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AGENDA - Audit Committee - 20200623 Audit Committee Meeting Agenda Tuesday, June 23, 2020 6:15 p.m. Video Conference Public Release June 17, 2020 Town of Aurora Audit Committee Meeting Agenda Tuesday, June 23, 2020 6:15 p.m., Video Conference Note: This meeting will be held electronically as per Section 20.1 of the Town's Procedure By-law No. 6228-19, as amended, due to the COVID-19 State of Emergency. 1. Approval of the Agenda 2. Declarations of Pecuniary Interest and General Nature Thereof 3. Delegations 4. Consideration of Items Requiring Discussion 1. FIN20-016 – 2019 Audited Financial Statements with Audit Report Presentation to be provided by Giselle Bodkin and Emma Roy, Auditors, BDO Canada LLP. Recommended: 1. That Report No. FIN20-016 be received; and 2. That the 2019 Audit Reports and Financial Statements for the year-ended December 31, 2019 be approved and published on the Town’s website; and 3. That the 2020 year-end audit plan as proposed by BDO Canada LLP be endorsed. 5. Adjournment Town of Aurora Audit Committee Report No. FIN20-016 Subject: 2019 Audited Financial Statements with Audit Report Prepared by: Jason Gaertner, Manager, Financial Management Department: Finance Date: June 23, 2020 Recommendation 1. That Report No. FIN20-016 be received; and 2. That the 2019 Audit Reports and Financial Statements for the year-ended December 31, 2019 be approved and published on the Town’s website, and 3. That the 2020 yearend audit plan as proposed by BDO Canada LLP be endorsed. Executive Summary The Town of Aurora’s audited financial statements for the year ended December 31, 2019, and the auditor’s report therein are presented for approval. Also, in accordance with the Audit Committee Terms of Reference, the Audit Committee is responsible to “review the 2020 audit plan and audit fee schedule for the ensuing year end”. Background The entire audit package as presented by our auditors BDO Canada LLP is attached, this package includes the 2019 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 financial performance report due to the inclusion of the Town’s tangible capital assets and other Public Sector Accounting Standards (PSAS) reporting differences. These statements 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 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 1 of 93 June 23, 2020 Page 2 of 5 Report No. FIN20-016 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 matters that they feel should be brought to their attention. Also attached (Attachment 2) is the Audit Plan for the 2020 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 2020 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 Finance, we continue to be committed to the provision, in a prompt fashion, of any documentation requested by the auditor 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. Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 2 of 93 June 23, 2020 Page 3 of 5 Report No. FIN20-016 Advisory Committee Review Not applicable. 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 2019 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 2019 Financial Statements of the Town so that the Statements may be published as required by legislation. In regards to the 2020 audit plan, the cost for this audit has been provided for within the 2020 budget. An amount of $40,900 has been budgeted for the 2020 audit with anticipated fees of $31,500 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 2018 audited financial statements will be published on the Town’s website. The Town of Aurora will use ‘Inform’ as the level of engagement for the Town’s 2019 audited financial statements. There are five different levels of community engagement to consider, with each level providing the community more involvement in the decision making process. These levels are: Inform, Consult, Involve, Collaborate and Empower. Examples of each can be found in the Community Engagement Policy. These options are based on the International Association of Public Participation (IAP2) Spectrum and assist in establishing guidelines for clearly communicating with our public and managing Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 3 of 93 June 23, 2020 Page 4 of 5 Report No. FIN20-016 community engagement. In order to inform the public, this report will be posted to the Town’s website. Link to Strategic Plan 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 support the Strategic Plan principles of integrity, progressive corporate excellence and continuous improvement. Alternative(s) to the Recommendation Not applicable. Conclusions The auditors are ready to issue an unqualified opinion on the fairness and completeness of the corporation’s financial statements for the year ended December 31, 2019. Staff recommend the approval of the statements. Once approved and final versions are prepared, the Mayor and CAO will sign the statements. In addition, it is recommended that Council endorse the proposed 2020 audit plan as presented by BDO Attachments Attachment #1 – 2019 Year-End Auditor’s reporting package for Council Attachment #2 – 2020 Audit Plan Previous Reports Audit Committee, June 25, 2019, FS19-022 – 2018 Audited Financial Statements with Audit Report Pre-submission Review Agenda Management Team review on May 28, 2020 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 4 of 93 June 23, 2020 Page 5 of 5 Report No. FIN20-016 Departmental Approval Approved for Agenda Rachel Wainwright-van Kessel, CPA, CMA Doug Nadorozny Director, Finance/Treasurer Chief Administrative Officer Digitally signed by Rachel Wainwright-van Kessel, CPA, CMA Date: 2020.06.16 09:23:53 -04'00' Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 5 of 93 BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. AUDIT FINAL REPORT TO THE AUDIT COMMITTEE MEMBERS June 23, 2020 THE CORPORATION OF THE TOWN OF AURORA Attachment #11Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 6 of 93 Audit Final Report for The Corporation of the Town of Aurora For the year ended December 31, 2019TABLE OF CONTENTSSUMMARY ............................................................................................................................................................................................................... 2 COVID-19 ............................................................................................................................................................................................................... 4 AUDIT FINDINGS .................................................................................................................................................................................................... 5 INTERNAL CONTROL MATTERS.............................................................................................................................................................................. 7 OTHER REQUIRED COMMUNICATIONS ................................................................................................................................................................... 8 APPENDIX A: INDEPENDENT AUDITOR’S REPORT ............................................................................................................................................... 