Envelopes suitable for cash should be obtained and used for daily cash receipts. The seal
should be signed by the person responsible for the cash.
• A control sheet for each reception desk should be created and used to track the number of
envelopes deposited. The number of envelopes in the safe should be compared to the
control sheet to ensure that all bags are accounted for.
• The security camera should be fixed immediately.
Internal Audit Report
om
Page 5
SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - JUNE 27, 2007
Town of Aurora — Leisure Complex Audit Report
April 2006
Management Response
• Overages and shortages will be recorded on each cash sheet at the end of every day.
Accounting personnel will track all overages/shortages and monitor potential problems.
( completed )
• Two staff will be on shift at the close of each day. These staff will run off the opposite
report and initial the tape at the end of each day. Both register tapes will be forwarded to
accounting personnel for verification. ( completed )
• Treasury will be requested to provide Leisure Services with sealable bank bags which
will be used at the end of each day for daily transactions. ( request made )
• A control sheet will be developed and utilized by the Admin./Budget Co-ordinator daily.
The number of bags will be compared with the control sheet on a daily basis. (by
October, 2006 )
• The security camera has been updated and is in working order. ( completed )
4.3 Tickets/Membership Passes
Observation
Completeness and access controls over tickets (Pay as You Go, punch passes, and membership
passes) are not adequate, Tickets are easily duplicated, are not pre -numbered. Large quantities of
blank tickets are kept in an unlocked drawer and blank pool/aquafit passes are kept in a plastic
recipe box on the desk, both of which are susceptible to theft.
As tickets are redeemed they are ripped and put in the garbage, nothing is rung into the register
and no receipt is given to the client. Improved controls over ticket redemption would reduce the
likelihood of lost revenues.
Recommendation
Tickets should be redesigned where necessary to include pre -numbering and security
features to reduce the risk of reproduction. A log should be kept to enable reconciliation
of tickets sold to sales.
Management should investigate the cost of acquiring a web camera, scanner and printer
to more fully utilize the technology in the Class system. Photo passes can be produced
and usage tracked via the scanner. Multi -use photo passes can also be produced and
scanned each time it is used to eliminate the need for books of tickets and punch passes.
Tickets should be stamped "redeemed" and rung into the register under a "no charge" key
and a receipt given to the client. Tickets should be retained as evidence of redemption
and reconciled to the number of "no charge" sales by the Town accountant.
Management Response
• Leisure Services is awaiting direction from the Treasury Department on their
recommendation for the design of new tickets. ( request made )
Leisure Services will ask IT to investigate the program upgrade in Class as requested in
the recommendation. ( ongoing )
Internal Audit Report
-47-
Page 6
SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - JUNE 27, 2007
Town of Aurora — Leisure Complex Audit Report
April 2006
• Tickets will be stamped as "redeemed". A "no charge" key will be set up on both
registers. Tickets will be collected and rung into the register for reconciliation at the end
of each day. ( by October, 2006 )
4.4 CLASS System
Observation
A review of transactions processed through the Class system revealed the following opportunities
to strengthen internal controls:
Operators have the ability to process a cash program/membership withdrawal in the
system which increases the risk of misappropriated funds. Although procedures require
that the withdrawal confirmation along with the written request be sent to the Town for
approval and processing of the refund, it would be possible for a withdrawal to be put
through Class on the date of purchase, and the cash could be taken which would likely
not be caught until a client complaint was received.
• Operators have the ability to change the preset fee amount in Class upon registration for
programs/memberships. Manipulation of fees could result in lost revenues.
Recommendation
• The "Cash Transactions" section of the Class Daily Cash Balancing Report should be
reviewed by the Secretary/Clerk — Financial on a daily basis to identify any cash
withdrawals processed. Any such transactions should be brought to the attention of the
Manager of Programs for investigation.
Management should investigate the possibility of exception reporting in Class which
would identify instances where fees have been changed. If available, this report should be
printed off daily at the Town to identify and follow up any inappropriate undercharging
of fees.
