AGENDA - Audit Committee - 20180626Audit Committee
Meeting Agenda
Tuesday, June 26, 2018
6:15 p.m.
Council Chambers
Aurora Town Hall
Public Release
June 21, 2018
Town of Aurora
Audit Committee
Meeting Agenda
Tuesday, June 26, 2018
6:15 p.m., Council Chambers
1.Approval of the Agenda
Recommended:
That the agenda as circulated by Legislative Services be approved.
2. Declarations of Pecuniary Interest and General Nature Thereof
3.Delegations
4.Consideration of Items Requiring Discussion
1.FS18-019 – 2017 Audited Financial Statements with Audit Report
Presentation to be provided by Dan Elliott, Director, Financial Services, Giselle
Bodkin, Partner, and Andrea Nauss, Manager, BDO Canada LLP
Recommended:
1.That Report No. FS18-019 be received; and
2.That the 2017 Audit Reports and Financial Statements for the year-ended
December 31, 2017 be approved and published on the Town’s website;
and
3.That the 2018 year-end audit plan as proposed by BDO Canada LLP be
endorsed.
5.Adjournment
Town of Aurora
Audit Committee Report No. FS18-019
Subject: 2017 Audited Financial Statements with Audit Report
Prepared by: Jason Gaertner, Manager, Financial Planning Services
Department: Financial Services
Date: June 26, 2018
Recommendation
1.That Report No. FS18-019 be received; and
2.That the 2017 Audit Reports and Financial Statements for the year-ended
December 31, 2017 be approved and published on the Town’s website.
3.That the 2018 year-end audit plan as proposed by BDO Canada LLP be
endorsed.
Executive Summary
To present for approval, the Town of Aurora’s audited financial statements for the year
ended December 31, 2017, and the auditor’s report thereon. Also, in accordance with the
Audit Committee Terms of Reference, the Audit Committee is responsible to “review the
2018 audit plan and audit fee schedule for the ensuing year end”.
Background
Attached hereto is the entire audit package as presented by our auditors BDO Canada
LLP, which include the 2017 Year End Audit Report, Letter to the Audit Committee and
the audited financial statements which can all be found under Attachment 1. The actual
financial statements have been prepared by staff and audited by BDO Canada LLP. The
results shown in these consolidated statements differ from the traditionally prepared year-
end report card due to the inclusion of tangible capital assets and other Public Sector
Accounting Standards (PSAS) reporting differences. They have been marked DRAFT by
the auditors, as the audit cannot technically be completed until after the approval of the
statements by Council. Council is required to approve these statements as part of the
finalization of the audit. Once the auditors sign their final report in the coming days, the
financial statements will be made publicly available by being placed on the Town website,
a requirement under Section 295 of the Municipal Act, 2001, S.O. 2001, c. 25 as amended
(the Act). BDO also provides a letter to management on internal controls and other
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June 26, 2018 Page 2 of 4 Report No. FS18-019
matters that they feel should be brought to their attention.
Also attached (Attachment 2) is the Audit Plan for the 2018 Year End audit as prepared
by the firm of BDO Canada LLP (BDO).
Representatives from BDO Canada LLP will be in attendance to present their report and
findings.
Analysis
The Audited Financial Statements present a consolidation of the Town’s finances and
include the combined results of the General Operations of The Town, the Library Board,
and the Water/Wastewater Sewer Operations.
Also attached is a report prepared by BDO that addresses the audit plan for 2018 fiscal
year end, including the scope and approach to their audit. Staff are not in a position to
comment or challenge the approach that the auditors have chosen in order to fulfil their
professional obligations required when rendering an audit opinion report. From the
perspective of the Financial Services group, we continue to be committed to the provision
of any requested documentation to the auditor in a prompt fashion in an effort to facilitate
the audit in a timely manner.
Audit fees are always quoted on the presumption that staff will have completed all
requested schedules and support materials in advance of the audit, and that the financial
statements and associated notes have been properly and fully prepared by staff. The fee
also anticipates not finding any item of substance requiring extensive additional audit
effort to resolve or report.
The auditors are required to review all Council minutes, including closed session minutes.
They are also required to review the prior year’s internal control letters and consider any
concerns raised therein during their current audit, looking for continuing circumstances,
weaknesses or concerns as raised in the prior year, and how such may affect the outcome
of their current audit, and the opinion to be expressed therefrom.
Advisory Committee Review
Not applicable.
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June 26, 2018 Page 3 of 4 Report No. FS18-019
Legal Considerations
The annual audit of the Town’s financial statements fulfils the statutory requirements set
out in Section 296 of the Act.
Financial Implications
There are no financial implications in regards to the 2017 year-end audit report, the
purpose of which is for its receipt by the Audit Committee as well as to obtain approval of
the Consolidated 2017 Financial Statements of the Town so that the Statements may be
published as required by legislation.
In regards to the 2018 audit plan, the cost for this audit has been provided for within the
2018 budget. An amount of $40,900 has been budgeted for the 2018 audit with
anticipated fees of $28,200 for the audit of the consolidated financial statements,
excluding administration charges and taxes. Additional audit expenses from this budget
include independent actuarial valuations separately commissioned by staff.
Communications Considerations
In accordance with the Municipal Act, 2001, S.O.2001, c25, Section 295, the Town’s
2017 audited financial statements will be published on the Town’s website.
Link to Strategic Plan
None; the annual audit is a statutory requirement, and is guided by professional standards
applicable to all Canadian licensed audit practitioners. Preparation and publication of the
annual audited financial statements supports the Strategic Plan principles of integrity, and
progressive corporate excellence and continuous improvement.
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Audit Committee Meeting Agenda Tuesday, June 26, 2018Item 1 Page 4 of 77
–“
Year End Report for The Corporation of
the Town of Aurora
Presented by
Giselle Bodkin, CPA, CA
Andrea Nauss, CPA, CA
Attachment #1
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TABLE OF CONTENTS
Where are you today?
Key Performance Results ....................................................................... 2-8
Audit Committee Best Practice Recommendations .................................................... 9
Summary of Audit Process ............................................................................ 10-11
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2
TOTAL REVENUE, EXPENSES AND ANNUAL SURPLUS
(IN THOUSANDS ‘000)
2012 2013 2014 2015 2016 2017
Revenue 71,871 70,409 96,654 119,372 122,593 91,859
Expenses 65,071 67,315 71,543 75,537 80,987 86,058
Annual Surplus 6,800 3,094 25,111 43,835 41,606 5,801
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
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3
ANNUAL SURPLUS PLUS AMORTIZATION AND TCA ADDITIONS
2012 2013 2014 2015 2016 2017
Annual Surplus + Amortization 16,804 13,618 36,018 55,494 55,440 20,529
TCA Additions 13,207 7,894 19,752 51,182 31,972 16,522
-
10,000
20,000
30,000
40,000
50,000
60,000
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4
TOTAL NET FINANCIAL ASSETS
(IN THOUSANDS ‘000)
2012 2013 2014 2015 2016 2017
Net Financial Assets 54,983 59,474 45,843 53,348 76,988 81,744
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
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5
TOTAL ACCUMULATED SURPLUS AND TANGIBLE CAPITAL
ASSETS
(IN THOUSANDS ‘000)
2012 2013 2014 2015 2016 2017
Accumulated Surplus 428,195 419,245 444,356 488,191 529,797 535,598
Accumulated TCA 379,720 378,381 395,727 434,742 452,604 453,402
-
100,000
200,000
300,000
400,000
500,000
600,000
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6
2017 REVENUE
2012 REVENUE
46.50%
38.03%
3.68%-0.20%
0.94%
10.66%
Revenue
Taxation
User fees
Grants
Net gain (loss) on
disposal of TCA and
land
Assumed
infrastructure assets
44.83%
34.83%
2.67%
4.64%
2.75%10.28%
Revenue
Taxation
User fees
Grants
Gain on disposal of TCA
Assumed infrastructure
assets
Other
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7
FIVE YEAR EXPENSE COMPARISON
(IN THOUSANDS ‘000)
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8
2017 EXPENSES
2012 EXPENSES
31.92%
17.11%
6.85%
42.72%
0.30%
1.09%
Expenses
Salaries, wages and benefits
Amortization
Materials and supplies
Contracted services
Interest on long-term liabilities
Others
35.12%
15.37%
5.79%
41.43%
0.54%1.74%
Expenses
Salaries, wages and benefits
Amortization
Materials and supplies
Contracted services
Interest on long-term liabilities
Others
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9
Audit Committee Best Practice Recommendations
• Financial Reporting
o The Committee should receive monthly internal financial statements and ensure that
the financial statements clearly reflect the true performance of the Organization.
o The Committee should review audit adjustments made and those waived because of
immateriality.
o The Committee should review and approve the draft audited financial statements.
o Is there a financial expert on the Committee? The financial expert would have the
following 5 attributes:
Understanding of the financial statements and accounting principles used to
prepare the issuer's financial statements;
Ability to assess the application of such accounting policies;
Experience preparing, auditing, analyzing or evaluating financial statements, or
experience supervising individuals engaged in preparing, auditing, analyzing or
evaluating financial statements;
An understanding of internal controls and procedures for financial reporting;
An understanding of audit committee functions
• Risks and Controls
o The Committee should create the right tone at the top to foster growth of suitable
controls.
o The Committee should have a sufficient understanding of the risks at the Organization.
o The Committee should analyze the internal control system to ensure that the risks are
adequately mitigated.
• Audit Function
o The Committee should ensure that the external auditor selected has sufficient
knowledge of and experience in the Organization’s industry.
o The Committee should review the audit fee and ensure that it is in line with the scope
of the audit.
o The Committee should confirm and discuss the auditor’s independence.
o The Committee should keep an open line of communication with the external auditors,
including such items as:
The auditor's responsibility under Canadian Auditing Standards.
The quality of the accounting principles followed by the Organization.
Disagreements with management.
Difficulties in performing the audit.
Major issues management discussed with the auditors before their retention.
• Other Issues to Consider:
o Is the Committee independent from the Organization?
o Is the Committee sufficiently financially literate?
o Are there clear position descriptions for directors?
o Is there orientation and continuing education for all directors in place?
o Is there a written code of business conduct and ethics?
o Is there a nominating committee?