10 APPENDIX B: INDEPENDENCE UPDATE ................................................................................................................................................................ 12 APPENDIX C: UNADJUSTED DIFFERENCES .......................................................................................................................................................... 15 APPENDIX D: REPRESENTATION LETTER ............................................................................................................................................................ 16 APPENDIX E: BDO RESOURCES ............................................................................................................................................................................ 19 Attachment #12Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 7 of 93 Audit Final Report for The Corporation of the Town of Aurora For the year ended December 31, 2019SUMMARY Status of the Audit As of the date of this report, we have substantially completed our audit of the 2019 consolidated financial statements, pending completion of the following items: XReceipt of signed management representation letterXReceipt of outstanding legal confirmationsXSubsequent events review through to financial statement approval dateXApproval of consolidated financial statements by the Board of DirectorsWe 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 consolidated financial statements are free from material misstatement. See Appendix A for our draft independent auditor’s report. The scope of the work performed was substantially the same as that described in our Planning Report to the Audit Committee Members dated March 18, 2020. Materiality As communicated to you in our Planning Report to the Audit Committee Members, preliminary materiality was $9,224,000 for financial statement areas surrounding tangible capital assets and specific materiality was $2,042,000 for the remaining financial statement areas. Final materiality was $9,224,000 and $1,853,000 respectively. Audit Findings Our audit focused on the risks specific to your business and key accounts. Our discussion points below focus on areas of significant risks of material misstatement, or the following items: XManagement override of controlsXRevenue recognition – assumed lands and developer chargesXTangible capital asset adjustmentOur audit and therefore this report will not necessarily identify all matters that may be of interest to the Audit Committee Members in fulfilling its responsibilities. This report has been prepared solely for the use of the Audit Committee Members and should not be distributed without our prior consent. Consequently, we accept no responsibility to a third party that uses this communication. Attachment #13Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 8 of 93 Audit Final Report for The Corporation of the Town of Aurora For the year ended December 31, 2019Internal Control Matters We are required to report to you in writing, any significant deficiencies in internal control that we have identified. The specifics of this communication are included in our report below. Independence Our annual letter confirming our independence was previously provided to you. We know of no circumstances that would cause us to amend the previously provided letter. Unadjusted Differences We have disclosed all significant 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 consolidated financial statements taken as a whole. Should the Audit Committee Members agree with this assessment, we do not propose further adjustments. For purposes of our discussion, a summary of unadjusted differences has been presented in Appendix C.Attachment #14Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 9 of 93 Audit Final Report for The Corporation of the Town of Aurora For the year ended December 31, 2019Management 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 consolidated 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 representation letter included in Appendix D to the report. Fraud Discussion Through our planning process, and current and prior years’ audits, we have developed an understanding of your oversight processes. We are not currently aware of any fraud affecting the company. If you are aware of changes to processes or are aware of any instances of actual, suspected or alleged fraud affecting the Town since our discussions held at planning, we request that you provide us with this information. Please refer to the Auditor’s Responsibilities for Detecting Fraud in the Planning Report to the Audit Committee Members. COVID-19 As global reactions and responses to coronavirus (COVID-19) continue to evolve and change, BDO Canada has issued a number of publications on the financial reporting and tax implications resulting from the outbreak to assist companies in navigating these challenging times. This includes publications on the accounting implications arising from changing economic conditions, understanding available government assistance, crisis management and responding to liquidity changes. For additional information on COVID-19 can have on all aspects of a company’s operations, refer to the following link: https://www.bdo.ca/en-ca/covid-19/home/ Attachment #15Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 10 of 93 Audit Final Report for The Corporation of the Town of Aurora For the year ended December 31, 2019AUDIT FINDINGS SIGNIFICANT RISKS OF MATERIAL MISSTATEMENT RISKS NOTED AUDIT FINDINGS Management override of internal controls A common significant risk in all audit engagements is the risk of Management override of controls and fraud risk that may occur in the deferred revenue cycle. In accordance with auditing standards, BDO has performed specific procedures that include testing journal entries, reviewing accounting estimates for biases and obtaining and evaluating the business rationale for transactions that are outside the normal course of operations for the organization, if any. Developer land contributions, developer charges, and gas tax revenue There is a significant risk regarding the fair value estimates of the land assumed by the town as the transactions are not officially made at arm’s length on the open market. Additionally, recorded developer charges and gas tax revenues represent a significant amount on the financial statements and are subject to greater scrutiny due to the elevated risk of fraud regarding the contributions. In accordance with auditing standards, BDO has performed specific procedures that include reviewing fair value estimates for bias, sampling developer charges and obtaining and evaluating the business rationale of transactions that are outside the normal course of operations for the organization, if any. BDO also reviewed deferred revenue recognition policies for the organization and noted that their treatment is consistent with Public Service Accounting Standards and management was applying the policy properly. BDO’s testing of developer charges revenue and deferred revenue identified a misstatement in these balances in the current and prior year. Due to the value of the misstatement, the error was corrected through a prior period adjustment. Additional testing related to these balances and around financial statement presentation and disclosure, was required and performed