Management Response
• Review of cash withdrawals on the Class Daily Cash Balancing Report on a daily basis
will be implemented in October, 2006,
• The Admin./Budget Co-ordinator will investigate the possibility of utilizing an
"exception" report as suggested in the recommendation. ( by October, 2006 )
Internal Audit Report
M;
Page 7
SPECIAL GENERAL COMMITTEE — AUDIT COMMITTEE — JUNE 27, 2007
Town of Aurora — Leisure Complex Audit Report
April 2006
4.5 Aquatics Compliance
Observation
A review of Aquatics compliance to Ministry of Health Regulations revealed the following
opportunities to strengthen internal controls:
• The Policies and Procedures manual does not include the requirement for Aquatics staff
to perform pool chemistry tests every two hours. Including this in the manual would
formally establish the testing as an essential component of aquatics staff duties.
• Manual pool chemistry tests were not completed/documented every two hours per
regulatory requirements. In a 10 day period (April 1-10) 7 out of 10 days had a total of
12 gaps in the 2 hour testing on the deck. Manual testing by Operations revealed 5 out of
7 days had a total of 13 gaps in the testing.
Recommendation
• The requirement to perform and document pool chemistry testing every two hours should
be added to the policies and procedures manual. The importance of performing and
documenting pool chemistry testing should be reviewed with staff. The Aquatics
supervisor should perform weekly spot checks to follow up.
Management Response
• The requirement to perform and document pool chemistry testing every 2 hours will be
added to the staff training manuals, The Facility Manager has met with operations staff
to ensure compliance. Weekly spot checks will be performed by a full time aquatics staff
person and an, Operations Supervisor. ( completed )
Allan Downey
Director of Leisure Services
Paul J.J. Duggan
Director - Audit Services
Regional Municipality of York
Internal Audit Report
=
Page 8
SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - JUNE 27, 2001gTTACHMENT02
Town of Aurora
Procurement & Accounts Payable
Audit Deport
October 2006
internal Audit Report
-50-
SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - JUNE 27, 2007
Town of Aurora - Procurement & Accounts Payable Audit Report
October2006
TABLE OF CONTENTS
Section Page No.
1.0 MANAGEMENT SUMMARY .................................... ............. .................................................... I ................ 2
2.0 INTRODUCTION..........................................................................................................................................2
3.0 OBJECTIVES AND SCOPE.........................................................................................................................3
4.0 DETAILED OBSERVATIONS AND RECOMMENDATIONS................................................................4
4.1 RESULTS OF DETAILED INVOICE TESTING.............................................................................................4
4.2 POLICIES AND PROCEDURES ................. .......................................... ................... ........... I...... I.................5
4.3 SIGNING AUTHORITY.........................................................................................................................— 5
4.4 PROCUREMENT DOCUMENTATION........................................................................................................ 6
Internal Audit Report
-51-
Page 1
SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - JUNE 27, 2007
Town of Aurora . Procurement & Accounts Payable Audit Report
October 2006
1.0 Management Summary
We have completed an audit of the Town of Aurora's compliance with the requirements as
contained in the Purchasing By -lain 4621-04.F. The focus of our review was to determine if
processed disbursements and supporting documentation were accurate and appropriately
authorized.
The scope of the audit included detailed testing of a selected sample of Accounts Payable
disbursements issued for the fiscal period January to June 2006, and a review of related
supporting documentation. Interviews were also performed with appropriate personnel as
necessary. Testing was conducted at a sufficient level of detail to allow us to evaluate the Town's
compliance with the current by-law.
Based on the work we performed, we conclude that the Town is generally in compliance with the
Purchasing By-law. Opportunities for internal control improvements were noted and discussed
with appropriate management. These improvements relate to periodic reiteration of individual
responsibilities to those who are active within both the purchasing and payment cycles. We have
provided our recommendations in the body of the report.