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10
Summary of Audit Process
• Overall Approach
o Attain an understanding of processes and controls within the departments by
performing system descriptions and walkthroughs.
o Attain an understanding of internal IT and software, through discussions with the IT
department and our systems descriptions.
o Identify specific areas of the financial information which contain risk, and significant
judgment.
o From these initial stages, we determine what procedures to be performed on the
specific areas of the financial statements.
• Income Statement Approach
o Revenue
Taxation – we obtain the annual by-law and compare to the revenue recorded
following-up on significant differences.
Grants and government transfers – we obtain a sample of revenue received
and agree to the funding documents, following up on differences.
Interest income – Interest reasonability tests are performed on tax interest,
reserve interest, bank and investments.
Assumed infrastructure assets – we obtain the asset registers and recalculate.
We take a sample of additions and trace to the supporting documentation to
ensure the amounts agree. We then compare the overall asset registers to that
recorded and follow-up on any significant differences.
Gain on disposal of tangible capital assets – we review the disposals and
compare to the asset registers to ensure the cost was removed appropriately.
Also, if the assets were sold we obtain documentation on the proceeds to
ensure the calculation of the gain/loss is appropriate.
User fees, fines, licenses, permits and other revenue – we performed a
detailed comparison of current year to the prior five years and budget on an
account by account basis, using a threshold to determine the significant
changes. We then review the significant changes with management and obtain
supporting documentation.
o Expenses
Salaries, wages and employee benefits – we perform test of controls on a
cyclical basis. This tests various input and output controls for salaries. With
regards to benefits we perform a reasonability test based on yearly
percentages of CPP, EI, and benefits as a percentage of salaries. These are
compared to the stated rates and differences are followed up.
Materials and supplies, contracted services and other – we perform
substantive tests on these expenses and vouch to supporting documentation on
a sample basis, following up on any differences.
Interest on long-term liabilities - we review the various debenture contracts
and agree the interest expensed to the interest indicated in those.
Amortization – we recalculate the amortization on a test basis and compare to
the actual amounts recorded, following up on any significant differences.
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11
• Balance Sheet Approach
o Assets
Cash – test of controls are performed on bank reconciliations, and a bank
confirmation is sent to the bank and agreed to the general ledger.
Taxes receivable – we perform a detailed five year comparison by aging
following-up on significant differences. We also perform a large arrears check
and follow-up to determine what the approach is to collect from that resident.
User fees and accounts receivable – we obtain the various accounts receivable
account details and for significant balances agree to the supporting
documentation or calculations. We also perform reasonability tests on various
specific balances. We perform cut-off tests to ensure that amounts have been
recorded in the proper period. We also check for deferred revenue or amounts
that have been outstanding for significant periods of time and ensure they
should not be written off.
Portfolio investments – Confirmations are sent to the investment advisors and
review of investment certificates and continuity schedules is performed.
Land listed for sale – we obtain the current year listing and for any purchases
or sales obtain the agreement and agree the amounts and recalculate any
gains/losses.
Tangible capital assets and tangible capital assets under construction – we
obtain the asset registers and recalculate. We take a sample of additions and
trace to the supporting documentation to ensure the amounts agree. We then
compare the overall asset registers to that recorded and follow-up on any
significant differences.
Prepaid expenses – we obtain supporting documentation for any material items
included in prepaid.
o Liabilities
Accounts payable and accrued liabilities – we obtain supporting
documentation for significant liabilities outstanding. We perform cut-off
testing to ensure they have been recorded in the proper period. We test to
ensure that accruals are reasonable.
Deposits – we review the deposits and ensure that amounts received should not
be recognized through a sample of items, following up with the specific
departments.
Deferred revenue – we obtain the continuity schedule. For additions we test
the supporting grant funding letters, test the calculation of developer charges
and the reasonability of interest. For decreases we ensure they are approved
in the budget.
Employee benefits liabilities – we obtain the actuarial report, and review the
assumptions made and ensure they are reasonable. We then ensure that the
appropriate accounting method has been applied. We follow-up with both the
actuary and the Town’s Finance department on any unusual items, differences.
Net long-term liabilities – we obtain third party confirmation on the balance,
terms and interest rate, following up on any significant differences.
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The Corporation of the Town of Aurora
Final Report to the Audit Committee
June 26, 2018
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THE CORPORATION OF THE TOWN OF AURORA 3
TABLE OF CONTENTS
Status of the Audit 4
Independence 4
Materiality 4
Audit Findings 5
Fraud Discussion 7
Internal Control Matters 6
Other Required Communications 8
BDO Resources 10
Appendix A – Draft Audit Report
Appendix B – Independence Update
Appendix C – Unadjusted Differences
Appendix D – Representation Letter
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THE CORPORATION OF THE TOWN OF AURORA 4
STATUS OF THE AUDIT
As of the date of this final report, we have substantially completed our audit of the 2017
financial statements pending the completion of the items highlighted below. These items will
need to be completed prior to issuance of our audit report on the financial statements.
COMPLETION OF AUDIT
• Receipt of signed Management representation letter
• Subsequent events review through to financial statement approval date
FINANCIAL STATEMENTS
• Approval of financial statements by Council
We conducted our audit in accordance with Canadian generally accepted auditing standards.
The objective of our audit was to obtain reasonable, not absolute, assurance about whether
the financial statements are free from material misstatement. The scope of the work
performed was substantially the same as that described in our Planning Report to the Audit
Committee dated March 27, 2018.
INDEPENDENCE
At the core of the provision of external audit services is the concept of independence.
Canadian generally accepted auditing standards require us to communicate to the Audit
Committee at least annually, all relationships between BDO Canada LLP and its related entities
and The Corporation of the Town of Aurora and its related entities, that, in our professional
judgment, may reasonably be thought to bear on our independence with respect to the audit of
the Municipality.
Our annual letter confirming our independence was previously provided to you. Except as
noted in Appendix B, we know of no circumstances that would cause us to amend the
previously provided letter.
MATERIALITY
Misstatements, including omitted financial statement disclosures, are considered to be
material if they, individually or in aggregate, could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial statements.
As communicated to you in our Planning Report to the Audit Committee, preliminary
materiality was $2,250,000. Final materiality remained unchanged from our preliminary
assessment.
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THE CORPORATION OF THE TOWN OF AURORA 5
AUDIT FINDINGS
As part of our ongoing communications with you, we are required to have a discussion on our
views about significant qualitative aspects of the Municipality’s accounting practices, including
accounting policies, accounting estimates and financial statement disclosures. In order to have
a frank and open discussion, these matters will be discussed verbally with you. A summary of
the key discussion points are as follows:
ACCOUNTING AND AUDIT MATTERS
Management Override of Controls
Management is in a unique position to perpetrate fraud because of management’s ability to
directly or indirectly manipulate accounting records or prepare fraudulent financial statements
by overriding controls that otherwise appear to be operating effectively. Our audit procedures
tested the appropriateness of journal entries recorded in the general ledger and other
adjustments made in the preparation of financial statements. We also obtained an
understanding of the business rationale for significant transactions that we became aware of
that were outside the normal course of operations for the Municipality, or that otherwise
appeared to be unusual given our understanding of the Municipality and its environment. We
reviewed accounting estimates for biases and evaluated whether the circumstances producing
the bias, if any, represented a risk of material misstatement due to fraud. No exceptions
noted.
ADJUSTED AND UNADJUSTED DIFFERENCES
We have disclosed all significant adjusted and unadjusted differences and disclosure omissions
identified through the course of our audit engagement. Each of these items has been discussed
with Management.
Management has determined that the unadjusted differences are immaterial both individually
and in aggregate to the financial statements taken as a whole. Should the Audit Committee
agree with this assessment, we do not propose further adjustments.
For purposes of our discussion, a summary of adjusted and unadjusted differences and
disclosure omissions has been presented in Appendix C.
MANAGEMENT REPRESENTATIONS
During the course of our audit, management made certain representations to us. These
representations were verbal or written and therefore explicit, or they were implied through
the financial statements. Management provided representations in response to specific queries
from us, as well as unsolicited representations. Such representations were part of the
evidence gathered by us to be able to draw reasonable conclusions on which to base our audit
opinion. These representations were documented by including in the audit working papers
memoranda of discussions with management and written representations received from
management.
A summary of the representation we have requested from management is set out in the
management representation letter included in Appendix D to the report.
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THE CORPORATION OF THE TOWN OF AURORA 6
FRAUD DISCUSSION
Canadian generally accepted auditing standards require us to discuss fraud risk with the Audit
Committee on an annual basis. As an update to the discussion held with the Audit Committee
during the planning of our audit, we have prepared the following comments:
Required Discussion
BDO Response
Question to Audit
Committee
Details of existing
oversight processes
with regards to fraud.
Based on our discussions during the
planning of our audit, the Audit
Committee’s oversight processes
include:
• Audit Committee charters;
• Discussions at audit committee
meetings;
• Review of related party
transactions; and
• Consideration of tone at the top.
Are there any new
processes or changes
in existing processes
relating to fraud
since the date of our
previous discussions,
that we should be
aware of?
Knowledge of actual,
suspected or alleged
fraud.
Currently, we are not aware of any
actual, suspected or alleged fraud.
Are you aware of any
instances of actual,
suspected or alleged
fraud affecting the
Municipality?
AUDITORS’ RESPONSIBILITIES FOR DETECTING FRAUD
We are responsible for planning and performing the audit to obtain reasonable assurance that
the financial statements are free of material misstatements, whether caused by error or fraud.
The likelihood of not detecting a material misstatement resulting from fraud is higher than the
likelihood of not detecting a material misstatement resulting from error, because fraud may
involve collusion as well as sophisticated and carefully organized schedules designed to conceal
it.
The scope of the work performed was substantially the same as that described in our Planning
Report to the Audit Committee dated March 27, 2018.
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THE CORPORATION OF THE TOWN OF AURORA 7
INTERNAL CONTROL MATTERS
During the course of our audit, we performed the following procedures with respect to the
Municipality’s internal control environment:
• Documented operating systems to assess the design and implementation of control
activities that were relevant to the audit.
• Discussed and considered potential audit risks with management.
The results of these procedures were considered in determining, the extent and nature of
substantive audit testing required.
We are required to report to you in writing, significant deficiencies in internal control that we
have identified during the audit. A significant deficiency is defined as a deficiency or
combination of deficiencies in internal control that, in the auditor's professional judgment, is
of sufficient importance to merit the attention of those charged with governance.