as a result of the error identified. As part of our ongoing communications with you, we are required to have a discussion on our views about significant qualitative aspects of the Town'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: Attachment #16Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 11 of 93 Audit Final Report for The Corporation of the Town of Aurora For the year ended December 31, 2019Tangible capital asset adjustment There was an increased risk of error noted as the result of the Citywide reconciliation performed by management uncovering a significant number of assets unrecognized in the previous year’s financial statements. Additional un-budgeted work was performed to verify the reconciliation was performed correctly by the organization’s third party consultant. Procedures performed included; sampling of tangible capital asset additions and disposals that had previously been unrecorded and ensuring adjustments were accurately reflected in the capital asset continuity schedule and financial statements. Attachment #17Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 12 of 93 Audit Final Report for The Corporation of the Town of Aurora For the year ended December 31, 2019INTERNAL CONTROL MATTERS During the course of our audit, we performed the following procedures with respect to the Town’s internal control environment: XDocumented operating systems to assess the design and implementation of control activities that were relevant to the audit.XDiscussed 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 Town’s consolidated 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 consolidated 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. Attachment #18Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 13 of 93 Audit Final Report for The Corporation of the Town of Aurora For the year ended December 31, 2019OTHER REQUIRED COMMUNICATIONS 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.•BDO Response: N/AMaterial uncertainties related to events and conditions that may cast significant doubt on the entity's ability to continue as a going concern.•BDO Response: N/ADisagreements with management about matters that, individually or in the aggregate, could be significant to the entity's financial statements or our audit report.•BDO Response: N/AMatters involving non-compliance with laws and regulations.•BDO Response: N/ASignificant related party transactions that are not in the normal course of operations and which involve significant judgments made by management concerning measurement or disclosure.•BDO Response: N/AManagement consultation with other accountants about significant auditing and accounting matters.•BDO Response: N/AOther Matters•BDO Response: N/AProfessional 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 attached table summarizes these additional required communications. Attachment #19Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 14 of 93 Audit Final Report for The Corporation of the Town of Aurora For the year ended December 31, 2019APPENDICES Appendix A: Independent auditor’s report Appendix B: Independence update Appendix C: Unadjusted differences Appendix D: Representation letter Appendix E: BDO resources Attachment #110Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 15 of 93 Audit Final Report for The Corporation of the Town of Aurora For the year ended December 31, 2019 APPENDIX A: INDEPENDENT AUDITOR’S REPORT Independent Auditor's Report To the Members of the Audit Committee, The Corporation of the Town of Aurora Opinion We have audited the consolidated financial statements of The Corporation of the Town of Aurora, which comprise the consolidated statement of financial position as at December 31, 2019, and the consolidated statements of operations and accumulated surplus, consolidated statement of changes in net financial assets and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of The Corporation of the Town of Aurora as at December 31, 2019, and the consolidated results of its operations, changes in net financial assets, and cash flows for the year then ended in accordance with Canadian public sector accounting standards. Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter We draw you attention to Note 2 of the financial statements, which explains that certain comparative information presented for the year ended December 31, 2019 has been restated. Our opinion is not modified in respect of this matter. Responsibilities of Management and Those Charged with Governance for the Consolidated 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity’s financial reporting process. Attachment #1 11 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 16 of 93 Audit Final Report for The Corporation of the Town of Aurora For the year ended December 31, 2019 Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: x Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. x Obtain an understanding of internal controls relevant to the audit 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 controls. x Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. x Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Entity to cease to continue as a going concern. x Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. x Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal controls that we identify during our audit. Chartered Professional Accountants, Licensed Public Accountants Barrie, Ontario June 23, 2020 Attachment #1 12 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 17 of 93 Audit Final Report for The Corporation of the Town of Aurora For the year ended December 31, 2019 APPENDIX B: INDEPENDENCE UPDATE Attachment #1 13 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 18 of 93 June 23, 2020 Members of the Audit Committee Members The Corporation of the Town of Aurora Dear Audit Committee Members: We have been engaged to audit the consolidated financial statements of The Corporation of the Town of Aurora (the “Town”) for the year ended December 31, 2019. Canadian generally accepted auditing standards (GAAS) require that we communicate at least annually with you regarding all relationships between the Town and our Firm that, in our professional judgment, may reasonably be thought to bear on our independence. In determining which relationships to report, these standards require us to consider relevant rules and related interpretations prescribed by the appropriate provincial institute/order and applicable legislation, covering such matters as: x Holding a financial interest, either directly or indirectly in a client; x Holding a position, either directly or indirectly, that gives the right or responsibility to exert significant influence over the financial or accounting policies of a client; x Personal or business relationships of immediate family, close relatives, partners or retired partners, either directly or indirectly, with a client; x Economic dependence on a client; and x Provision of services in addition to the audit engagement. We have prepared the following comments to facilitate our discussion with you regarding independence matters arising since March 18, 2020, the date of our last letter. We are aware of the following relationships between the Town and us that, in our professional judgment, may reasonably be thought to have influenced our