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Agenda - Special General Committee - 20090203SPECIAL GENERAL COMMITTEE MEETING AGENDA AUDIT COMMITTEE NO, 09-04 MONBAY, FEBROARY 3, 2008 6:00 PM TOWN NALL PUBLIC RELEASE January 28, 2009 Aumoi A TOWN OF AURORA SPECIAL GENERAL COMMITTEE MEETING AUDIT COMMITTEE AGENDA NO. 09-04 Tuesday, February 3, 2009 6:00 p.m. Council Chambers Mayor Morris in the Chair I DECLARATIONS OF PECUNIARY INTEREST APPROVAL OF AGENDA RECOMMENDED: THAT the agenda as circulated by the Corporate Services Department be approved. III DELEGATIONS None IV CONSIDERATION OF ITEMS V ADJOURNMENT Special General Committee — Audit Committee - Meeting No. 09-04 Tuesday, February 3, 2009 Page 2 of 2 AGENDA ITEMS 1. AC09-001 — 2008 Audit Plan pg. 1 RECOMMENDED: THAT the Audit Committee recommends the 2008 Audit Plan as proposed by Grant Thornton and endorsed by the Financial Services staff be adopted; and THAT Grant Thornton be engaged to complete the audit at a fee not to exceed $56,050 plus disbursements and applicable taxes, unless otherwise approved. SPGC - AUDIT COMMITTEE February 3, 2009 ITEM# 1-1 TOWN OF AURORA AUR—ORA AUDIT COMMITTEE REPORT No. AC09-001 SUBJECT: 2008 Audit Plan FROM: L. John Gutteridge, Director of Finance/Treasurer DATE: February 3, 2009 RECOMMENDATIONS THAT the Audit Committee recommends the 2008 Audit Plan as proposed by Grant Thornton and endorsed by the Financial Services Staff be adopted, and THAT Grant Thornton be engaged to complete the audit at a fee not to exceed $56,050 plus disbursements and applicable taxes, unless otherwise approved. BACKGROUND In accordance with the Audit Committee Terms of Reference the audit committee is responsible to: 11 Review the audit plan and audit fee schedule for the ensuing year end Attached hereto is the Audit Plan for the 2008 Year End audit as prepared by the firm of Grant Thornton. The fees proposed are as per the tender they submitted in the following amount: and as outlined on page 11 of their report. 2008 Audit Fees Town annual audit $51,300 Library annual audit . $ 4,750 Total before taxes & disbursements $56,050. As part of their tender proposal there will be a 3% surcharge for disbursements. COMMENTS Council will recall that we went to Tender for Auditing Services in a joint tender with the Town of Whitchurch Stouffville on a three year tender for auditing services, 2008 is the middle year of the three year tender. - 1 - SPGC - AUDIT COMMITTEE ITEM# 1-2 February 3, 2009 February 3 2009 - 2 - Report No. AC09-001 The report attached address the changes that have occurred in the Town during 2008 and we believe that the plan clearly identifies the issues the need to be addressed for the 2008 .year end audit. From the perspective ofthe Financial Service Department there are a number of significant changes in our requirements for this year and we are committed to meeting these challenges and producing results as per the time line outlined on page 10 of their document. We would like to bring to Council's attention some of the significant changes with the PSAB Accounting, these are some of the most significant changes in Municipal Accounting in many years and will create challenges for the Financial Services Department. OPTIONS As presented in report. FINANCIAL IMPLICATIONS The cost for the audit is as proposed in the tender submitted by Grant Thornton. CONCLUSIONS Municipal Accounting is undergoing some significant changes that will require new reporting, these changes will create additional burden on the staff of the financial services department. We would ask Council to consider completing the budget process prior to year end so the work of the department can be disbursed equitably over this period and avoid the need to request additional staff. 