As the purpose of the audit is for us to express an opinion on the Municipality’s financial
statements, our audit cannot be expected to disclose all matters that may be of interest to
you. As part of our work, we considered internal control relevant to the preparation of the
financial statements such that we were able to design appropriate audit procedures. This work
was not for the purpose of expressing an opinion on the effectiveness of internal control.
SIGNIFICANT DEFICIENCIES IN INTERNAL CONTROL
We did not note any significant deficiencies in internal control during the course of our audit.
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THE CORPORATION OF THE TOWN OF AURORA 8
OTHER REQUIRED COMMUNICATIONS
Professional standards require independent auditors to communicate with those charged with
governance certain matters in relation to an audit. In addition to the points communicated
within this letter, the table below summarizes these additional required communications.
Communication Required Auditors’ Response
Potential effect on the financial statements of any
material risks and exposures, such as pending litigation,
that are required to be disclosed in the financial
statements.
We have obtained a summary of
outstanding litigation and claims
from the Municipality’s legal
department and communicated
with the Municipality’s external
legal counsel and insurer. Where
applicable, litigation and claims
have been accounted for and
disclosed in the financial
statements.
The final draft of the representation letter. Refer to Appendix D
Material uncertainties related to events and conditions
that may cast significant doubt on the Municipality’s
ability to continue as a going concern.
None.
Disagreements with management about matters that,
individually or in aggregate, could be significant to the
Municipality’s financial statements or our audit report.
None.
Matters involving non-compliance with laws and
regulations
None.
Significant related party transactions that are not in the
normal course of operations and which involve
significant judgments made by management concerning
measurement or disclosure.
None.
Subsequent events that have caused changes to the
audit report
None.
Modifications in opinion None.
Emphasis of matters paragraphs or other matters
paragraphs
None.
Significant matters arising from the audit that were
discussed or subject to correspondence with
management.
None.
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THE CORPORATION OF THE TOWN OF AURORA 9
Significant accounting policies, estimates and judgments Audit Results – discussed above.
Unreasonable management’s refusal to allow the
auditor to send a confirmation request, or the inability
to obtain relevant and reliable audit evidence from
alternative audit procedures.
None.
Limitation of the scope of the audit imposed by
management.
None.
Findings from the group audit. No significant findings.
Management consultation with other accountants about
significant auditing and accounting matters.
None.
Other matters None.
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THE CORPORATION OF THE TOWN OF AURORA 10
BDO RESOURCES
BDO is one of Canada’s largest accounting services firms providing assurance and accounting,
taxation, financial advisory, risk advisory, financial recovery and consulting services to a
variety of publicly traded and privately held companies.
BDO serves its clients through 105 offices across Canada. As a member firm of BDO
International Limited, BDO serves its multinational clients through a global network of over
1,100 offices in more than 100 countries. Commitment to knowledge and best practice sharing
ensures that expertise is easily shared across our global network and common methodologies
and information technology ensures efficient and effective service delivery to our clients.
Outlined below is a summary of certain BDO resources which may be of interest to the Audit
Committee.
PUBLICATIONS
BDO’s national and international accounting and assurance department issues publications on
the transition and application of Public Sector Accounting Standards (PSAB). In addition, we
offer a wide array of publications on Accounting Standards for Private Enterprises (ASPE),
International Financial Reporting Standards (IFRS), and Accounting Standards for Not-for-Profit
Organizations (ASPNO).
For additional information on PSAB, including links to archived publications and model financial
statements, refer to the link below:
http://www.bdo.ca/en/library/services/assurance-and-accounting/pages/default.aspx.
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APPENDIX A
Draft Auditor’s Report
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Independent Auditor's Report
To the Mayor and Councillors of
The Corporation of the Town of Aurora
We have audited the accompanying consolidated financial statements of The Corporation of the Town of
Aurora, which comprise the consolidated statement of financial position as at December 31, 2017, the
statements of operations and accumulated surplus, change in net financial assets and cash flows for the
year then ended, and a summary of significant accounting policies and other explanatory information.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with Canadian public sector accounting standards, and for such internal control
as management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor's judgment, including
the assessment of the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the
entity's preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, these financial statements present fairly, in all material respects, the financial position of
The Corporation of the Town of Aurora as at December 31, 2017 and the results of its operations and its
cash flows for the year then ended in accordance with Canadian public sector accounting standards.
Chartered Professional Accountants, Licensed Public Accountants
Barrie, Ontario
June 26, 2018
1DRAFT - SUBJECT TO CHANGEAudit Committee Meeting Agenda
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APPENDIX C
Unadjusted Differences
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` SUMMARY OF UNADJUSTED DIFFERENCES Increase (Decrease) Assets Liabilities Equity Net Income $- $- $- $- - - - - Total - - - - Effect of Prior Year’s Reversing Errors - - 241,535 (241,535) Total Unadjusted Differences $-$-$241,535 $(241,535) SUMMARY OF DISCLOSURE OMISSIONS There were no disclosure omissions noted during the course of our audit. Audit Committee Meeting Agenda Tuesday, June 26, 2018 Item 1 Page 32 of 77
APPENDIX D
Representation Letter
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Town of Aurora
100 John West Way, Box 1000
Aurora, Ontario L4G 6J1
June 26, 2018
BDO Canada LLP
Chartered Professional Accountants
300 Lakeshore Drive, Suite 300
Barrie, Ontario
L4N 0B4
This representation letter is provided in connection with your audit of the financial statements of
Town of Aurora for the year ended December 31, 2017, for the purpose of expressing an opinion
as to whether the financial statements are presented fairly, in all material respects, in
accordance with Canadian public sector accounting standards.
We confirm that to the best of our knowledge and belief, having made such inquiries as we
considered necessary for the purpose of appropriately informing ourselves:
Financial Statements
• We have fulfilled our responsibilities, as set out in the terms of the audit engagement dated
March 27, 2018, for the preparation of the financial statements in accordance with Canadian
public sector accounting standards; in particular, the financial statements are fairly presented
in accordance therewith.
• Significant assumptions used by us in making accounting estimates, including those measured
at fair value, are reasonable.
• Related party relationships and transactions have been appropriately accounted for and
disclosed in accordance with the requirements of Canadian public sector accounting
standards.
• All events subsequent to the date of the financial statements and for which Canadian public
sector accounting standards require adjustment or disclosure have been adjusted or disclosed.
• The financial statements of the entity use appropriate accounting policies that have been
properly disclosed and consistently applied.
• The effects of uncorrected misstatements are immaterial, both individually and in the
aggregate, to the financial statements as a whole. A list of the uncorrected misstatements is
attached to the representation letter.
• We have reviewed and approved all journal entries recommended by the auditors during the
audit.
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Information Provided
• We have provided you with:
o access to all information of which we are aware that is relevant to the preparation of
the financial statements, such as records, documentation and other matters;
o additional information that you have requested from us for the purpose of the audit;
and
o unrestricted access to persons within the entity from whom you determined it
necessary to obtain audit evidence.
• We are responsible for the design, implementation and maintenance of internal controls to
prevent, detect and correct fraud and error, and have communicated to you all deficiencies in
internal control of which we are aware.
• All transactions have been recorded in the accounting records and are reflected in the
financial statements.
• We have disclosed to you all known instances of non-compliance or suspected non-compliance
with laws and regulations whose effects should be considered when preparing the financial
statements.
• We have disclosed to you the identity of the entity’s related parties and all the related party
relationships and transactions of which we are aware.
Fraud and Error
• We have disclosed to you the results of our assessment of the risk that the financial
statements may be materially misstated as a result of fraud.
• We have disclosed to you all information in relation to fraud or suspected fraud that we are
aware of and that affects the entity and involves:
o management;
o employees who have significant roles in internal control; or
o others where the fraud could have a material effect on the financial statements.
• We have disclosed to you all information in relation to allegations of fraud, or suspected
fraud, affecting the entity’s financial statements communicated by employees, former
employees, analysts, regulators, or others.
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Existence, Completeness and Valuation of Specific Financial Statement Balances
• The inventories as set out in the financial statements represent all of the inventories to
which the entity held title as at the balance sheet date. Inventories do not include any goods
consigned to the entity, merchandise billed to customers or any items for which the liability
has not been provided in the books.
• For contributed property, plant and equipment, the nature and amount of contributed
property, plant and equipment received and recognized have been disclosed.
• Where the fair value of contributed property, plant and equipment was not determinable,
information about contributed property, plant and equipment recognized at a nominal value
has been disclosed.
• Property, plant and equipment has been appropriately recognized and measured in
accordance with Canadian public sector accounting standards.
• There are no pledges or assignments of assets as security for liabilities except as disclosed in
the financial statements.
• The entity has complied with all provisions in its agreements related to debt and there were
no defaults in principal or interest, or in the covenants and conditions contained in such
agreement.
• The employee future benefit costs, assets and obligation have been determined, accounted
for and disclosed in accordance with Canadian public sector accounting standards. The
source data and plan provisions provided are complete and accurate. The plans included in
the valuation are complete. The determination of the discount rate and the use of specific
actuarial assumptions are our best estimate assumptions. We feel that the extrapolations are
accurate and have properly reflected the effects of changes and events occurring subsequent
to the most recent valuation that had a material effect on the extrapolation.
• There were no direct contingencies or provisions (including those associated with guarantees
or indemnification provisions), unusual contractual obligations nor any substantial
commitments, whether oral or written, other than in the ordinary course of business, which
would materially affect the financial statements or financial position of the entity, except as
disclosed in the financial statements.
General Representations
• We are aware of the environmental laws and regulations that impact our organization and we
are in compliance. There are no known environmental liabilities or contingencies that have
not been accrued for or disclosed in the financial statements.
• We confirm that operating segments are appropriately identified and disclosed in accordance
with Canadian public sector accounting standards.
• There have been no plans or intentions that may materially affect the carrying value or
classification of assets and liabilities.
• No significant matters, other than those disclosed in the financial statements, have arisen
that would require a restatement of the comparative financial statements.
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• We have made the following additional significant representations to you during the course of
your audit which we understand that you have relied upon:
The municipality is a schedule 2 employer for WSIB but does not currently employ firefighters
and is not aware of any additional liabilities that me be incurred in relation to the new WSIB
legislation for firefighters.
Other Representations Where the Situation Exists
• We have informed you of all known actual or possible litigation and claims, whether or not
they have been discussed with legal counsel. When applicable, these litigation and claims
have been accounted for and disclosed in the financial statements.