A draft copy of this report has been discussed with Accounts Payable and Purchasing
management, who have provided us with their comments and who have agreed to take the
necessary action to implement the recommendations.
Should the reader have any questions or require a more detailed understanding of the risk
assessment and sampling decisions made during this audit, please contact the Director, Audit
Services.
Audit Services would like to thank the Accounts Payable and Purchasing management and staff
for their cooperation and assistance.
2.0 Introduction
In June 2005 the Town of Aurora and York Region entered into a memorandum of understanding
for the delivery of audit services. To determine which areas would benefit most from audit
services, an Audit Plan was developed by the Audit Services Branch using a Risk Assessment
Methodology that helps to define the different risks associated with the various processes at the
town. It is one tool that Audit Services uses in assessing where best to allocate audit resources.
Audit Services randomly selected 35 disbursement transactions from a population of
approximately 6000 transactions between January 1, 2006 and June 30, 2006. The selection was
performed judgementally. From the sample of 35 invoices, 10 purchase orders were identified for
further detailed testing for compliance with the Procurement By-law.
Infernal Audit Report
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SPECIAL GENERAL COMMITTEE — AUDIT COMMITTEE — JUNE 27, 200.7
Town of Aurora - Procurement & Accounts Payable Audit Report
October2006
3.0 Objectives and Scope
The objectives of this engagement included:
• Ensuring that supporting documentation is in compliance with the Purchasing Policy.
• Ensuring processed disbursements are accurate and appropriately authorized.
The audit objectives were accomplished through:
• Detailed testing of a sample of processed disbursements to -date for the 2006 fiscal
year.
• Interviews with appropriate personnel.
Review of disbursement files and other related documents.
Internal Audit Report
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Page 3
SPECIAL GENERAL COMMITTEE — AUDIT COMMITTEE — JUNE 27, 2007
Town of Aurora - Procurement & Accounts Payable Audit Report
October 2006
4.0 Detailed Observations and Recommendations
4.1 Results of Detailed Invoice Testing
Observation
Detailed testing of 35 invoices highlighted the following opportunities to strengthen internal
controls over the procurement and payments processes:
�e
# of
% of total
Condition
invoices
reviewed
1. Invoices did not have purchase requisitions/purchase orders
7
20%
approved prior to the receipt of the invoice.
2. Invoice was not approved as evidenced by an authorized
1
3%
signature prior to payment.
3. Invoice amount exceeded the authorized signing authority
1
3%
limit.
Recommendation
• Accounts Payable management should ensure that all staff are aware of the requirement to
have an approved purchase requisition prior to an order being placed/work being
performed.
• Accounts Payable management should ensure that all staff are aware of their signing
authority limits.
Invoices should be reviewed and signed as evidence that they are approved prior to processing
payment. This is considered to be a "best practise". If approval of the P.O, in the electronic
system is also considered to be approval of payment of the invoice, this should be documented
in your Policies/By-law and Procedures, and should be reported to the Audit Committee and
Council. This alternative practice is being used in some municipalities and businesses,
however, this alternative processing increases the inherent risk in the purchasing and payment
process.
Management Response
With regard to condition No. 1, this is actually a Purchasing issue and will be addressed with the
Purchasing Department. This issue is primarily the result of one department and we have
instructed this department to insure that this doesn't happen again. We are looking to review the
procurement by-law and process to include a formal reporting mechanism that will identify non-
conformity to the purchasing process.
Internal Audit Report
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SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - JUNE 27, 2007
Town of Aurora - Procurement & Accounts Payable Audit Report
October2006
It is our hope that this will be completed in the first quarter of 2007.
This implementation will be completed in the first quarter of 2007.
We are also implementing a policy where approval and sign off of signing for purchase approvals
will occur on an annual basis. This will address the issue of keeping signing authorities current.
This process will be completed by December 31, 2006.