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 1D3: Be accountable and transparent- to residents by ensuring open and accessible information flow.and accessible. decision -making -2- SPGC - AUDIT COMMITTEE February 3, 2009 ITEM # February 3, 2009 - 3 - Report No. AC09-001 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 — Report to the Audit Committee as prepared by Grant Thornton PRE -SUBMISSION REVIEW Senior Management Team — Wednesday, January 21, 2009 Prepared by: L. John Gutteridge, Director of Finance/Treasurer-Ext. #4111 ,rr L. Johnbutteridge Director of Finance/Treasurer -3- Neil Garbe Chief Administrative Officer SPGC - AUDIT COMMITTEE ITEM# 1-4 February 3, 2009 -4- SPGC - AUDIT COMMITTEE February 3, 2009 ITEM# 1-5 0 GrantThorntor Report to the Audit Committee — Initial Communication on Audit Planning The Corporation of the Town of Aurora For the year ended December 31, 2008 -5- SPGC - AUDIT COMMITTEE ITEM # 1 - 6 February 3, 2009 t. art Granffhorntor V GortIonutan LLP 15NIstate Parkway, Suite M Markham, ON L3R 504 T 4416)3%0100 F t905) 4760906 www.GranlThorniumuca 7anuary 5, 2009 To the Members of the Audit Committee of The Corporation of the Town of Aurora We are pleased to enclose a copy of a document titled Report to the Audit Committee — Initial Communication on Audit Planning. This document covers the terms of our financial statement audit engagement of The Corporation of the Town of Aurora (the 00Town,') for the year ending A eceinber 3l, 2008. This document will help the committee understand dae audit services we provide to The Corporation of the Town of Aurora and the level of responsibility assumed by Grant Thornton LLP under Canadian generally accepted auditing standards. If you have any particular comments, concerns or additional expectations that may require us to undertake additional work over and above that which is currently contemplated, please do not hesitate to raise them at our scheduled meeting. . Yours sincerely, Grant Thornton LLP Allister Byrne, FCA Partner cc: L. John Gutteridge, Director of Finance/ Treasurer ,1WR.T..AaW.., ..n,. TM,Im LLP. A O:v:dar 'Itorma NM1ou+ovn!L11 .6- SPGC - AUDIT COMMITTEE ITEM # February 3, 2009 Contents. Page The Corporation of the Town of Aurora — Snapshot of the business and recent changes 1 Achieving effective governance 3 Quality assurance, Independence and communication q Our audit approach 5 Client service team g Audit timetable 10 Fee schedule - ti Appendix A — Letter of Independence 12 Appendix B — P.SAB & Auditing developments - 15 Appendix G- Audit requirements letter pg, Audit - Tax • Advisory 0 Grant T➢omton LLP. A Canadian Member of Grant Thornton International. All rights reserved. - 7 - SPGC - AUDIT COMMITTEE ITEM # 1 - 8 February 31 2009 Report to the Audit Committee- Initial Communication on Audit Planning The Corporation of the Town of Aurora For the year ended December 31, 2008 The Corporation of the Town of Aurora — Snapshot of the business and recent changes Town -specific changes We aonaidar ail relevant Changes in management: The departure of the CAO in July.2008, saw Mr. Bob Panizza (Director of factors when preparing an Corporate Services) fill this position until November 2008, date of retirement. Mr. Neil Garbe has audit plan specifically been appointed the CAO with effect from January 5, 2bW. Other changes in management within the tailored to your fiscal year have been new Director of Public Works, Director of Planning and Director of Corporate municipality Services. Revenue Activity i Building permit revenue earned during fiscal 2008 substantially exceeded expectation due to better than anticipated building activity. Per Bill 124, excess revenue from building permitsis transferred to a reserve fund. Operational controls: The Town has continued to experience improvements in internal controls year over year, and have been mainly focused on improving segregation of duties. During the yen one, of the Treasury Clerics was promoted to a newly created position of "Revenue Administrator" created to enhance segregation of duties in the Taxation function. This makes the staff complement I Revenue Administrator and 3 Treasury Clerks, as opposed to 4 Treasury Clerks. - The Treasurer is currently reviewing the Purchasing Clerk position to improve segregation of duties within the department and to insure staff are fully utilized. Broader business environment All Municipalities are slowly progressing through developing policies and procedures to determine the value of their tangible capital assets in accordance with the new PSAB requirements. The municipalities in York Region continue to make great strides in becoming more environmentally friendly through the use of green bins. Audit • Tar - Advisory u Otani Thornton LLp. A Canadian Member of Grant rhomion International. All rights reserved: _8_ SPGC - AUDIT COMMITTEE ITEM # 1 - 9 February 3, 2009 Report to the Audit Committee -Initial Communication on Audit Planning The Corporation of the Town of Aurora For the year ended December 31, 2008 