Yours truly,
_______________________________________ _______________________________________
Signature Position
_______________________________________ _______________________________________
Signature Position
l
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Assets Dr(Cr)Liabilities Dr(Cr)Opening R/E Dr(Cr)Income Dr(Cr)Likely Aggregate Misstatements Before Effect of Previous Year's Errors and Estimates- - - - - - - Effect of Previous Year's Errors, Net of Tax Effects241,535 (241,535) Tax EffectLikely Aggregate Misstatements- - 241,535 (241,535) The Corporation of the Town of AuroraSummary of Unadjusted MisstatementsDecember 31, 2017Pre-Tax Proposed AdjustmentsDescription of the MisstatementIdentified MisstatementProjected Misstatement Estimates
Audit Committee Meeting Agenda Tuesday, June 26, 2018 Item 1 Page 38 of 77
The Corporation of the Town of Aurora
Consolidated Financial Statements
For the year ended December 31, 2017
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The Corporation of the Town of Aurora
Consolidated Financial Statements
For the year ended December 31, 2017
Contents
Independent Auditor's Report 1
Consolidated Financial Statements
Consolidated Statement of Financial Position 2
Consolidated Statement of Operations and Accumulated Surplus 3
Consolidated Statement of Change in Net Financial Assets 4
Consolidated Statement of Cash Flows 5
Notes to the Consolidated Financial Statements 6 - 20
Schedule 1 - Consolidated Schedule of Segmented Disclosure 21 - 22
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Independent Auditor's Report
To the Mayor and Councillors of
The Corporation of the Town of Aurora
We have audited the accompanying consolidated financial statements of The Corporation of the Town of
Aurora, which comprise the consolidated statement of financial position as at December 31, 2017, the
statements of operations and accumulated surplus, change in net financial assets and cash flows for the
year then ended, and a summary of significant accounting policies and other explanatory information.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with Canadian public sector accounting standards, and for such internal control
as management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor's judgment, including
the assessment of the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the
entity's preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, these financial statements present fairly, in all material respects, the financial position of
The Corporation of the Town of Aurora as at December 31, 2017 and the results of its operations and its
cash flows for the year then ended in accordance with Canadian public sector accounting standards.
Chartered Professional Accountants, Licensed Public Accountants
Barrie, Ontario
June 26, 2018
1
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The Corporation of the Town of Aurora
Consolidated Statement of Financial Position
December 31 2017 2016
(Dollar amounts presented in '000's)
Financial assets
Cash (note 2) $9,530$ 4,278
Taxes receivable 7,757 5,455
User fees receivable 6,714 5,348
Accounts receivable 7,098 7,421
Portfolio investments (note 4) 117,328 112,460
Land listed for sale (note 5) 2,837 2,952
151,264 137,914
Liabilities
Notes payable and bank indebtedness (note 6) 5,874 7,219
Accounts payable and accrued liabilities 18,201 10,395
Deposits (note 7) 5,693 3,207
Deferred revenue (note 8) 33,700 33,610
Employee benefits liabilities (note 9) 1,084 1,010
Net long-term liabilities (note 10) 4,968 5,485
69,520 60,926
Net financial assets 81,744 76,988
Non-financial assets
Tangible capital assets (note 23) 453,402 452,604
Prepaid expenses 452 205
453,854 452,809
Accumulated surplus (note 11) $ 535,598 $529,797
Contingencies and contractual obligations (notes 17 and 18)
Approved by Council
Mayor
Chief Administrative Officer
The accompanying notes are an integral part of these consolidated financial statements
2
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The Corporation of the Town of Aurora
Consolidated Statement of Operations and Accumulated Surplus
Budget
For the year ended December 31 2017 2017 2016
(Dollar amounts presented in '000's)
(note 3)
Revenue
Taxation (note 12) $ 42,470 $42,887$ 40,071
User fees 32,818 35,075 52,766
Grants (note 13) 9,622 3,391 2,796
Gain on disposal of land available for sale -604 5,726
Loss on disposal of tangible
capital assets -(789)(239)
Assumed infrastructure assets -863 10,632
Other (note 14) 7,502 9,828 10,841
92,412 91,859 122,593
Expenses
General government 14,783 15,232 13,329
Protection to person and property 14,413 12,855 12,749
Transportation services 9,463 9,526 9,107
Environmental services 27,469 26,050 24,638
Leisure and cultural services 20,348 20,327 19,058
Planning and development 3,202 2,068 2,106
89,678 86,058 80,987
Annual surplus 2,734 5,801 41,606
Accumulated surplus, beginning of yeaU 529,797 529,797 488,191
Accumulated surplus, end of year $532,531$ 535,598 $529,797
The accompanying notes are an integral part of these consolidated financial statements
3
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The Corporation of the Town of Aurora
Consolidated Statement of Change in Net Financial Assets
Budget
For the year ended December 31 2017 2017 2016
(Dollar amounts presented in '000's)
(note 3)
Annual surplus $ 2,734 $5,801$ 41,606
Amortization of tangible capital assets 14,728 14,728 13,834
Net proceeds on disposal of tangible capital
assets -207 37
Loss on disposal of tangible capital assets -789 239
Acquisition of tangible capital assets (15,659)(15,659)(21,340)
Assumed infrastructure assets -(863)(10,632)
Change in prepaid expenses -(247)(104)
Change in net financial assets 1,803 4,756 23,640
Net financial assets, beginning of year 76,988 76,988 53,348
Net financial assets, end of year $ 78,791 $81,744$ 76,988
The accompanying notes are an integral part of these consolidated financial statements
4
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The Corporation of the Town of Aurora
Consolidated Statement of Cash Flows
For the year ended December 31 2017 2016
(dollar amounts presented in '000's)
Operating transactions
Annual surplus $5,801$ 41,606
Non-cash charges to operations:
Amortization of tangible capital assets 14,728 13,834
Gain on disposal of land listed for sale (604)(5,726)
Loss on disposal of tangible capital assets 789 239
Assumed infrastructure assets (863)(10,632)
Changes in non-cash operating working capital:
Taxes receivable (2,302)1,222
User fees receivable (1,366)(1,682)
Accounts receivable 323 (783)
Land listed for sale (1,186)(530)
Accounts payable and accrued liabilities 7,806 (3,955)
Deposits 2,486 (1,271)
Deferred revenue 90 (2,571)
Employee benefits liabilities 74 26
Prepaid expenses (247)(104)
Total Operating Transactions 25,529 29,673
Capital transactions
Acquisition of tangible capital assets (15,659)(21,340)
Net proceeds on disposal of land listed for sale 1,905 6,958
Net proceeds on disposal of tangible capital assets 207 37
Total Capital Transactions (13,547)(14,345)
Investing transactions
Increase in portfolio investments (4,868)(28,509)
Financing transactions
Advances / (principal repayments) on long-term liabilities (517)2,908
Advances / (principal repayments) of notes payable
and bank indebtedness (1,345)(2,151)
Total Financing Transactions (1,862)757
Increase / (Decrease) in cash 5,252 (12,424)
Cash, beginning of year 4,278 16,702
Cash, end of year $9,530$ 4,278
The accompanying notes are an integral part of these consolidated financial statements
5
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The Corporation of the Town of Aurora
Notes to the Consolidated Financial Statements
December 31, 2017
(Dollar amounts presented in '000's)
1. Summary of Significant Accounting Policies
The Corporation of the Town of Aurora (the "Town") is a municipality in the Province of
Ontario. The Town conducts its operations guided by the provisions of provincial statutes
such as the Municipal Act, Municipal Affairs Act and related legislation.
Management's Responsibility
The consolidated financial statements of the Town are the responsibility of management.
They have been prepared in accordance with Canadian public sector accounting standards
established by the Public Sector Accounting Board ("PSAB") of The Chartered Professional
Accountants of Canada.
Basis of Consolidation
The consolidated financial statements reflect the assets, liabilities, revenue, expenditures
and fund balances of the Town and comprise all of the organizations that are accountable
for the administration of their financial affairs and resources to the Town and are owned or
controlled by the Town. These boards include:
The Aurora Public Library Board
All inter-organizational and inter-fund transactions and balances are eliminated.
Basis of Accounting
Revenue and expenses are reported on the accrual basis of accounting whereby revenue is
recognized as it is earned and measurable; and expenses are recognized in the period that
goods and services are acquired, a liability is incurred, or transfers are due.
Cash
Cash and cash equivalents are comprised of cash on hand, cash held in financial institutions
and temporary investments with maturities of 90 days or less.
Government Transfers
Government transfers, which include legislative grants, are recognized in the consolidated
financial statements in the period in which the events giving rise to the transfers occur,
providing the transfers are authorized, any eligibility criteria have been met, and
reasonable estimates of the amounts can be made, except to the extent possible that the
transfer stipulations give rise to an obligation that meets the definition of a liability.
Transfers are recognized as deferred revenue when transfer stipulations give rise to a
liability. Transfer revenue is recognized in the consolidated statement of operations as the
stipulated liabilities are settled.
Tangible Capital Assets
Tangible capital assets are recorded at cost, less accumulated amortization. Cost includes
all costs directly attributable to acquisition or construction of the tangible capital asset
including transportation costs, installation costs, design and engineering fees, legal fees and
site preparation costs. Contributed tangible capital assets are recorded at fair value at the
time of the donation, with a corresponding amount recorded as revenue. Amortization is
recorded on a straight-line basis over the estimated life of the tangible capital asset using
the following rates.
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The Corporation of the Town of Aurora
Notes to the Consolidated Financial Statements
December 31, 2017
(Dollar amounts presented in '000's)
1. Summary of Significant Accounting Policies (continued)
Tangible Capital Assets (continued)
Buildings 10 - 50 years
Landscaping & Other 5 - 20 years
Vehicles 7 - 15 years
Other
Machinery and Equipment 7 - 20 years
Library Collection 7 years
Computer Equipment 4 - 10 years
Facilities (excluding Buildings) 5 - 80 years
Transportation Infrastructure
Roads 20 - 36 years
Signage 1 - 36 years
Bridges and Other Structures 15 - 40 years
Environmental Infrastructure
Underground and Other Networks 15 - 100 years
One half of the annual amortization is charged in the year of acquisition and in the year of
disposal.