independence. The following relationships represent matters that have occurred from March 18, 2020 to June 23, 2020. x We have provided assistance in the preparation of the consolidated financial statements, including adjusting journal entries. These services created a self-review threat to our independence since we subsequently expressed an opinion on whether the consolidated financial statements presented fairly, in all material respects, the financial position, results of operations and cash flows of the organization in accordance with (relevant GAAP). x We, therefore, required that the following safeguards be put in place related to the above: x Management provided us with a trial balance and draft consolidated financial statements, including notes, prior to completion of our audit. x Management created the source data for all the accounting entries. x Management developed any underlying assumptions required with respect to the accounting treatment and measurement of the entries. x Management reviewed advice and comments provided and undertook their own analysis considering the Town’s circumstances and generally accepted accounting principles. x Management reviewed and approved all journal entries prepared by us, as well as changes to financial statement presentation and disclosure. 1 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 19 of 93 BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. x Someone other than the preparer reviewed the proposed journal entries and consolidated financial statements. We hereby confirm that we are independent with respect to the Town within the meaning of the Code of Professional Conduct of the Chartered Professional Accountants of Ontario as of June 23, 2020. This letter is intended solely for the use of the Audit Committee, the Board of Directors, management and others within the Town and should not be used for any other purposes. Yours truly, Chartered Professional Accountants, Licensed Public Accountants Attachment #1 15 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 20 of 93 Audit Final Report for The Corporation of the Town of Aurora For the year ended December 31, 2019 APPENDIX C: UNADJUSTED DIFFERENCES SUMMARY OF UNADJUSTED DIFFERENCES The following is a summary of uncorrected misstatements noted during the course of our audit engagement: Increase (Decrease) Assets Liabilities Equity Net Income Allocated but unrequired gas tax monies reversed in Q1 2019 $ -$-$ 106,122 $ (106,122) Adjustment to opening NBV of TCAs - - (6,950,065) 6,950,065 Leisure services accounts receivable credit balances 148,206 (148,206) Water revenue accounts receivable credit balances 269,466 (269,466) Cut-off error related to supplier invoice for capital expenditures not accrued at year end 495,965 (495,965) Effect of Prior Year’s Reversing Errors - - - - Total Unadjusted Differences $ 913,637 $ (913,637) $ (6,843,943) $ 6,843,943 Attachment #1 16 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 21 of 93 Audit Final Report for The Corporation of the Town of Aurora For the year ended December 31, 2019 APPENDIX D: REPRESENTATION LETTER June 16, 2020 BDO Canada LLP Chartered Professional Accountants 300 Lakeshore Dr. Suite 300 Barrie, ON L4N 0B4 This representation letter is provided in connection with your audit of the financial statements of The Corporation of the Town of Aurora for the year ended December 31, 2019, 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. x Significant assumptions used by us in making accounting estimates, including those measured at fair value, are reasonable. x Related party relationships and transactions have been appropriately accounted for and disclosed in accordance with the requirements of Canadian public sector accounting standards. x 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. x The financial statements of the entity use appropriate accounting policies that have been properly disclosed and consistently applied. x 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. x We have reviewed and approved all journal entries recommended by the practitioners during the audit. A list of the journal entries is attached to the representation letter. Information Provided x We have provided you with: x 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; x additional information that you have requested from us for the purpose of the audit; and Attachment #1 17 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 22 of 93 Audit Final Report for The Corporation of the Town of Aurora For the year ended December 31, 2019 x unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence. x 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. x All transactions have been recorded in the accounting records and are reflected in the financial statements. x 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. x 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 x 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. x 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: x management; x employees who have significant roles in internal control; or x others where the fraud could have a material effect on the financial statements. x 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. General Representations x Where the value of any asset has been impaired, an appropriate provision has been made in the financial statements or has otherwise been disclosed to you. x We have provided you with significant assumptions that in our opinion are reasonable and appropriately reflect our intent and ability to carry out specific courses of action on behalf of the entity when relevant to the use of fair value measurements or disclosures in the financial statements. x We confirm that there are no derivatives or off-balance sheet financial instruments held at year end that have not been properly recorded or disclosed in the financial statements. x Except as disclosed in the financial statements, there have been no changes to title, control over assets, liens or assets pledged as security for liabilities or collateral. x 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 agreements. Attachment #1 18 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 23 of 93 Audit Final Report for The Corporation of the Town of Aurora For the year ended December 31, 2019 x 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. Other Representations Where the Situation Exists x We have informed you of all known actual or possible litigation and claims, whether or not they have been discussed with legal counsel. Since there are no actual, outstanding or possible litigation and claims, no disclosure is required in the financial statements. x We have provided you all the relevant information in order to appropriately record and disclose the restatement made to correct a material misstatement in the prior period financial statements that affect the comparative information. This restatement was for: x Correction of deferred revenue and revenue related to development charges. Revenue was understated and deferred revenue was overstated. x We will provide to you, when available and prior to issuance by the entity, the final version of the document(s) comprising the annual report. x Disclosures included in the financial statements regarding the relevant significant business, financial, and reporting impacts of the COVID-19 outbreak accurately reflect management’s full consideration of such impacts. Yours truly, _____________________________________ _______________________________________ Signature Position _______________________________________ _______________________________________ Signature Position Attachment #1 19 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 24 of 93 Audit Final Report for The Corporation of the Town of Aurora For the year ended December 31, 2019APPENDIX E: BDO RESOURCES BDO is a leading provider of professional services to clients of all sizes in virtually all business sectors. Our team delivers a comprehensive range of assurance, accounting, tax, and advisory services, complemented by a deep industry knowledge gained from nearly 100 years of working within local communities. As part of the global BDO network, we are able to provide seamless and consistent cross-border services to clients with global needs. 