Accounting & auditing standards As in prior periods, there continues to be significant changes with respect to financial reporting, accounting and auditing standards which impact on municipal governments. ' Accounting standards issued by the CICA and those under development which may affect the Town for the current and future years include: • PSAB Section 3150 - Tangible Capital Assets • PSAB Section 1200 - Financial Statement Presentation • PSAB Section 2700 - Segment Disclosures • PSABSection 1150- Generally Accepted Accounting Principles • PSG-6 - Including Results of Organizations and Partnerships Applying Fair Value Measurement • PSG-7 -Tangible Capital Assets of Local Governments • Ro-exposure Draft- Government Transfers • Statement of Principles - Financial Instruments Auditing standards issued by the CICA which may affect the Town for the current and future years include: • Section 5365 - Communication with Actuaries Further detail of the changes to accounting and auditing standards, including management's preliminary conunents on their applicability to the Town are included in Appendix C. If you have any questions about these changes we invite you to raise them during our meeting. We will be pleased to address your concerns. Audit • Tax - Advisory J Grant Thornton UP. A Canadian Member of Grehl Thornton Internatlonai. All rlgus reserved. SPGC - AUDIT COMMITTEE February 3, 2009 The Audit Committee helps .at ire tone for l he organization by emphasizlog hon.. ty, othioel behaviour and fraud prevention Report to the Audit Committee - Initial Communication on Audit Planning The Corporation of the Town of Aurora For the year ended December 31, 2008 Achieving effective governance STEM # 1- 10 There are several fundamental components of effective governance. The Audit Committee plays a key role in achieving strong governance, particularly with respect to financial reporting, Roles in ensuring strong financial reporting Audit • Tax • Advisory 9 Groot Thornton LLP. A Canadian Morris, of Grant nuorntmr Inlarnellonel. All rights reserved. 3, - 10- SPEC - AUDIT COMMITTEE ITEM February 3, 2009 Report to the Audit Committee -Initial Communication on Audit Planning The Corporation of the Town of Aurora For the year ended December 31, 2008 Quality assurance, independence and communication Quality assurance Grant Thornton LLP has a Grant Thornton LLP has a robust quality control program that forms a core part of our client robust quality control service. We combine internationally developed audit methodology, advanced technology, rigorous review procedures, mandatory professional development requirements, and the use of specialists to program deliver high quality audit services to our clients. In addition to our internal processes, we are subject to inspection and oversight by standard setting and regulatory bodies. We are proud of our fmn's approach to quality assurance and would be pleased to discuss any aspect with you at your convenience. Independence We have a rigorous process where we continually monitor and maintain our independence. We are required to communicate this annually to the Audit Committee of the Town in writing and have _ attached our letter of independence as Appendix A. The process of maintaining our independence includes, but is not limited to confirming the independence of our engagement team members. Communication with the Audit Committee Throughout the audit Communication is key to quality service. In conducting our audit we will communicate frequently process we encourage the with the Audit Cotnnrittee so that issues and concerns are addressed in a timely and productive Audit cumulus. to contact manner, - us II there are any We encourage the members of the Audit Committee to contact us at any time if questions or ` questions or concerns concerns arise. Audit - Tax • Advisory 0 Grant Turanian LLP. A Canadian Member at Groat Thornton international. All dyhts reserved. - 11 - SPGC - AUDIT COMMITTEE February 3, 2009 Report to the Audit Committee— Initial Communication on Audit Planning The Corporation of the Town of Aurora For the year ended December 31, 2008 Our audit approach ITEM# 1-12 An understanding of your municipality and your business drives the Grant Thornton LLP audit approach. Tailoring is central to our approaeh and a key aspect in providing the Town with quality service. The objective of our audit is to obtain reasonable