Non-pension Post-employment Benefits, Compensated Absences & Termination Benefits
The Town accrues its obligations under employee benefit plans as the employees render the
services necessary to earn employee future benefits. The Town has adopted the following
valuation methods and assumptions:
a) Actuarial cost method:
Accrued benefit obligations are computed using the projected benefit method
prorated on service, as defined in PSAB 3250 and PSAB 3255. The objective under
this method is to expense each member's benefit under the plan taking into
consideration projections of benefit costs to and during retirement. Under this
method an equal portion of total estimated future benefit is attributed to each year
of service.
b) Accounting policies:
Actuarial gains and losses are amortized on a linear basis over the expected average
remaining service life ("EARSL") (expected remaining payment period in respect of
the retiring allowance) of members expected to receive benefits under the plan,
with amortization commencing in the period following the determination of the gain
or loss. Obligations are attributed to the period beginning on the member's date of
hire and ending on the expected date of termination, death or retirement,
depending on the benefit value.
c) Workplace Safety and Insurance Board (WSIB):
The costs of WSIB obligations are actuarially determined and are expensed in the
period they occur. Any actuarial gains and losses that are related to WSIB benefits
are recognized immediately in the period they arise.
7
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The Corporation of the Town of Aurora
Notes to the Consolidated Financial Statements
December 31, 2017
(Dollar amounts presented in '000's)
1. Summary of Significant Accounting Policies (continued)
Pension agreements
The Town makes contributions to the Ontario Municipal Employees' Retirement System
("OMERS"), a multi-employer public sector pension fund, based on the principles of a
defined benefit plan, which specifies the amount of the retirement benefit to be received
by the employees on the basis of predefined retirement age, length of eligible service and
rates of remuneration over a fixed period of time.
Because OMERS is a multi-employer pension plan, any pension plan surpluses or deficits are
a joint responsibility of all participating Ontario municipalities and their employees. As a
result, the Town does not recognize any share of the OMERS pension surplus or deficit.
Accordingly, contributions made during the year are expensed.
Deposits
The Town receives deposits on building permits and site plan applications that ensure
restitution of any potential damage caused by the developer. These deposits are held in
trust until the work has been completed, at which point in time, the deposit is returned.
Deferred Revenue
Deferred revenue represents user charges and fees which have been collected, but for
which the related services have yet to be performed. These amounts will be recognized as
revenue in the fiscal year the services are performed.
The Town receives development charges under the authority of provincial legislation and
Town by-laws. These funds, by their nature, are restricted in their use and, until applied to
specific capital works, are recorded as deferred revenue (formerly obligatory reserve
funds).
Use of Estimates
The preparation of financial statements in accordance with Canadian public sector
accounting standards requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period. The principal
estimates used in the preparation of these financial statements are the post-employment
benefits liabilities, the estimated useful lives of tangible capital assets and valuation of
tangible capital assets. Actual results could differ from management's best estimates as
additional information becomes available in the future.
Assumed Infrastructure Assets
Subdivision streets, lighting, sidewalks, drainage, and other infrastructure and in some
instances park fixtures and trail networks are required to be provided by subdivision
developers. Upon completion they are assumed by the Town and recorded at fair value at
the date of assumption. The Town is not involved in the construction and does not budget
for either the contributions from the developer or the capital expenditure.
8
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The Corporation of the Town of Aurora
Notes to the Consolidated Financial Statements
December 31, 2017
(Dollar amounts presented in '000's)
1. Summary of Significant Accounting Policies (continued)
Revenue Recognition
Revenues are recognized as follows:
a) Taxation revenue is recognized as revenue when it is authorized and the taxable
event occurs. Related penalties and interest are recognized as revenue in the year
that they are earned.
b) User fees are reported on an accrual basis.
c) Grants
- Conditional grant revenue is recognized to the extent the conditions imposed
on it have been fulfilled.
- Unconditional grant revenue is recognized when monies are receivable.
d) Investment income earned on surplus funds is reported as revenue in the period
earned.
Investment income earned on deferred revenue amounts such as development
charges and parkland allowances, is added to the associated funds and forms part of
the respective deferred revenue balance.
Investment income earned on the Town's reserve fund balances is added to the
associated funds and forms part of the respective period ending reserve fund
balance. Reserve fund balances in a credit position are similarly charged interest.
e) Development related fees and charges are recognized over the period of services or
when required expenses occur if applicable.
2. Cash
The Town's bank accounts are held at one chartered bank. The bank accounts earn interest
at composite prime rate minus 1.75%. As at December 31, 2017, the rate is 1.00% (2016 -
1.00%).
The Town has an overdraft credit facility agreement with TD Bank, to be used for day to
day operations. The maximum credit limit is $1,000 with interest calculated using the
composite prime rate minus 0.25%. As at December 31, 2017, the rate is 2.45% (2016 -
2.45%) and the outstanding balance is $Nil (2016 - $Nil).
3. Budget Reconciliation
The Budget for 2017 adopted by Council on December 13, 2016 was prepared on a basis not
consistent with that used to report actual results (Canadian public sector accounting
standards). The budget was prepared on a modified accrual basis, while Canadian public
sector accounting standards now require financial statements to be prepared on a full
accrual basis. Accordingly, the budget expensed all tangible capital expenditures rather
than including amortization expense. As a result, the budget figures presented in the
statements of operations and change in net financial assets represent the 2017 budget
adopted by Council with adjustments as follows:
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The Corporation of the Town of Aurora
Notes to the Consolidated Financial Statements
December 31, 2017
(Dollar amounts presented in '000's)
3. Budget Reconciliation (continued)
Revenue Expense Net
Council approved budget:
Operating - Town & Library $ 60,815 $ 60,815 $ -
Operating - water/sewer 22,621 22,621 -
Capital (for multiple years) 18,199 18,199 -
Total Council approved budget 101,635 101,635 -
Less: Multiple years capital (18,199) (18,199) -
debt principal payments1 -(517)517
Plus: 2017 Non-TCA capital - 4,298 (4,298)
transfers to/from other funds2 (2,301) (12,267) 9,966
transfers from deferred revenue 11,277 - 11,277
amortization expense3 - 14,728 (14,728)
Adjusted budget per the
consolidated statement of operations $ 92,412 $ 89,678 $ 2,734
1 "Debt principal payments" are considered a repayment of a long-term liability and are not
considered an expense under accrual accounting - only the related interest portion
remains a valid expense under accrual accounting.
2 "Transfers to/from other funds" represents transfer to/from reserves for expenditures and
is not considered a revenue source under accrual accounting.
3 Under accrual accounting, costs related to the acquisition of "Tangible Capital Assets" are
recorded on the balance sheet - only the amortization of existing Tangible Capital Assets
is included as an expense.
4. Portfolio Investments
Portfolio investments are comprised of fixed income securities that are primarily federal,
provincial and municipal government bonds, debentures and promissory notes and bearer
deposits that mature after more than 90 days. Portfolio investments are valued at the lower
of cost or market value.
Portfolio investments of $117,328 (2016 - $112,460) have a market value of $122,788
(2016 - $118,154).
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The Corporation of the Town of Aurora
Notes to the Consolidated Financial Statements
December 31, 2017
(Dollar amounts presented in '000's)
5. Land Listed for Sale
As of December 31, 2017 the Town has listed a total of two properties that it owns which
have been deemed surplus to the Town's needs. Of these two properties, one relates to the
Town's Leslie Lands parcel.
Subsequent to the year end, the Town sold its remaining Leslie Lands parcel property. The
details of these transactions can be found in note 19.
6. Notes Payable and Bank Indebtedness
For the purposes of constructing a new Joint Operations Centre, the Town arranged for a
construction line of credit through Infrastructure Ontario. The line of credit is fully open,
bears a monthly variable interest rate, interest is paid monthly, and the line of credit is to
be refinanced within 120 days of completion of the project. It is the Town’s intent to pay
down the line of credit to the extent possible as planned project funding sources
materialize prior to refinancing. During 2016, subsequent to the completion of the facility,
the 120 day refinancing period was extended by Infrastructure Ontario to allow more time
for the Town to receive anticipated revenues in the short term.
As of December 31, 2017 the Town has received a total of $11,678 of advances to date from
Infrastructure Ontario and subsequently paid back a total of $5,804 resulting in an
outstanding balance of $5,874 related to this line of credit.
On May 1, 2018 the Town made a final payment of $304 toward this line of credit and
refinanced the remaining outstanding balance of $5,500 through a five year term, ten year
amortized debenture bearing interest at 2.85%, maturing in May 2023. Principal and interest
is repayable is semi-annual installments of $318.
7. Deposits
Beginning Ending
Balance 2017 2017 Balance
2017 Inflows Outflows 2017
Refundable Damage Deposits $ 3,207 4,459 (1,973)$5,693
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The Corporation of the Town of Aurora
Notes to the Consolidated Financial Statements
December 31, 2017
(Dollar amounts presented in '000's)
8. Deferred Revenue
Beginning
Balance
2017
2017
Inflows
2017
Outflows
Ending
Balance
2017
Development charges $ 18,920 7,125 (9,202)$16,843
Parkland purposes 4,445 3,258 (563)7,140
Federal Gas Tax 2,246 1,657 (2,057)1,846
Revenue Deferral - General 3,613 6,044 (5,614)4,043
29,224 18,084 (17,436)29,872
Deferred Revenue
transferred to capital but
unexpensed at the end of
the year 4,386 5,683 (6,241)3,828
$ 33,610 23,767 (23,677)$33,700
9. Employee Benefits Liabilities
2017 2016
Post-employment benefits $800$694
Accrued sick leave 252 148
1,052 842
WSIB benefits 32 168
$1,084$ 1,010
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The Corporation of the Town of Aurora
Notes to the Consolidated Financial Statements
December 31, 2017
(Dollar amounts presented in '000's)
9. Employee Benefits Liabilities (Continued)
Post-employment benefits
Post-employment benefits are health and dental benefits that are provided to early retirees
and employees currently on a long term disability. The Town recognizes these post-
employment costs as they are earned during the employee's tenure of service. The accrued
benefit obligations for the Town's post-employment benefits and accrued sick leave
liabilities as at December 31, 2017 are as follows:
2017 2016
Accrued benefit obligation, beginning of year $1,234$ 1,257
Add: Benefit expense 208 71
Interest cost 63 58
Actuarial losses 493 -
Less: Benefits paid for the period (146)(152)
Accrued benefit obligation, end of year 1,852 1,234
Unamortized actuarial losses (800)(392)
Accrued benefit liability $1,052$842
The accrued benefit obligations for the Town's post-employment benefits liability and
accrued sick leave as at December 31, 2017 are based on actuarial valuations for
accounting purposes as at December 31, 2017 with projections to December 31, 2019.