4.2 Policies and Procedures
Observation
There are no formal policies and procedures for Accounts Payable or the Purchasing Department.
Formalization of policies and procedures helps to ensure that expectations are understood and
adhered to.
Recommendation
Formal policies and procedures should be drafted and implemented.
Management Response
Formal policies and procedures will be drafted and implemented my 2"d quarter 2007.
4.3 Signing Authority
Review of the Accounts Payable Approval Records Forms revealed the following:
There is no dollar limit indicated for L John Gutteridge on the form for Treasury, and the
form has not been dated or approved by John Rogers.
The form for Corporate Services does not have Bob Panizza (Department Head) as an
approved signatory, and he has approved invoices.
One employee was terminated in November, 2005 but had not been removed from the A/P
Approval Record Form.
Internal Audit Report
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SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - JUNE 27, 2007
Town of Aurora - Procurement & Accounts Payable Audit Report
October 2006
Recommendation
The Accounts Payable Approval Records Forms should be updated to ensure that all
authorized signatories and their approval limits are completed and approved by the
respective department heads.
The Accounts Payable Approval Records Forms should be reviewed periodically to
ensure that they are up to date.
Management Response
We agree with the points identified and have taken action to have John Rogers sign off on the
Financial Services Department approval schedule, the same has taken place for the Corporate
Service Department and Bob Panizza.
A process is being developed to have as a minimum an annual review and renewal.
This will be completed by December 31, 2006.
4.4 Procurement Documentation
Two out of 10 (20%) of the procurement files selected did not contain evidence of the evaluation
criteria, or the evaluation process and consequently Audit Services could not ascertain whether or
not the most suitable/lowest qualifying bid was selected.
Section 7(g) of the Procurement by-law requires that "the evaluation of each Bid shall be
carefully recorded ..., which shall be filed and maintained in accordance with the record
retention by-law. "
Recommendation
Management should reiterate with staff, the importance of ensuring that all evaluation criteria
documentation is submitted to the Purchasing Manager.
The Purchasing Manager should ensure that all required documentation is received and retained
in the procurement file as required by the by-law.
ManagementResponse
We agree with the observation and have instructed appropriate personnel that a purchase order
will not be issued until the appropriate documents are obtained for the file.
This has been implemented.
Internal Audit Report
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SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - JUNE 27, 2007
Town of Aurora - Procurement & Accounts Payable Audit Report
October 2006
L. John Gutteridge
Director of Finance/Treasurer
Paul J.J. Duggan
Director — Audit Services - Regional
. Municipality of York
Internal Audit Report
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Page 7
SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE
AGENDA ITEM # a
TOWN OF AURORA
AURORA AUDIT COMMITTEE REPORT No.AC07-001
SUBJECT: Terms of Reference, Town of Aurora Audit Committee
FROM: L. John Gutteridge, Director of Finance / Treasurer
DATE: June 18, 2007
RECOMMENDATIONS
That the report be received and no changes be recommended to the Terms of
Reference for the Town's Audit Committee at this time.
BACKGROUND
Last year Council adopted the Terms of Reference for the Town's Audit Committee as
attached hereto as Attachment #1.
As this is the first opportunity for this Committee to review the Audit Committee Terms of
Reference and one of the responsibilities of the Audit Committee is "review and assess
the adequacy of the Audit Committee Terms of Reference annually, requesting
Council approval for proposed changes and ensure appropriate disclosure as may
be required by or regulation" we felt that this should be added to this agenda.
As this Council has a 4 year mandate you may want to consider if it is necessary for all of
Council to sit as the audit committee. All municipalities take different approaches to their
audit committees with some having all of Council sit as we do, and some have a mix of
political and public representation. We are not suggesting you change we just wanted to
make you aware that you do have options as to the composition of this committee.
If you would like to consider another option we can bring back a report on the formation of
other municipalities audit committee.
OPTIONS
1. That the report be received and no changes be recommended to the Terms of
Reference for the Town's Audit Committee at this time.