assurance that the financial statements are free of material misstatement. The responsibilities of the Audit Committee and management are broad and therefore the financial statement audit engagement is not designed to identify all matters which maybe of interest to the Audit Committee or management in the discharge of these responsibilities. However, we will communicate the following should we encounter them during the course of our audit: Audit • Tax - Advisory €,� Grant Thornton LLP. ACanadian Memha� of Gram Thondon international. Ali rights reserved. - /2 — SPGC - AUDIT COMMITTEE ITEM # 1 - 13 February 3, 2009 Report to the Audit Committee -initial Communication on Audit Planning The Corporation at the Town of Aurora For the year ended December 31, 2000 • Misstatements, other than trivial errors • Fraud • Misstatements that may cause future financial statements to be materially misstated • Illegal or possibly illegal acts, other than those considered inconsequential, and • Material weaknesses and significant deficiencies in internal control over financial reporting. Internal control Our audit includes gaining an understanding of the Town's internal control over financial reporting. Our understanding will focus on processes associated with the identified financial statement risk areas (see below). The audit team uses this understanding to determine the nature, extent and tinting of our audit procedures. Our understanding may also result in valuable internal control findings for your consideration. Please note that the objectives of a financial statement audit are different from fiduciary control objectives. Therefore, management and the Audit Committee cannot rely on our findings to discharge their responsibilities in this area. Risk assessment Our risk assessment process has identified the following areas where we will focus our attention: The following areas have been identified as low risk and our audit approach for these areas will be as follows: Audit • Tax • Advisory @Grant Thornton LLP. A Cana ildn Member of Giant Thornton Internatlonal. All rights reserved. SPGC - AUDIT COMMITTEE February 3, 2009 Report to the Audit Committee -Initial Communication on Audit Planning the Corporation of the Town of Airrom For the year ended December at, 2008 ITEM# 4-14 Materiality ...In our opinion, the The purpose of our audit is to provide an opinion as to whether your financial statements present fairly, financial statements in all material respects, the financial position, results of operations and cash flows in accordance with present fully, in all generally accepted accounting principles as of to date. Therefore, materiality is a critical auditing concept and as such we apply it in all stages of the eugagement. material rea ac s, the financial position of... Applying the concept of materiality at the planning and execution stage of the engagement recognizes that the audit team cannot verify every balance, transaction or judgment made in the. financial reporting process. During audit planning, we make a preliminary assessment of materiality for purposes of developing our, audit strategy, including determining the extent of our audit procedures. During the completion stage, we consider not onlythe quantitative assessment of materiality, but also qualitative factors, in assessing the impact on the financial statements, our audit opinion and the matters reported to the Audit Committee. Fraud considerations We are responsible for planning and performing the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement caused by error or by fraud. Our audit procedures consider the requirements of CICA Handbook Section 5135, The Auditor's Responsibility to Consider Fraud and Error. Section 5135 was issued to heighten the awareness of the potential for Fraud can occur in any fraud when planning and executing audits and it emphasizes the need for professional skepticism municipality, at any time, during the audit. and can be porpclrated by anyone. The following provides a summary of some of the fraud -related procedures we plan to perform during the audit. • Discuss amongst the engagement team where the financial statements maybe susceptible to material misstatement due to fraud. • Gather information to identify the risks of material misstatement due to fraud, including our understanding of internal control and making detailed inquires to both management and the Audit