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 Members. BDO Canada’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: https://www.bdo.ca/en/library/services/tax/pages/default.aspx TAX BULLETINS, ALERTS AND NEWSLETTERS PSAS PUBLICATIONS Public Sector Accounting Standards (PSAS) Update 2019 https://www.bdo.ca/BDO/media/AAPublications/PSAS_Update_09Sep19.pdf Attachment #120Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 25 of 93 The Corporation of the Town of Aurora Consolidated Financial Statements For the year ended December 31, 2019 Attachment #1 21 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 26 of 93 The Corporation of the Town of Aurora Consolidated Financial Statements For the year ended December 31, 2019 Contents Independent Auditor's Report 1-2 Consolidated Financial Statements Consolidated Statement of Financial Position 3 Consolidated Statement of Operations and Accumulated Surplus 4 Consolidated Statement of Change in Net Financial Assets 5 Consolidated Statement of Cash Flows 6 Notes to the Consolidated Financial Statements 7 - 22 Schedule 1 - Consolidated Schedule of Segmented Disclosure 23 - 24 Attachment #1 22 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 27 of 93 Independent Auditor's Report To the Mayor and Councillors of The Corporation of the Town of Aurora Opinion We have audited the consolidated financial statements of The Corporation of the Town of Aurora, (the Town) which comprise the consolidated statement of financial position as at December 31, 2019, and the consolidated statement of operations and accumulated surplus, consolidated statement change in net financial assets and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Town as at December 31, 2019, and the consolidated results of its operations, changes in net financial assets, and cash flows for the year then ended in accordance with Canadian public sector accounting standards. Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Town in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter We draw you attention to Note 2 of the financial statements, which explains that certain comparative information presented for the year ended December 31, 2019 has been restated. Our opinion is not modified in respect of this matter. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Town’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Town or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Town’s financial reporting process. Draft - Subject to Changegggggggggggggggggggggggggngngngngngngngngtion ion of the Town Tow of Auro n as s at a December mber 31, 3 201 onsolidated dat statement te c the year then then ended, ende an ficant accounting policies. tatements tements present en fairly, ecember 31, 2019ber 31, 2019, and th, a sh flows for or the the year th ance with with Canadian Canadia ge ds s are a further further described de tatementsments sssection ection of o requirements requirements that that are r we we have have fulfilled fulfilled our o e that the audit evidence the audit evidenc terter you attention tentio to Note N 2 ion presented ed for for the t y ied in respect of this matthi Responsibilities Responsibilitie of Mana Statements Statem Management Managemen is statements stateme in as managemas ma are free fare In Attachment #1 23 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 28 of 93 Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit 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 Town’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Town’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Town to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Chartered Professional Accountants, Licensed Public Accountants Barrie, Ontario June 23, 2020Draft - Subject to Changeements as as a uditor’s reportr’s report uarantee tee that t anan ill always way detect det aa r and are are consideredconside influence ce the the economicecon auditing auditing standards, tandards, we he audit. We also: e audit. We also: f the consolidated nsolidated finan it procedures responsive ate to provide o provide a basis for g from fraud is higher thafrom fraud is h y, intentional entional omissions, omiss control trol relevant to rel th the circumstances, circumstances but he Town’s internal contro’s interna ness ss of accounting accountin policie isclosures made by managres made by m appropriateness opriateness of f manama the audit audit evidence obtevidence ob nditions o that hat may may cast si f f we we conclude oncl that tha a ma ditor’s itor report to eport to the the relat losures are inadequate, tores are inade btained up to the e date d o the Town to cease to cocease Evaluate luat the over including the underlying tr Obtain bus s W Attachment #1 24 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 29 of 93 The Corporation of the Town of Aurora Consolidated Statement of Financial Position December 31 2019 2018 (Dollar amounts presented in '000's) Restated (note 2) Financial assets Cash (note 4) $ 9,348 $ 10,527 Taxes receivable 9,651 10,653 User fees receivable (note 6)5,524 6,654 Accounts receivable 7,380 6,736 Portfolio investments (note 7) 134,223 128,104 166,126 162,674 Liabilities Accounts payable and accrued liabilities 18,223 19,625 Deposits (note 9) 4,033 5,107 Deferred revenue (note 10) 44,544 35,393 Employee benefits liabilities (note 11) 1,563 1,324 Net long-term liabilities (note 12) 8,654 9,694 77,017 71,143 Net financial assets 89,109 91,531 Non-financial assets Tangible capital assets (note 23) 471,697 459,416 Prepaid expenses 314 795 472,011 460,211 Accumulated surplus (note 13) $ 561,120 $ 551,742 Contingencies and contractual obligations (notes 19 and 20) Subsequent events (note 3) Approved by Council Mayor Chief Administrative Officer The accompanying notes are an integral part of these consolidated financial statements Attachment #1 25 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 30 of 93 The Corporation of the Town of Aurora Consolidated Statement of Operations and Accumulated Surplus Budget For the year ended December 31 2019 2019 2018 (Dollar amounts presented in '000's) Restated (note 2) (note 5) Revenue Taxation (note 14) $ 48,059 $ 48,939 $ 46,407 User fees 35,754 35,245 36,404 Grants (note 15) 1,478 2,114 3,927 Gain on disposal of land available for sale --6,036 Loss on disposal of tangible capital assets -(1,677)35 Gain on tangible