2. That the Director of Finance prepare a report on alternative structures for the Audit
Committee.
SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - JUNE 27, 2007
June 18, 2007 - 2 - Report No. AC07-001 '
FINANCIAL IMPLICATIONS
N/A
CONCLUSIONS
As was pointed out this report is being presented as a compliant issue for the existing
terms of reference, Council may at your discretion suggest changes.
LINK TO STRATEGIC PLAN
Goal D: Ensure transparent, accountable and open governance in concert with informed
and involved citizens
Objective D1: Continue the commitment of fiscal responsibility and accountability
Objective D3: Be accountable and transparent to residents by ensuring open and
accessible information flow and accessible decision -making
ATTACHMENTS
Attachment #1 - Terms of Reference Town of Aurora Audit Committee
PRE -SUBMISSION REVIEW
Prepared by. L. John Gutteridge, Director of Finance/Treasurer -Ext. #4111
Gutteridge �
of Finance/Treasurer == - �Chief Administrative Officer
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SPECIAL GENERAL COMMITTEE — AUDIT COMMITTEE — JUNE 27, 2007
ATTACHMENT #1
Terms of Reference
Town of Aurora Audit Committee
Purpose: -To provide oversight responsibilities for the Town of Aurora's:
> financial reporting processes;
> overall guidance and direction to the CAO and Management related to the
Town's system(s) of internal control;
internal and external audit processes; and,
7= processes for monitoring compliance with laws and regulations (applicable law),
the Code of Conduct and the Conflict of Interest Policy Statement;
Authority:- The Audit Committee is empowered to:
> recommend the appointment, dismissal and compensation of the Town's external
auditors;
> oversee the work of the internal and external auditors of the Town;
> resolve any disagreements between management and the auditor(s) regarding
financial reporting;
> retain independent counsel, accountants or others to advise the Committee or
assist in the conduct of an investigation;
seek any information the Committee requires from Management, employees
and/or agents of the Municipality;
> meet with the Town's management team, external auditors, or outside legal
counsel, as required, independently or together;
> review and recommend for approval audit fee billings in excess of the approved
budget for the completed audit of the period year; and
> review the audit plan and audit fee schedule for the ensuing year end,
SPECIAL GENERAL COMMITTEE — AUDIT COMMITTEE — JUNE 27, 2007
Composition:
The Audit Committee is comprised of all Members of Council (General
Committee) and reports directly to the Council of the Town of Aurora.
Meetings:
> the Audit Committee will shall meet at minimum two times per year with authority
to convene additional meetings, as circumstances require;
> meetings of the Audit Committee will be open to the public subject to exceptions
pursuant to Section 239 (2) of the Municipal Act, 2001, as amended;
> the Committee will invite members of management, auditors and/or others to
attend meetings and provide pertinent information, as necessary;
> meeting agendas will be prepared and provided In advance to members, along
with appropriate briefing materials; and
> minutes will be prepared.
Financial Statements
review significant accounting and reporting issues, including complex or unusual
transactions and highly judgmental areas, recent professional and regulatory
pronouncements, and understand their Impact on financial statements;
review with management and the external auditors the results of the audit,
including any difficulties encountered;
> review and receive the annual financial statements with management, and
consider whether they are complete, consistent with information known to
Committee members, and reflect appropriate accounting principles;
> recommend to Town Council the approval of the annual financial statements; and
> review with management and external auditors all matters required to be
communicated to the Committee under Generally Accepted Auditing Standards.
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SPECIAL GENERAL COMMITTEE — AUDIT COMMITTEE — JUNE 27, 2007
Internal Control
r consider the effectiveness of the Town's internal control system(s), including
information technology security and control;
understand the scope of internal and external auditor's review of internal control
and obtain reports on significant findings and recommendations, together with
Management's responses and the timing of the disposition of significant findings;
and
Y review the external auditor's Management Letter (if any) together with
Management's responses.