These actuarial valuations were based on assumptions about future events. The economic
assumptions used in these valuations are management's best estimates of expected rates of:
2017 2016
Expected future inflation rates 2.00%2.00%
Discount on accrued benefit obligations 3.40%4.75%
Drug costs escalation 8.00%5.00%
Other health care costs escalation 4.00%-%
Dental costs escalation 4.00%4.00%
The amount of benefits paid by the Town during the year was $33 (2016 - $13).
Workplace Safety and Insurance Board (WSIB) benefits
The Town is a Schedule 2 employer under the Workplace Safety and Insurance Act and, as
such, assumes responsibility for financing its workplace safety and insurance costs. The
accrued WSIB benefit obligations for the Town's WSIB benefits liability as at December 31,
2017 are based on actuarial valuations for accounting purposes as at December 31, 2017
with projections to December 31, 2019. These actuarial valuations were based on
assumptions about future events.
13
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The Corporation of the Town of Aurora
Notes to the Consolidated Financial Statements
December 31, 2017
(Dollar amounts presented in '000's)
10. Net Long-term Liabilities
2017 2016
Debenture, bearing interest at 2.29%, maturing in
March 2026. Principal and interest is repayable in
semi-annual installments of $184.$2,824$ 3,121
Debenture, bearing interest at 4.37%, maturing in
September 2025. Principal and interest is repayable in
semi-annual installments of $160.2,144 2,364
$4,968$ 5,485
Principal repayments for each of the next five years and thereafter are as follows:
2018 $ 534
2019 551
2020 569
2021 587
2022 606
Thereafter 2,121
$ 4,968
The interest expense related to the above long-term debt was $152 (2016 - $145).
One debenture was issued by The Regional Municipality of York in the name of the Town to
fund the construction of a recreation complex. A second debenture was issued by
Infrastructure Ontario in the name of the Town of Aurora to fund the Town's conversion of
all streetlights to LED. These long-term liabilities have been approved by municipal and
regional by-law. The annual principal and interest payments required to service these
liabilities are within the annual debt repayment limit prescribed by the Ministry of Municipal
Affairs and Housing.
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The Corporation of the Town of Aurora
Notes to the Consolidated Financial Statements
December 31, 2017
(Dollar amounts presented in '000's)
11. Accumulated Surplus
Accumulated surplus is comprised of the following:
2017 2016
Non Financial Surpluses
General revenue $8,534$ 8,489
Land listed for sale 2,837 2,952
Invested in tangible capital assets 453,402 452,604
Less: financed by long-term liabilities (4,968)(5,485)
Total non-financial surpluses 459,805 458,560
Reserves set aside by Council for Infrastructure
Infrastructure Sustainability - Water Rate Funded 10,431 8,888
Infrastructure Sustainability - Tax Rate Funded 10,160 9,237
20,591 18,125
Reserve funds, set aside for specific purposes by Council 18,311 15,756
Proceeds of sale of Aurora Hydro 36,891 37,356
Total reserves and reserve funds 75,793 71,237
Accumulated surplus $ 535,598 $529,797
12. Net Taxation
2017 2016
Total taxes levied by the Town $ 128,625 $120,696
Less:
Taxes levied on behalf of the Boards of Education 35,528 33,299
Taxes levied on behalf of the Region of York 50,210 47,326
$42,887$ 40,071
13. Grants Revenue
2017 2016
Federal $2,170$ 1,985
Provincial 775 496
Other 446 315
$3,391$ 2,796
15
Audit Committee Meeting Agenda
Tuesday, June 26, 2018
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The Corporation of the Town of Aurora
Notes to the Consolidated Financial Statements
December 31, 2017
(Dollar amounts presented in '000's)
14. Other Revenue
2017 2016
Penalties and interest on taxes $971$878
Fines 169 183
Licenses, permits and fees 4,809 6,272
Interest income 2,249 2,888
Other 1,630 620
$9,828$ 10,841
15. Pension Agreements
OMERS provides pension services to more than 482,000 active and retired members and
their approximately 1,000 employers. Each year an independent actuary determines the
funding status of OMERS Primary Pension Plan (the Plan) by comparing the actuarial value of
invested assets to the estimated present value of all pension benefits that members have
earned to date. The most recent actuarial valuation of the Plan was conducted at
December 31, 2017. The results of this valuation disclosed total actuarial liabilities of
$94,431 million in respect of benefits accrued for service with actuarial assets at that date
of $89,028 million indicating an actuarial deficit of $5,403 million. Because OMERS is a
multi-employer plan, any pension plan surpluses or deficits are a joint responsibility of
Ontario municipal organizations and their employees. As a result, the town does not
recognize any share of the OMERS pension surplus or deficit.
Contributions in 2017 ranged from 9.0% to 14.6% depending on the level of earnings. As a
result, $2,000 (2016 - $1,949) was contributed to OMERS for current year services.
16. Insurance Coverage
The Town is self-insured for insurance claims up to $10 for any individual claim and for any
number of claims arising out of a single occurrence.
Claim costs during the year amounted to $45 (2016 - $60).
The Town has made provisions for reserves for self-insurance claims under $10 to be used
for those claims that exceed the sum provided for in the annual budget. These reserves are
reported on the Financial Statement Operations and Accumulated Surplus under reserves set
aside by Council. In 2013, the Insurance stand alone reserve was collapsed into the Town's
general Tax Rate Stabilization Reserve; this reserve will be similarly accessible for this
purpose. The balance of the Tax Rate Stabilization Reserve as of December 31, 2017 was
$4,850.
16
Audit Committee Meeting Agenda
Tuesday, June 26, 2018
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The Corporation of the Town of Aurora
Notes to the Consolidated Financial Statements
December 31, 2017
(Dollar amounts presented in '000's)
17. Contingencies
The Town is subject to various legal claims arising in the normal course of its operations.
The ultimate outcome of these claims cannot be determined at this time; therefore, no
amounts have been recorded in these financial statements. The Town's management believe
that the ultimate disposition of these matters will not have a material adverse effect on its
financial position.
18. Contractual Obligations
The Town committed contractual obligations on major capital projects of approximately
$42,368 during 2017, which have various contract completion dates.
Effective January 1, 2002, the Town entered into an agreement with the Town of
Newmarket with respect to the provision of Fire and Emergency services. Under the
Agreement, the Town of Newmarket assumed responsibility for the combined Central York
Fire Services. The cost of these services is shared between the two municipalities on the
basis of a pre-defined cost sharing formula. The Town's share of costs for the year was
$10,017 (2016 - $9,631).
19. Subsequent Events
Subsequent to year end, the Town sold one of its properties that it had listed for sale as of
December 31, 2017 and disclosed in note 5. The noted property was sold on June 28, 2018
for a sale price of $7,059.
20. Segment Information
The Town is a diversified municipal government institution that provides a wide range of
services to its citizens. Distinguishable functional segments have been separately disclosed
in the Consolidated Schedule of Segment Disclosure. The nature of the segments and the
activities they encompass are as follows:
Taxation Revenue
The Town's primary source of funding for its operations is achieved through property taxes
levied against property owners.
Governance & Corporate Support
This functional segment includes The Mayor's office and Council, CAO Office, Legislative
Services, Legal, Communication, Information Technology and Financial Services, and all
other support services.
Fire & Emergency Services
Central York Fire Services provides fire and emergency services to the residents of Aurora
and Newmarket. The cost the Town paid for these services is described in Note 18.
17
Audit Committee Meeting Agenda
Tuesday, June 26, 2018
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The Corporation of the Town of Aurora
Notes to the Consolidated Financial Statements
December 31, 2017
(Dollar amounts presented in '000's)
20. Segment Information (continued)
Building, Bylaw & Licensing Services
The Town issues a variety of licenses and permits. This segment ensures an acceptable
quality of building construction and maintenance of properties through enforcement of
construction codes, building standards and by-laws for the protection of occupants. It
enforces all zoning by-laws and the processing of building permit applications.
Roads & Related Services
This segment represents the reconstruction, repair, maintenance works and winter control
services provided to the Town's roads, sidewalks, street lighting, walkways and bridges.
Environmental Services
This segment represents the water/sewer services and waste management services provided
by the Public Works Department.
Community Programs & Events
This segment represents the services that the Parks & Recreation Services Department
provided through community programs and special events.
Parks & Facilities
This segment maintains numerous recreation facilities, as well as indoor community space
for booking and community use. It also maintains parks and playgrounds, open spaces and a
vast trail system.
Public Library Services
This segment of library services covers the Library Board and The Town's library expenses.
The funding from the Town to the Library Board is eliminated before the segment amount is
determined.
Planning & Development
This functional segment manages the Town's urban development through the development
application process. It also oversees community economic development, environmental
concerns, heritage matters, local neighbourhoods, and the Town's Official Plan.
21. Comparative Amounts
Certain comparative figures in these consolidated financial statements have been
reclassified to conform to the presentation adopted for the current year.
22. Tangible Capital Assets Under Construction
Tangible capital assets under construction and other capital work in progress by the Town
having a value of $26,049 (2016 - $20,774) have not been amortized. Amortization of these
assets will commence when these noted assets are put into service. This value excludes any
developer constructed assets which have yet to be assumed.