Committee. • Using the information gathered in our risk assessment process. Use of work of internal audit - We will review and consider the internal audit reports issued in the year, and if we intend to rely on all or part of the internal audit work, assess the consequences of their findings on our audit approach. Client assistance and readiness Client assistance and readiness are integral to the successful meeting of our targeted report release date. As presented further below, it is also critical in meeting out, agreed fee. To facilitate the communication process, we have provided management with a letter detailing expected assistance and the critical milestone dates. Audit - Tax - Advisory rdl Grant Thornton LLP. ACoastlan Member of Grant Thornton International. All rights reserved. -14- SPGC - AUDIT COMMITTEE February 3, 2009 Report to the Audit Committee— Initial Communication on Audit Planning g The Corporation of the Town of Aurora For the year ended December 31, 2000 Deliverables we are committed to We are committed to executing our audit in a most effective, efficient and timely manner, We will executing our audit In a provide the following deliverables to the Audit Committee: most effective, efficient and timely manner - Initial communication on audit planning, - Audit report on the financial statements of the Town, - Audit report on the financial statements of the Aurora Public Library Board, - Communication of audit results, - Management letter that provides our observations and recommendations regarding internal controls, based on matters identified during the course of our audit, and - Report on Compliance with the Federal Gas Tax Legislation Audit • Tax • Advisory w Grant Thomton LLP. A Canadian Member of Grant TImmunr Imerneganal. All rights reserved. -15- SPGC - AUDIT COMMITTEE February 3, 2009 Report to the Audit Committee - Initial Communication on Audit Planning The Corporation of the Town of Aurora For the year ended December 31, 2008 Client service team ITEM# 1-16 We bave assembled a team of outstanding professionals to demonstrate our commitment to quality and service to the Town. Audit • Tan -Ad Weary C� Grant Thornton LLP. A Canadian Member of Grant Thornton International. All rights reserved. — / V — SPGC - AUDIT COMMITTEE February 3, 2009 ITEM# 1-17 Report to the Audit Committee -initial Communication on Audit Planning The Corporation of the Town of Aurora For the year ended December 31, 2008 Audit timetable Audit - Tax • Advisory 0 Grant Thornton LLP. A Canadian l4ember of Omni Thornton Inleinallonal. All rights reserved. to SPGC - AUDIT COMMITTEE February 3, 2009 Report to the Audit Committee - Initial Communication on Audit Planning The Corporation of the Town of Aurora For the year ended December 31, 2008 Fee. schedule Fee proposal considerations ITEM# 1-1s 11 Upfront and periodic discussions are central to our approach in dealing with fees. Our goal is to avoid surprises by having early and frank communication. We wish to.provide the Town with a competitive price and fair value, while also allowing sufficient audit hours to conduct an effective audit and deliver quality service. The proposed fee for the audit for the year ended December 31, 2008 is based on the level of activity and, the anticipated complexity of the audit of the Town and Library's financial statements. The proposed fee is based on receiving the following from management: • Draft financial statements including the notes to the financial statements; • All working papers and schedules as outlined in our requirements letter; Trial balance together with reconciled control accounts; • All books and records made available to us when requested; and • Use of the Town's staff to help us locate information and provide explanations. Our ability to deliver theservices outlined in the agreed timetable and our proposed fee will depend upon these schedules being available/ tasks being completed by the due dates. If there are any variances to the above plan, we will discuss them with you and agree to any additional fees before costs are incurred, wherever possible. Any unforeseen work outside the scope of this proposal will be billed separately after discussion with appropriate Town officials. Audit • Tax • Advisory 0 Grant Thornion LLP. A Canadian blember of Grant Thornton Iniernallooel. All rights reserved. - /8 - SPGC - AUDIT COMMITTEE February 3, 2009 ITEM# 1-49 Report