External Audit
> review the external auditor's proposed audit scope and approach;
subject to Section 296 of the Municipal Act, 2001 , as amended, review the
performance of the external auditors, and recommend to Town Council the
appointment or discharge of the auditors;
review and confirm the independence of the external auditors by obtaining
statements from the auditors on relationships between the' auditors and the Town
of Aurora, including nornaudlt services, and discussing the relationship with the
auditors; and
1 review the audit plan and audit fees for the ensuing year end.
Internal Audit
i review the Town's control processes and . systems to ensure compliance with
Town's policies, laws and regulations which impact operations and reports;
review policies used to safeguard corporate assets and verify the existence of
these assets; and
➢ review the efficiency and effectiveness of the utilization of the Town's resources
on programs and projects.
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SPECIAL GENERAL COMMITTEE — AUDIT COMMITTEE — JUNE 27, 2007
Compliance
> review the effectiveness of the system(s) for monitoring compliance with laws
and regulations and the results of Management's investigation and follow-up
(including disciplinary action) of any instances of non-compliance;
> review the findings of any examinations by regulatory agencies, and any auditor
observations;
> review the process for the communication of the Code of Conduct and Conflict of
Interest Policy Statement to Town personnel, and for monitoring compliance
therewith; and
> obtain regular updates from Management and the municipality's legal counsel
regarding compliance matters.
Reporting Responsibilities
> report to the Town Council about Audit Committee activities, Issues and related
recommendations;
> provide an open avenue of communication between the external auditors and
Town Council; and
> review any other reports the Municipality issues that relate to Audit Committee
responsibilities.
Other Responsibilities
> perform other activities related to these Terms of Reference as requested by
Town Council;
> institute and oversee special investigations as required; and
> review and asses the adequacy of the Audit Committee Terms of Reference
annually, requesting Council approval for proposed changes and ensure
appropriate disclosure as may be required by law or regulation.
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SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE -iTUNY-Tr, 2007 ITEM # 3
TOWN OF AURORA
AURORA AUDIT COMMITTEE REPORT No. AC07-002
SUBJECT: 2007 Budget Process Review
FROM: L. John Gutteridge, Director of Finance/Treasurer
DATE: June 18, 2007
RECOMMENDATIONS
That Report No. AC07-002 be received.
BACKGROUND
Now that the 2007 Budget is behind us it is time to start planning for your 2008 budget.
The purpose of this report is to take the opportunity to review our 2007 process and
determine what worked well and what didn't so we can improve the 2008 process.
As this was your first budget for some of you, you were probably not aware that we did
make some major changes in the budget process for the 2007 budget. As a result of these
changes we need this review to identify any improvements.
We are attaching to this report the Priority Setting Matrix for 2007 Capital Budget and a
sample Capital Budget — Analysis by Project, we would like to obtain Council's feed back
on the process and suggested changes if any.
COMMENTS
In this regard we have taken the opportunity to review our process
Management Team with the intent of recommending changes for Council
to Senior Management we ask them to evaluate the process based
matters and we have included the feed back we received:
CAPITAL BUDGET
Comments on how process worked:
o All agreed that the process was effective
• What worked well?
o Communication from Financial Services
SMT felt that communication was excellent
with the Senior
. When we went
on the following
o What can be improved next year?
o Suggestion that capital projects that don't make it one year get extra points
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SPECIAL GENERAL COMMITTEE — AUDIT COMMITTEE — JUNE 27, 2007
June 18. 2007 - 2 - Report No. AC07-002
the next year
o A method to handle projects that go over multiple years so we don't have to
present them the next year in the budget.
o Need to review scoring process once the process has been reviewed by
Council
o Capital Ranking — suggested changes
o Felt ranking process was good but not sure that Council used it.
o Need to address projects that didn't make it this year and a process to
recognize this in future years.