capital asset adjusment -6,949 - Assumed infrastructure assets -1,921 4,306 Other (note 16) 6,899 14,937 9,303 92,190 108,428 106,418 Expenses General government 14,735 17,790 14,862 Protection to person and property 14,695 13,434 13,414 Transportation services 10,903 10,513 10,083 Environmental services 34,040 32,001 28,495 Leisure and cultural services 23,286 23,191 21,023 Planning and development 2,192 2,121 1,868 99,851 99,050 89,745 Annual surplus (deficit)(7,661)9,378 16,673 Accumulated surplus,beginning of year, as previously stated551,742 551,742 535,598 Prior period adjustment (note 2) --(529) Accumulated surplus,beginning of year, as restated --535,069 Accumulated surplus,end of year $ 544,081 $ 561,120 $ 551,742 The accompanying notes are an integral part of these consolidated financial statements Attachment #1 26 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 31 of 93 The Corporation of the Town of Aurora Consolidated Statement of Change in Net Financial Assets Budget For the year ended December 31 2019 2019 2018 (Dollar amounts presented in '000's) Restated (note 2) (note 5) Annual surplus (deficit)$ (7,661)$ 9,378 $ 16,673 Amortization of tangible capital assets 15,090 15,090 14,948 Net proceeds on disposal of tangible capital assets -87 437 Loss (gain) on disposal of tangible capital assets -1,677 (35) Acquisition of tangible capital assets (20,265)(20,265)(17,058) Assumed infrastructure assets -(1,921)(4,306) Tangible capital asset adjustment gain -(6,949)- Change in prepaid expenses -481 (343) Change in net financial assets (12,836)(2,422)10,316 Net financial assets, beginning of year, as previously stated 91,531 91,531 81,744 Prior period adjustment (note 2) --(529) Net financial assets, beginning of year, as restated --81,215 Net financial assets, end of year $ 78,695 $ 89,109 $ 91,531 The accompanying notes are an integral part of these consolidated financial statements Attachment #1 27 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 32 of 93 The Corporation of the Town of Aurora Consolidated Statement of Cash Flows For the year ended December 31 2019 2018 (dollar amounts presented in '000's) Restated (note 2) Operating transactions Annual surplus $ 9,378 $ 16,673 Non-cash charges to operations: Amortization of tangible capital assets 15,090 14,948 Gain on disposal of land listed for sale -(6,036) Loss (gain) on disposal of tangible capital assets 1,677 (35) Assumed infrastructure assets (1,921)(4,306) Changes in non-cash operating working capital: Taxes receivable 1,002 (2,896) User fees receivable 1,130 60 Accounts receivable (644)362 Land listed for sale -- Accounts payable and accrued liabilities (1,402)1,424 Deposits (1,074)(586) Deferred revenue 9,151 1,164 Employee benefits liabilities 239 240 Prepaid expenses 481 (343) Total Operating Transactions 33,107 20,669 Capital transactions Acquisition of tangible capital assets (20,265)(17,058) Capital asset adjustments (6,949)- Net proceeds on disposal of land listed for sale -8,873 Net proceeds on disposal of tangible capital assets 87 437 Total Capital Transactions (27,127)(7,748) Investing transactions Increase in portfolio investments (6,119)(10,776) Financing transactions Advances / (principal repayments) on long-term liabilities (1,040)4,726 Advances / (principal repayments) of notes payable and bank indebtedness -(5,874) Total Financing Transactions (1,040)(1,148) Increase in cash (1,179)997 Cash, beginning of year 10,527 9,530 Cash, end of year $ 9,348 $ 10,527 The accompanying notes are an integral part of these consolidated financial statements Attachment #1 28 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 33 of 93 The Corporation of the Town of Aurora Notes to the Consolidated Financial Statements December 31, 2019 (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. Attachment #1 29 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 34 of 93 The Corporation of the Town of Aurora Notes to the Consolidated Financial Statements December 31, 2019 (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. Attachment #1 30 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 35 of 93 The Corporation of the Town of Aurora Notes to the Consolidated Financial Statements December 31, 2019 (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 allowance for doubtful accounts, taxes receivable, post-employment benefits liabilities, accrued liabilities, the net amount of development charges, the estimated useful lives of tangible capital assets, fair value of assumed infrastructure 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 generally not involved in the construction of these assets. In some instances, the Town may construct these assets on the developer's behalf on a fully cost recoverable basis. Under either scenario the Town does not budget for the contributions from the developer or the capital expenditure. Attachment #1 31 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 36 of 93 The Corporation of the Town of Aurora Notes to the Consolidated Financial Statements December 31, 2019 (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. As the Town's total taxes receivable are based on management's best estimates at the time, it is possible for the fianl amount collected to differ as a result of property value reassessments arising from audits, appeals or court decisions. b) User fees and other revenues are reported when a performance obligation has been satisfied through the delivery of a good or service or when authority to claim or retain an economic inflow exists and a past transaction or event that gives rise to an asset has been identified. 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, net of development credits. Attachment #1 32 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 37 of 93 The Corporation of the Town of Aurora Notes to the Consolidated Financial Statements December 31, 2019 (Dollar amounts presented in '000's) 2. Restatement of Prior Period Development charge (DC) revenue can only be utilized for specifically defined eligible expenditures as set out in the Development Charge Act. Eligible DC expenditures relate to the one-time costs that are put in place for the necessary infrastructure that is required in order to maintain a consistent level of town services to a growing community. Development charges are recorded as deferred revenue as they are collected, and then recognized as part of the Town's annual revenue when the associated infrastructure costs are incurred. In 2018 the Town did not recognize a sufficient amount of DC revenues, consequently DC revenues in 2018 is herein being restated by a prior period adjustment in order to report more recognized DC revenue for 2018 than what was previously reported as follows: The net effect of all of the above noted prior period adjustment is a follows 2018 Statement of Financial Position: Decrease in liabilities $ (13,833) Increase in accumulated surplus $ (13,833) Statement of Operations: Decrease in accumulated surplus, beginning of year 529 Increase in user fee revenue and annual surplus (14,362) Increase in accumulated surplus, end of year $ (13,833) 3. Subsequent Events In March, 2020 the Town of Aurora along with the rest of the world found itself subject to the COVID-19 pandemic. The magnitude of the impact of COVID-19 on the Town is not yet clear, but the existing social distancing measures and economic shut-down impacts have already had material impacts on the Town's short-term financial positon. In particular, the Town's community program, tax and water revenues have become constrained due to program cancellations and annouced financial relief measures. These lost or delayed revenues have been partially offset by program delivery cost savings and upper tier municipality financial relief measures. The Town's tax and water receiveables are expected to continue to be subject to upward pressure over the short-term. However, the Town's long term financial health is expected remain strong. Attachment #1 33 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 38 of 93 The Corporation of the Town of Aurora Notes to the Consolidated Financial Statements December 31, 2019 (Dollar amounts presented in '000's) 4. 