to the Audit Committee- Initial Communication on Audit Planning 12 The Corporation of the Town of Aurora For the year ended December 31, 2000 Appendix A — Letter of independence Audit • Tax • Advisory b Grant Thomlon LLP. A Canadian Member of proof raornlon International. All rights reserveJ. - 19- SPGC - AUDIT COMMITTEE ITEM # 1.201 February 3, 2009 0 GrantThornton The Audit Committee The Corporation of the Town of Aurora 1 Municipal Drive, Box No. 1000 Aurora, Ontario, LAG 6JI January 5, 2009 Dear Audit Committee Members:. Grant rhomton LLP 15 AII51ale ParhwW, M. 200 WrRharR ON BR 594 T (416) 3WO100 F(905)4r69900 w GranithoNwca We have been engaged to audit the consolidated financial statements of The Corporation of the Town of Aurora (the "Town") for the year ending December 31, 2008. Canadian generally accepted auditing standards (GAAS) require that we communicate at least annually with you regarding all relationships between the Town, its subsidiary - The Aurora Public Library, and Grant Thornton LLP that, in oar professional judgment, may reasonably be thought to bear on our independence. In determining which relationships to report, these standards require us to consider relevant rules and related interpretations prescribed by the appropriate provincial institute / ordre and applicable legislation, covering such matters as: holding a financial interest, either directly or indirectly, in a client; holding a position, either directly or indirectly, that gives the right or responsibility to exert significant influence over the financial or accounting policies of a client; personal or business relationships of immediate family, close relatives, partners or retired partners, either directly or indirectly, with a client; economic dependence on a client; and provision of services in addition to the audit engagement. We have prepared the following comments to facilitate our discussion with you regarding independence matters arising since November 7, 2007, the date of our last letter. We are not aware of any relationships between the Town, its subsidiary - The Aurora Public Library, and Grant Thornton LLP that, hi our professional judgment, may reasonably be thought to bear on our independence, that have occurred from November 8, 2007 to January 5, 2009. The audit fees charged to the Town for audit services were $56,050 and other audit related services of $15,000 during the period from November 8, 2007 to January 5, 2009. rwan•1ar•arvn�rr crc:l'i.amm�iu'.ntanadxi�uxaraG+nl ih;menira^.:,whe.4lW -20- SPGC - AUDIT COMMITTEE ITEM # 9 - 29 February 3, 2009 GrantThornton GAAS requires that we confirm our independence to the Audit Committee in the context of the Rules of Professional Conduct of the Institute of Chartered Accountants of Ontario. Accordingly, we hereby confirm that we are independent with respect to the Town within the meaning of the Rules of Professional Conduct of the Institute of Chartered Accountants of Ontario as of January 5, 2009. This report is intended solely for the use of the Audit Committee, Town Council, management, and others within the Town and should not be used for any other purposes. . We look forward to discussing with you the matters addressed in this letter at our upcoming meeting. Yours truly, Grant Thornton LLP Allister Byrne, FCA Partner cc L. John Gutteridge, Director of Finance/ Treasurer Audit • Tax • Adv(sory B Grant Thornton L P. A Carodian Member of Gram Tlomlon Intern.lional. All rights reserved, -21- SPGC - AUDIT COMMITTEE ITEM # 9 - 22 February 3, 2009 Report to the Audit Committee - Initial Communication an Audit Plonnhlg 1s The Corporation of the Town of Aurora For the year ended December M, 2008 Appendix B — PSAB & Auditing developments Audit • Tax • Advisory *Grant Thornton LLP, A Canadian Morainal of Craig Thornton International. All rights reserved. -22- SPGC - AUDIT COMMITTEE February 3, 2009 ITEM # 1 - 23 Report to the Audit Committee -Initial Communication on Audit planning. The Corporation of the Town of Aurora ' For the year ended Ceoember 31, 2008 PSAB Accounting developments -23- 16 SPGC - AUDIT COMMITTEE February 3, 2009 ITEM # 1- 24 Report to the Audit Committee —Initial Communication air Audit Planning The Corporation of the Town of Aurora For the year ended December 31, 2006 Audit • Taa • Advisory Ceram Themloo 4L.P. A Conadlan Member of Cram -0hontell lutomaYlonnl. All rights recervnd. 17 -24-