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The Corporation of the Town of Aurora
Notes to the Consolidated Financial Statements
December 31, 2017
(Dollar amounts presented in '000's)
23. Tangible Capital Assets
2017
General Infrastructure Total
Land Buildings Vehicles
Computer
and other Facilities Roads
Underground
and Other
Networks
Bridges and
Other
Structures
Assets Under
Construction
Cost
Balance, beginning of year $ 111,370 $ 102,393 $9,622$7,313$ 22,137 $ 93,934 $ 233,798 $ 20,858 $ 20,774 $ 622,199
Reclassification of beginning (432)433 (1)-
Add: Additions during the year 7 275 926 901 123 53 523 6 12,845 15,659
Add: Donations and transfers - 125 - 606 1,971 4,162 917 652 (7,570)863
Less: Disposals during the year (120)(23)(554)(443)(8)(659)(1,165)(210)-(3,182)
Balance, end of year 111,257 102,770 9,994 8,377 24,223 97,058 234,506 21,305 26,049 635,539
Accumulated amortization
Balance, beginning of year -35,209 5,083 4,344 9,646 35,679 65,740 13,894 -169,595
Add: Amortization during the year - 3,650 761 808 768 3,265 4,525 951 - 14,728
Less: Amortization on disposals -(23)(498)(436)(7)(419)(641)(162)-(2,186)
Balance, end of year -38,836 5,346 4,716 10,407 38,525 69,624 14,683 -182,137
Net book value of
tangible capital assets $ 111,257 $ 63,934 $4,648$3,661$ 13,816 $ 58,533 $ 164,882 $6,622$ 26,049 $ 453,402
19
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The Corporation of the Town of Aurora
Notes to the Consolidated Financial Statements
December 31, 2017
(Dollar amounts presented in '000's)
23. Tangible Capital Assets (continued)
2016
General Infrastructure Total
Land Buildings Vehicles
Computer
and other Facilities Roads
Underground
and Other
Networks
Bridges and
Other
Structures
Assets Under
Construction
Cost
Balance, beginning of year $ 109,647 $ 81,455 $8,696$6,537$ 21,522 $ 88,573 $ 227,666 $ 20,478 $ 27,742 $ 592,316
Add: Additions during the year 1,615 2,780 1,244 1,192 275 28 259 - 13,947 21,340
Add: Donations and transfers 108 18,348 - - 368 5,546 6,148 1,028 (20,915) 10,631
Less: Disposals during the year - (190) (318) (416) (28) (213) (275) (648) - (2,088)
Balance, end of year 111,370 102,393 9,622 7,313 22,137 93,934 233,798 20,858 20,774 622,199
Accumulated amortization
Balance, beginning of year -32,192 4,688 4,082 8,966 32,639 61,436 13,571 -157,574
Add: Amortization during the year - 3,084 706 677 708 3,182 4,535 942 - 13,834
Less: Amortization on disposals - (67) (311) (415) (28) (142) (231) (619) - (1,813)
Balance, end of year -35,209 5,083 4,344 9,646 35,679 65,740 13,894 -169,595
Net book value of
tangible capital assets $ 111,370 $ 67,184 $4,539$2,969$ 12,491 $ 58,255 $ 168,058 $ 6,964 $ 20,774 $ 452,604
20
Audit Committee Meeting Agenda
Tuesday, June 26, 2018
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The Corporation of the Town of Aurora
Consolidated Schedule of Segmented Disclosure
Schedule 1
December 31, 2017
(Dollar amounts presented in '000's)
2017
Taxation
Revenue
Governance &
Corporate
Support
Fire &
Emergency
Services
Bylaw &
Licensing
Services
Roads &
Related
Services
Environmental
Services
Community
Programs &
Events
Parks &
Facilities
Public Library
Services
Planning &
Development Consolidated
Revenue
Taxation $ 42,887$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 42,887
User fees - 337 380 53 2,263 23,107 4,486 2,050 390 2,009 35,075
Grants - 45 - - 2,539 437 319 - 51 - 3,391
Gain on disposal of land listed for sale -604 --------604
Loss on disposal of tangible capital assets -(789)--- -----(789)
Assumed infrastructure assets -863 --------863
Other - 3,917 - 3,431 352 745 485 92 37 769 9,828
Total Revenue 42,887 4,977 380 3,484 5,154 24,289 5,290 2,142 478 2,778 91,859
Expenses
Salaries, wages and benefits - 6,582 - 2,679 2,825 1,725 3,347 5,774 2,865 1,670 27,467
Amortization - 4,497 253 - 3,458 5,282 -768 469 - 14,727
Materials and supplies -445 4 38 1,486 948 235 2,586 151 6 5,899
Contracted services - 3,214 9,551 327 1,733 18,095 1,403 2,087 264 93 36,767
Interest on long-term liabilities ----- --256--256
Others -494 -2 24 -88 34 -300 942
Total Expenses -15,232 9,808 3,046 9,526 26,050 5,073 11,505 3,749 2,069 86,058
Annual Surplus (Deficit)$ 42,887 $(10,255)$(9,428)$ 438 $(4,372)$(1,761)$ 217 $(9,363)$(3,271)$ 709 $ 5,801
21
Audit Committee Meeting Agenda
Tuesday, June 26, 2018
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The Corporation of the Town of Aurora
Consolidated Schedule of Segmented Disclosure
Schedule 1
December 31, 2017
(Dollar amounts presented in '000's)
2016
Taxation
Revenue
Governance &
Corporate
Support
Fire &
Emergency
Services
Bylaw &
Licensing
Services
Roads &
Related
Services
Environmental
Services
Community
Programs &
Events
Parks &
Facilities
Public Library
Services
Planning &
Development Consolidated
Revenue
Taxation $ 40,071$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 40,071
User fees -623 1,783 51 3,498 24,768 6,161 13,339 369 2,174 52,766
Grants ---- 2,215 244 279 -58 - 2,796
Gain on disposal of land listed for sale -5,726--------5,726
Loss on disposal of tangible capital assets -(239)--------(239)
Assumed infrastructure assets -10,632--------10,632
Other - 3,940 - 4,500 (72)986 440 118 24 905 10,841
Total Revenue 40,071 20,682 1,783 4,551 5,641 25,998 6,880 13,457 451 3,079 122,593
Expenses
Salaries, wages and benefits - 5,958 - 2,922 2,927 1,444 3,230 5,600 2,823 1,739 26,643
Amortization - 3,789 216 - 3,407 5,252 -708 462 - 13,834
Materials and supplies -354 5 44 1,222 830 172 2,468 76 9 5,180
Contracted services - 3,139 9,243 316 1,551 17,112 1,098 1,802 238 86 34,585
Interest on long-term liabilities -------268--268
Other -89 -3 --88 25 -272 477
Total Expenses -13,329 9,464 3,285 9,107 24,638 4,588 10,871 3,599 2,106 80,987
Annual Surplus (Deficit)$40,071$7,353$ (7,681)$1,266$ (3,466)$1,360$2,292$2,586$ (3,148)$973$41,606
22
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Tuesday, June 26, 2018
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The Corporation of the Town of
Aurora
Planning Report to the Audit Committee
June 26, 2018
Attachment #2
Audit Committee Meeting Agenda
Tuesday, June 26, 2018
Item 1
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Audit Committee Meeting Agenda Tuesday, June 26, 2018Item 1 Page 64 of 77
THE CORPORATION OF THE TOWN OF AURORA 3
TABLE OF CONTENTS
Terms of Reference 4
Independence 4
Audit Team 5
Responsibilities 6
Audit Strategy 7
Materiality 8
Risks and Planned Audit Response 9
Fraud Discussion 10
Reliance on Experts 12
Audit Timing 13
Fees 14
BDO Resources 15
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THE CORPORATION OF THE TOWN OF AURORA 4
TERMS OF REFERENCE
Our overall responsibility is to form and express an opinion on the financial statements. These
financial statements are prepared by management, with oversight by those charged with
governance. The audit of the financial statements does not relieve management or those
charged with governance of their responsibilities. The scope of our work, as confirmed in our
engagement letter of March 27, 2018, and a summary of our proposed fees are set out below.
ENGAGEMENT OBJECTIVES
• Forming and expressing an audit opinion on the consolidated financial statements.
• Present significant findings to the Audit Committee including key audit and accounting
issues, any significant deficiencies in internal control and any other significant matters
arising from our work.
• Provide timely and constructive management letters. This will include deficiencies in
internal control identified during our audit.
• Consult regarding accounting, income taxes and reporting matters as requested throughout
the year.
• Work with management towards the timely issuance of consolidated financial statements.
INDEPENDENCE
At the core of the provision of external audit services is the concept of independence. Canadian
generally accepted auditing standards require us to communicate to the Audit Committee at
least annually, all relationships between BDO Canada LLP and its related entities and Client and
its related entities, that, in our professional judgment, may reasonably be thought to bear on
our independence for the forthcoming audit of the Municipality. There have been no changes to
our independence as communicated on June 26, 2018 for the audit of the Municipality for the
previous year ended December 31, 2017.
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THE CORPORATION OF THE TOWN OF AURORA 5
AUDIT TEAM
In order to ensure effective communication between the Audit Committee and BDO Canada LLP,
the contact details of the engagement team are outlined below.
Name Role
Years on
engagement
Phone
number Email address
Giselle Bodkin, CPA, CA Engagement
Partner
6 Years 705-726-6331
x 8510
gbodkin@bdo.ca
Andrea Nauss, CPA, CA Assurance
Senior Manager
5 years 705-726-6331
X 8555
anauss@bdo.ca
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THE CORPORATION OF THE TOWN OF AURORA 6
RESPONSIBILITIES
It is important for the Audit Committee to understand the responsibilities that rest with the
Municipality and its management, those that rest with the external auditor and the
responsibilities of those charged with governance. BDO’s responsibilities are outlined within the
annual engagement letter attached as Appendix A to the previous planning report to the Audit
Committee dated March 27, 2018. The oversight and financial reporting responsibilities of
management and the Audit Committee are summarized below.
MANAGEMENT’S RESPONSIBILITIES
• Maintain adequate accounting records and maintain an appropriate system of internal
control for the Municipality.
• Select and consistently apply appropriate accounting policies.
• Prepare the annual consolidated financial statements.
• Safeguard the Municipality’s assets and take reasonable steps for the prevention and
detection of fraud and other irregularities.
• Make available to us, as and when required, all of the Municipality’s accounting records
and related financial information.
AUDIT COMMITTEE’S RESPONSIBILITIES
• Oversee the work of the external auditor engaged for the purpose of issuing an
independent auditor’s report.
• Facilitate the resolution of disagreements between management and the external auditor
regarding financial reporting matters.
• Pre-approve all non-audit services to be provided to the Municipality or its subsidiaries by
the external auditor.
• Review the consolidated financial statements before the Municipality publicly discloses
this information.
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THE CORPORATION OF THE TOWN OF AURORA 7
AUDIT STRATEGY
Our overall audit strategy involves extensive partner and manager involvement in all aspects of
the planning and execution of the audit and is based on our overall understanding of the
Municipality.
We will perform a risk based audit which allows us to focus our audit effort on higher risk areas
and other areas of concern for management and the Audit Committee.