o Capital Project Description — suggested changes
o More specific on cost breakdown and the components of where funding
coming from
o Need to indicate on form if project is a carry forward project
o. Need to be consistentwhen identifying operating impact and adjust operating
accordingly.
o Do reports to advise Council of Capital Projects that are being considered
OPERATING BUDGET
o Format and Presentation
o Felt that information provided was adequate and help focus on programs not
line by line items.
o Need to make sure roll up for consolidation is as per directed by operating
department.
o It was suggested that the driver package be more detailed in providing
information regarding wage increases, fuel costs etc.
o Operating Budget Binder
o Suggest that we go back to 81/2 X 11 paper
o Look at sharing information via the Intranet once it is up and running.
o Would find it advantageous if questions about specific items were identified
so proper answers can be prepared to avoid delays by having to bring
information back at a later date.
BUSINESS PLANS
o Suggestions or Comments
o Presentation of Business Plans need to be done before capital projects are
presented in order to connect the needs of the department and the
information provided.
o Business plans need to be standardized this year
o Need to do more work on the KPI's
FEEDBACK ON PRESENTATION'S J
o Suggest that budget meetings be held in Council Chambers to make presentations
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SPECIAL GENERAL COMMITTEE — AUDIT COMMITTEE — JUNE 27, 2007
June 18, 2007 - 3 - Report No. AC07-002
more effective.
o Suggest that we do a better job of scheduling presentation times. Separate the
Public Works and Leisure Services presentations, make them on separate days.
o Suggest that we plan for 2 Saturday meetings and 4 weeknight meetings.
In general the management team were happy with the improvements in the process and
would like to see budget timetable have budget completed by the end of December.
N/A
FINANCIAL IMPLICATIONS
N/A
CONCLUSIONS
The purpose of this report and my presentation is to obtain Council's feed back on the
process and to establish the 2008 Budget Timetable.
LINK TO STRATEGIC PLAN
Goal D: Ensure transparent, accountable and open governance in concert with informed
and involved citizens
Objective D1: Continue the commitment of fiscal responsibility and accountability
Objective D2: Enhance customer service
Objective D3: Be accountable and transparent to residents by ensuring open and
accessible information flow and accessible decision -making
Objective D4: Create a respectful environment that fosters team work and open dialogue,
consistent with a Character Community. These Objectives acknowledge the responsibilities
required by governance that contribute to informed and involved citizens.
ATTACHMENTS
Attachment #1 — Priority Setting Matrix for 2007 Capital Budget
Attachment #2 — Capital Budget — Analysis by Project
SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - JUNE 27, 2007
June 18, 2007 - 4 - Report No. AC07-002
PRE -SUBMISSION REVIEW
Prepared by: L. John Gutteridge, Director of Finance/Treasurer -Ext. #4111
utteridge ohn S. Rogers
of Finance/Treasurer Chief Administrative Officer
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SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - JUNE 27, 2AITACHMENT #1
Priority Setting Matrix for 2007 Capital Budget
Categories
Potential Scores
Maximum
Score
Legal Obligation
- Must be done this year — 25 points
25
Is the project necessary to support legal
- Must be done next year — 15 points
obligations? (Regulations/ Legislation/Council
- Must be done in the next three to five
Policy)
years — 5 points
- Must be done in more than five years —
0 points
Health and Safety
- Immediate action required to protect
20
Is the project necessary from a mandated
Health and Safety — 20 points
Health and Safety perspective?
- Preventative action required to improve
Health and Safety — 10 points
- Not necessary to protect Health and
Safety — 0 points
Support Approved Town Programs/
- Supports approved plan(s) and
15
Direction
identified for action in this year-15
Does the project support approved Town
points
programs/directions, such as:
- Supports approved plan(s) and
Strategic Plan
identified for action next year —10
Official Plan
points
Master Servicing Plans
- Supports approved plan(s) and
Capital Asset Management Plan
identified for action in the next three to
Economic Development Study
five years — 5 points
Culture and Recreation Master Plan
- Does not support any approved plans —
0 points
Growth Related
- Growth related project —10 points
10
Is the project growth related?