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, 2019, the rate is 2.20% (2018 - 2.20%). 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, 2019, the rate is 3.70% (2018 - 3.70%) and the outstanding balance is $Nil (2018 - $Nil). The Town has letters of credit outstanding with the bank as at December 31, 2019 of $486,208 (2018 - $486,208), which were required by its utilities provider for security on a development project. 5. Budget Reconciliation The Budget for 2019 adopted by Council on March 26, 2019 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 2019 budget adopted by Council with adjustments as follows: Attachment #1 34 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 39 of 93 The Corporation of the Town of Aurora Notes to the Consolidated Financial Statements December 31, 2019 (Dollar amounts presented in '000's) 5. Budget Reconciliation (continued) Revenue Expense Net Council approved budget: Operating - Town & Library $ 67,455 $ 67,455 $ - Operating - water/sewer 27,014 27,014 - Capital (for multiple years) 60,564 60,564 - Total Council approved budget 155,033 155,033 - Less: Multiple years capital (60,564) (60,564)- debt principal payments1 - (1,040) 1,040 Plus: 2019 Non-TCA capital - 4,957 (4,957) transfers to/from other funds2 (2,872) (13,625) 10,753 transfers from deferred revenue 593 - 593 amortization expense3 - 15,090 (15,090) Adjusted budget per the consolidated statement of operations $ 92,190 $ 99,851 $ (7,661) 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. 6. User Fees Receivable During the year the amount of the Town's water receivables that are in dispute were revised upwards from $1,546 to $1,880. Management anticipates that this amount in dispoute will be settled by the end of 2020. In management’s opinion, no further write off of water receivables are necessary in the consolidated financial statements. 7. 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 $134,223 (2018 - $128,104) have a market value of $139,697 (2018 - $130,318). 8. Land Listed for Sale As of December 31, 2019 the Town has no land listed for sale. Attachment #1 35 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 40 of 93 The Corporation of the Town of Aurora Notes to the Consolidated Financial Statements December 31, 2019 (Dollar amounts presented in '000's) 9. Deposits Beginning Ending Balance 2019 2019 Balance 2019 Inflows Outflows 2019 Refundable Damage Deposits $ 5,107 916 (1,990)$ 4,033 10. Deferred Revenue Beginning Balance 2019 2019 Inflows 2019 Outflows Ending Balance 2019 Restated (note 2) Development charges $ 19,206 13,833 (12,973)$ 20,066 Parkland purposes 8,521 4,822 (155)13,188 Federal Gas Tax 2,803 3,414 65 6,282 Revenue Deferral - General 4,104 4,650 (4,353)4,401 34,634 26,719 (17,416)43,937 Deferred Revenue transferred to capital but unexpensed at the end of the year 759 - (152)607 $ 35,393 26,719 (17,568)$ 44,544 11. Employee Benefits Liabilities 2019 2018 Post-employment benefits $ 1,042 $ 924 Accrued sick leave 469 358 1,511 1,282 WSIB benefits 52 42 $ 1,563 $ 1,324 Attachment #1 36 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 41 of 93 The Corporation of the Town of Aurora Notes to the Consolidated Financial Statements December 31, 2019 (Dollar amounts presented in '000's) 11. 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, 2019 are as follows: 2019 2018 Accrued benefit obligation, beginning of year $ 1,997 $ 1,852 Add: Benefit expense 222 215 Interest cost 72 67 Actuarial losses / (gain)(141)- Less: Benefits paid for the period (151)(137) Accrued benefit obligation, end of year 1,999 1,997 Unamortized actuarial losses (488)(715) Accrued benefit liability $ 1,511 $ 1,282 The accrued benefit obligations for the Town's post-employment benefits liability and accrued sick leave as at December 31, 2019 are based on actuarial valuations for accounting purposes as at December 31, 2019 with projections to December 31, 2022. 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: 2019 2018 Expected future inflation rates 1.75%2.00% Discount on accrued benefit obligations 3.50%3.40% Drug costs escalation 6.75%8.00% Other health care costs escalation 6.75%4.00% Dental costs escalation 3.75%4.00% The amount of benefits paid by the Town during the year was $98 (2018 - $61). 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, 2019 are based on actuarial valuations for accounting purposes as at December 31, 2019 with projections to December 31, 2022. These actuarial valuations were based on assumptions about future events. Attachment #1 37 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 42 of 93 The Corporation of the Town of Aurora Notes to the Consolidated Financial Statements December 31, 2019 (Dollar amounts presented in '000's) 12. Net Long-term Liabilities 2019 2018 Debenture, bearing interest at 2.29%, maturing in March 2026. Principal and interest is repayable in semi-annual installments of $184.$ 2,208 $ 2,519 Debenture, bearing interest at 4.37%, maturing in September 2025. Principal and interest is repayable in semi-annual installments of $160.1,676 1,915 Debenture, bearing interest at 2.85%, maturing in May 2023. Principal and interest is repayable in semi-annual installments of $318.4,770 5,260 $ 8,654 $ 9,694 Principal repayments for each of the next five years and thereafter are as follows: 2020 $ 1,072 2021 1,105 2022 1,139 2023 1,174 2024 1,210 Thereafter 2,954 $ 8,654 The interest expense related to the above long-term debt was $276 (2018 - $274). 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. The third debenture also issued by Infrastructure Ontario in the name of the Town of Aurora was utilized by the Town to fund its Joint Operations Centre. 