To assess risk accurately, we need to
gain a detailed understanding of the
Municipality’s business and the
environment it operates in. This
allows us to identify, assess and
respond to the risks of material
misstatement.
To identify, assess and respond to
risk, we obtain an understanding of
the system of internal control in
place in order to consider the
adequacy of these controls as a basis
for the preparation of the
consolidated financial statements,
to determine whether adequate
accounting records have been
maintained and to assess the
adequacy of these controls and
records as a basis upon which to
design and undertake our audit
testing.
Based on our risk assessment, we design an appropriate audit strategy to obtain sufficient
assurance to enable us to report on the consolidated financial statements.
We choose audit procedures that we believe are the most effective and efficient to reduce audit
risk to an acceptable low level. The procedures are a combination of testing the operating
effectiveness of internal controls, substantive analytical procedures and other tests of detailed
transactions.
Having planned our audit, we will perform audit procedures, maintaining an appropriate degree
of professional skepticism, in order to collect evidence to support our audit opinion.
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THE CORPORATION OF THE TOWN OF AURORA 8
MATERIALITY
Misstatements, including omitted financial statement disclosures, are considered to be material
if they, individually or in aggregate, could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
Judgments about materiality are made in light of surrounding circumstances and include an
assessment of both quantitative and qualitative factors and can be affected by the size or nature
of a misstatement, or a combination of both.
For purposes of our audit, we have set preliminary materiality at $2,250,000 for the Municipality.
Our materiality calculation is based on the Municipality’s preliminary results. In the event that
actual results vary significantly from those used to calculate preliminary materiality, we will
communicate these changes to the Audit Committee as part of our year end communication.
We will communicate all corrected and uncorrected misstatements identified during our audit to
the Audit Committee, other than those which we determine to be “clearly trivial”.
Misstatements are considered to be clearly trivial for purposes of the audit when they are
inconsequential both individually and in aggregate.
We encourage management to correct any misstatements identified throughout the audit
process.
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THE CORPORATION OF THE TOWN OF AURORA 9
RISKS AND PLANNED AUDIT RESPONSES
Based on our knowledge of the Municipality’s business, our past experience, and knowledge
gained from management and the Audit Committee, we have identified the following significant
risks; those risks of material misstatement that, in our judgment, require special audit
consideration.
Significant risks arise mainly because of the complexity of the accounting rules, the extent of
estimation and judgment involved in the valuation of these financial statement areas, and the
existence of new accounting pronouncements that affect them. We request your input on the
following significant risks and whether there are any other areas of concern that the Audit
Committee has identified.
Management Override of Controls
Significant Risk Approach
• Management is in a unique position to
perpetrate fraud because of
management’s ability to directly or
indirectly manipulate accounting
records prepare fraudulent financial
statements by overriding controls that
otherwise appear to be operating
effectively.
• Our planned audit procedures test the
appropriateness of journal entries
recorded in the general ledger and
other adjustments made in the
preparation of financial statements.
• We will also obtain an understanding of
the business rationale for significant
transactions that we become aware of
that are outside the normal course of
operations for the Municipality, or that
otherwise appear to be unusual given
our understanding of the Municipality
and its environment. We will review
accounting estimates for biases and
evaluate whether the circumstances
producing the bias, if any, represented
a risk of material misstatement due to
fraud.
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THE CORPORATION OF THE TOWN OF AURORA 10
FRAUD DISCUSSION
Canadian generally accepted auditing standards require us to discuss fraud risk with the Audit
Committee on an annual basis. We have prepared the following comments to facilitate this
discussion.
Required Discussion
BDO Response
Question to Audit
Committee
Details of existing
oversight processes
with regards to fraud.
Through our planning process, and based
on prior years’ audits, we have
developed an understanding of your
oversight processes including:
• Audit Committee charters;
• Discussions at audit committee
meetings and our attendance at
those meetings;
• Review of related party
transactions; and
• Consideration of tone at the top
Are there any new
processes or changes
in existing processes
relating to fraud that
we should be aware
of?
Knowledge of actual,
suspected or alleged
fraud.
Currently, we are not aware of any
fraud.
Are you aware of any
instances of actual,
suspected or alleged
fraud affecting the
Municipality?
AUDITORS’ RESPONSIBILITIES FOR DETECTING FRAUD
We are responsible for planning and performing the audit to obtain reasonable assurance that
the consolidated financial statements are free of material misstatements, whether caused by
error or fraud, by:
• Identifying and assessing the risks of material misstatement due to fraud;
• Obtaining sufficient and appropriate audit evidence regarding the assessed risks of material
misstatement due to fraud, through designing and implementing appropriate responses; and
• Responding appropriately to fraud or suspected fraud identified during the audit.
The likelihood of not detecting a material misstatement resulting from fraud is higher than the
likelihood of not detecting a material misstatement resulting from error because fraud may
involve collusion as well as sophisticated and carefully organized schemes designed to conceal
it.
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Tuesday, June 26, 2018
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During the audit, we will perform risk assessment procedures and related activities to obtain an
understanding of the entity and its environment, including the entity’s internal control, to obtain
information for use in identifying the risks of material misstatement due to fraud and will make
inquires of management regarding:
• Management’s assessment of the risk that the consolidated financial statements may be
materially misstated due to fraud, including the nature, extent and frequency of such
assessments;
• Management’s process for identifying and responding to the risks of fraud in the entity,
including any specific risks of fraud that management has identified or that have been
brought to its attention, or classes of transactions, account balances, or disclosures for which
a risk of fraud is likely to exist;
• Management’s communication, if any, to those charged with governance regarding its
processes for identifying and responding to the risks of fraud in the entity; and
• Management’s communication, if any, to employees regarding its view on business practices
and ethical behaviour.
In response to our risk assessment and our inquiries of management, we will perform procedures
to address the assessed risks, which may include:
• Inquire of management, the Audit Committee, and others related to any knowledge of fraud,
suspected fraud or alleged fraud;
• Perform disaggregated analytical procedures and consider unusual or unexpected
relationships identified in the planning of our audit;
• Incorporate an element of unpredictability in the selection of the nature, timing and extent
of our audit procedures; and
• Perform additional required procedures to address the risk of management’s override of
controls including;
o Testing internal controls designed to prevent and detect fraud;
o Testing the appropriateness of a sample of adjusting journal entries and other
adjustments for evidence of the possibility of material misstatement due to fraud;
o Reviewing accounting estimates for biases that could result in material
misstatements due to fraud, including a retrospective review of significant prior
years’ estimates; and
o Evaluating the business rationale for significant unusual transactions.
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Tuesday, June 26, 2018
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RELIANCE ON EXPERTS
In order for us to perform adequate audit procedures on certain financial statement areas, we
will be relying on the work of, and the report prepared by Dixon Actuarial Services Inc.
Canadian generally accepted auditing standards require us to communicate with the expert.
We propose to discuss the following with Dixon Actuarial Services Inc.:
• The objective and nature of our audit engagement and how we intend to use the expert's
findings and report.
• Our assessment of the significance and risk aspects of the engagement that will affect the
expert's work.
• The requirement to advise us if they have any relationship with the organization which
could impair their judgment or objectivity in the conduct of their engagement.
• The nature, timing and extent of the expert's work and our planned review of it, possibly
including review of their working papers.
• Confirmation that the assumptions used in their calculations are consistent with those used
in the prior periods and with industry standards.
• Their obligation to advise BDO Canada LLP of any matters up to the estimated audit report
date that may affect their calculations and their report.
We ask that the appropriate level of management review the data provided to Dixon Actuarial
Services Inc. and that they also review the assumptions used and results reported by the expert
for reasonableness.
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AUDIT TIMING
The following schedule outlines the anticipated timing of the audit of the consolidated financial
statements of the Municipality.
Audit tasks and deliverables Dates
Planning visit and interim fieldwork commences January 2019
Final audit fieldwork commences April 2019
Present draft consolidated financial statements and
final report to the Audit Committee
June 2019
As part of the year-end audit committee meeting, we will provide the Audit Committee with a
copy of our draft audit opinion, discuss our findings, including significant estimates utilized by
management, accounting policies, financial statement disclosures, and significant transactions
completed during the year. We will also report any significant internal control deficiencies
identified during our audit and reconfirm our independence.
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FEES
We estimate our fees for 2018 will be $29,750 for the audit of the consolidated financial
statements.
Our estimated fees are based on the time expected to complete the audit and excludes taxes,
out of pocket expenses, and internal administration fees and are based upon the following
assumptions:
• We will be provided with the requested audit schedules, working papers and descriptions of
accounting systems and processes as detailed in our annual requirements letter upon the
commencement of fieldwork;
• The consolidation and draft financial statements, including notes, are prepared to a standard
suitable for audit with all balances reconciled to the underlying accounting records;
• There will be minimal adjusting journal entries; and
• The nature of the Municipality’s operations remain consistent with the prior year and there
have been no changes in accounting personnel.
In the event that we incur additional charges or we experience delays in completing the audit,
we will advise management.
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BDO RESOURCES
BDO is one of Canada’s largest accounting services firms providing assurance and accounting,
taxation, financial advisory, risk advisory, financial recovery and consulting services to a variety
of publicly traded and privately held companies.
BDO serves its clients through 105 offices across Canada. As a member firm of BDO International
Limited, BDO serves its multinational clients through a global network of over 1,000 offices in
more than 100 countries. Commitment to knowledge and best practice sharing ensures that
expertise is easily shared across our global network and common methodologies and information
technology ensures efficient and effective service delivery to our clients.
Outlined below is a summary of certain BDO resources which may be of interest to the Audit
Committee.
PUBLICATIONS
BDO’s national and international accounting and assurance department issues publications on
the transition and application of Public Sector Accounting Standards (PSAB). In addition, we
offer a wide array of publications on Accounting Standards for Private Enterprises (ASPE),
International Financial Reporting Standards (IFRS), and Accounting Standards for Not-for-Profit
Organizations (ASPNO).
For additional information on PSAB, including links to archived publications and model
financial statements, refer to the link below:
http://www.bdo.ca/en/library/services/assurance-and-accounting/pages/default.aspx.
TAX BULLETINS, ALERTS AND NEWSLETTERS
BDO’s national tax department issues a number of bulletins, alerts and newsletters relating
to corporate federal, personal, commodity, transfer pricing and international tax matters.
For additional information on tax matters and links to archived tax publications, please refer
to the following link: Tax Library | BDO Canada
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