- Partially growth related project — 5
points
- Not a growth related project — 0 points
External Funding
- 70% or more of funding from external
8
Will the project receive external funding?
sources — 8 points
- Government grant
- 50% to 69% of funding from external
- Development Charge Reserve funding
sources — 6 points
-Obligatory Reserve funding
- Up to 50% of funding from external
sources — 4 points
- No funding to come from external
sources — 0 points
Impact of deferral
- High impact of deferral — 7 points
7
Impact of deferral
- Medium impact of deferral — 5 points
- Low impact of deferral — 3 points
- No impact of deferral — 0 points
S:\Financial Services\F05 Budgets &Estimates\2008 Budget\Priority Setting Matrix for 2008
Capital Budget.doc
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SPECIAL GENERAL COMMITTEE - AUDIT COMMITTEE - JUNE 27, 2007
Impact on Operations
Impact on operating budgets
Related to Service Levels
Is the project related to service levels?
Does the project address a Council direction
not captured elsewhere in the priorities?
- Decrease in ongoing operational costs,
net of revenues — 6 points
- No impact on ongoing operational
costs, net of revenues — 3 points
- Increase in ongoing operational costs,
net of revenues — 0 points
- Required to improve service levels — 5
points
- Required to maintain service levels — 3
points
- Not related to service levels — 0 points
- Addresses Council direction —4 points
- Does not address Council direction — 0
points
M
S:1Financial Services\F05 Budgets &Estimates12008 Budget\Priority Setting Matrix for 2008
Capital Budget.doc
SPECIAL GENERAL COMMITTEE -AUDIT COMMITTEE -
FAGENDA ITEM #
2008 Budget Timetable
Process
Date
Processes
Budget Timetable
Approval
June 2007
Budget Time Table To Council
Friday, Aug 31/07
Business Plans Submitted
Business Plan
Monday, Sept. 17107
Special GC Meeting - Business Plans
Friday Sept. 28/07
2008, 2009, 2010 & 2011 Capital Budget
Requests Submitted to Financial Services
Thursday, Oct. 4/07 (2 - 5)
SMT - Capital Evaluation Meeting
Capital Budget
Friday, Oct. 5/07 (1 - 4)
SMT - Capital Evaluation Meeting
Friday, Oct. 12/07
All Capital Budget Requests Evaluated
Saturday, Oct. 20/07
Special GC Meeting - Capital
Monday, Oct. 1107
Salary and Wage Information signed -off by all
Departments
October 1 - 15, 2007
Budget Review with Budget Coordinator
Monday, Oct. 15/07
2008, 2009, 2010 & 2011 Operating Budget
Requests Submitted to Financial Services
Operating Budget
Tuesday, Oct. 16/07 (2 - 4)
Budget Review with Public Works
Wednesday, Oct. 17/07 (3 - 4)
Budget Review with Building
Friday, Oct. 19/07 (2 - 3)
Budget Review with Planning
Friday, Oct. 19/07 (3 - 4)
Budget Review with CAO
Tuesday, Oct. 23/07 (2 - 4)
Budget Review with Leisure Services
Wednesday, Oct. 24/07 (3 - 4)
Budget Review with Corporate Services
Thursday, Oct. 25/07 (10 - 11)
Budget Review with Financial Services
Saturday, Nov. 10/07
Special GC Meeting - Operating
Budget Meetings
Monday, Nov. 19107
Special GC Meeting - Operating
Monday, Nov. 26/07
Special GC Meeting - Operating
Monday, Dec. 3/07
Special GC Meeting - Finalize Budget
Approve Budget
December 11, 2007
Council Meeting
Approve Water Budget
January 2008
Water Budget Council
SAFinancial Services\F05 Budgets &Estimatest2008 Budget12008 Budget Time Table
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