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. Attachment #1 38 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 43 of 93 The Corporation of the Town of Aurora Notes to the Consolidated Financial Statements December 31, 2019 (Dollar amounts presented in '000's) 13. Accumulated Surplus Accumulated surplus is comprised of the following: 2019 2018 Restated (Note 2) Non Financial Surpluses General revenue $ 13,894 $ 31,467 Invested in tangible capital assets 471,697 459,416 Less: financed by long-term liabilities (8,654)(9,694) Total non-financial surpluses 476,937 481,189 Reserves set aside by Council for Infrastructure Infrastructure Sustainability - Water Rate Funded 11,877 10,424 Infrastructure Sustainability - Tax Rate Funded 5,513 2,311 17,390 12,735 Reserve funds, set aside for specific purposes by Council 34,322 26,788 Proceeds of sale of Aurora Hydro 32,471 31,030 Total reserves and reserve funds 84,183 70,553 Accumulated surplus $ 561,120 $ 551,742 14. Net Taxation 2019 2018 Total taxes levied by the Town $ 144,779 $ 137,025 Less: Taxes levied on behalf of the Boards of Education 39,102 37,011 Taxes levied on behalf of the Region of York 56,738 53,607 $ 48,939 $ 46,407 15. Grants Revenue 2019 2018 Federal $ 387 $ 1,232 Provincial 1,304 2,288 Other 423 407 $ 2,114 $ 3,927 Attachment #1 39 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 44 of 93 The Corporation of the Town of Aurora Notes to the Consolidated Financial Statements December 31, 2019 (Dollar amounts presented in '000's) 16. Other Revenue 2019 2018 Penalties and interest on taxes $ 1,444 $ 1,188 Fines 321 191 Licenses, permits and fees 2,727 3,057 Interest income 4,468 3,432 Other 5,977 1,435 $ 14,937 $ 9,303 17. Pension Agreements OMERS provides pension services to almost 500,000 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, 2019. The results of this valuation disclosed total actuarial liabilities of $107,687 million in respect of benefits accrued for service with actuarial assets at that date of $104,290 million indicating an actuarial deficit of $3,397 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 2019 ranged from 9.0% to 14.6% depending on the level of earnings. As a result, $2,173 (2018 - $2,044) was contributed to OMERS for current year services. 18. 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 $35 (2018 - $69). 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, 2019 was $7,101 (2018 - $4,695). Attachment #1 40 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 45 of 93 The Corporation of the Town of Aurora Notes to the Consolidated Financial Statements December 31, 2019 (Dollar amounts presented in '000's) 19. 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. 20. Contractual Obligations The Town committed contractual obligations on major capital projects of approximately $18,261 during 2019, 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 $11,182 (2018 - $10,490). 21. 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 20. 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. Attachment #1 41 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 46 of 93 The Corporation of the Town of Aurora Notes to the Consolidated Financial Statements December 31, 2019 (Dollar amounts presented in '000's) 21. Segment Information (continued) 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. 22. Tangible Capital Assets Under Construction Tangible capital assets under construction and other capital work in progress by the Town having a value of $44,547 (2018 - $30,431) 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. Attachment #1 42 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 47 of 93 The Corporation of the Town of AuroraNotes to the Consolidated Financial StatementsDecember 31, 2019(Dollar amounts presented in '000's)23. Tangible Capital Assets2019GeneralInfrastructureTotalLandBuildingsVehiclesComputerand otherFacilitiesRoadsUndergroundand OtherNetworksBridges andOtherStructuresAssets UnderConstructionCostBalance, beginning of year $ 111,495$ 104,316$ 10,862$ 8,281$ 25,663$ 102,985$ 239,013$ 21,444$ 30,431$ 654,490Add: Additions during the year392 1,305 949 115 25 346 - 17,133 20,265Add: Donations and transfers- - - - 3,839 - 745 41(2,704)1,921Add: Net TCA adjustment- 1,725 - - 787 1,025 6,590 793 - 10,920Less: Disposals during the year-(18)(652)(385)(84)(470)(1,862)(204)(313)(3,988)Balance, end of year111,495106,41511,5158,84530,320103,565244,83222,07444,547683,608Accumulated amortizationBalance, beginning of year-42,2895,7725,04011,24741,19074,05115,485-195,074Add: Amortization during the year- 3,601 882 887 978 3,469 4,594 679 - 15,090Add: Net TCA adjustment- 439 - - 355 426 2,244 507 - 3,971Less: Amortization on disposals-(11)(613)(384)(86)(304)(621)(205)-(2,224)Balance, end of year-46,3186,0415,54312,49444,78180,26816,466-211,911Net book value of tangible capital assets$ 111,49560,0975,4743,30217,82658,784164,5645,60844,547471,697Attachment #143Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 48 of 93 The Corporation of the Town of AuroraNotes to the Consolidated Financial StatementsDecember 31, 2019(Dollar amounts presented in '000's)23. Tangible Capital Assets (continued)2018GeneralInfrastructureTotalLandBuildingsVehiclesComputerand otherFacilitiesRoadsUndergroundand OtherNetworksBridges andOtherStructuresAssets UnderConstructionCostBalance, beginning of year$ 111,257$ 102,770$ 9,994$ 8,377$ 24,223$ 97,058$ 234,506$ 21,305$ 26,049$ 635,539Add: Additions during the year621 1,254 479 309 19 229 105 14,042 17,058Add: Donations and transfers303 1,127 - - 1,131 6,753 4,458 61 (9,527) 4,306Less: Disposals during the year(65) (202) (386) (575) - (845) (180) (27) (133) (2,413)Balance, end of year111,495104,31610,8628,28125,663102,985239,01321,44430,431654,490Accumulated amortizationBalance, beginning of year-38,8365,3464,71610,40738,52569,62414,683-182,137Add: Amortization during the year- 3,655 810 898 840 3,398 4,531 816 - 14,948Less: Amortization on disposals- (202) (384) (574) - (733) (104) (14) - (2,011)Balance, end of year-42,2895,7725,04011,24741,19074,05115,485-195,074Net book value of tangible capital assets$ 111,495$ 62,027$ 5,090$ 3,241$ 14,416$ 61,795$ 164,962$ 5,959$ 30,431$ 459,416Attachment #144Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 49 of 93 The Corporation of the Town of AuroraConsolidated Schedule of Segmented DisclosureSchedule 1December 31, 2019(Dollar amounts presented in '000's)2019TaxationRevenueGovernance &CorporateSupportFire &EmergencyServicesBylaw &LicensingServicesRoads &RelatedServicesEnvironmentalServicesCommunityPrograms &EventsParks &FacilitiesPublic LibraryServicesPlanning &DevelopmentConsolidatedRevenueTaxation$48,939$-$-$-$-$ -$-$-$-$-$48,939User fees- 86 844 444 855 25,289 4,690 489 943 1,605 35,245Grants- 20 47 112 1,097 258 485 50 45 - 2,114Gain on tangible capital asset adjustment- 6,949-------- 6,949Loss on disposal of tangible capital assets-(1,677)--- -----(1,677)Assumed infrastructure assets------- 1,921-- 1,921Other- 6,065- 2,2339643,171 1,16979638501 14,937Total Revenue48,93911,4438912,7892,91628,7186,3443,2561,0262,106108,428ExpensesSalaries, wages and benefits- 6,874- 2,966 2,993866 3,817 6,777 2,866 1,719 28,878Amortization- 4,628291- 3,3365,406-978450- 15,089Materials and supplies-468181 1,2652,3582764864677 5,409Contracted services- 5,739 9,969122 2,816 23,291 1,350 5,082316281 48,966Interest on long-term liabilities-------223--223Others-80-4103809013-115485Total Expenses-17,78910,2613,17310,51332,0015,53313,5594,0992,12299,050Annual Surplus (Deficit)$ 48,939$(6,346)$(9,370)$(384)$(7,597)$(3,283)$ 811$(10,303)$(3,073)$(16)$ 9,378Attachment #145Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 50 of 93 The Corporation of the Town of AuroraConsolidated Schedule of Segmented DisclosureSchedule 1December 31, 2019(Dollar amounts presented in '000's)2018 Restated (note 2) TaxationRevenueGovernance &CorporateSupportFire &EmergencyServicesBylaw &LicensingServicesRoads &RelatedServicesEnvironmentalServicesCommunityPrograms &EventsParks &FacilitiesPublic LibraryServicesPlanning &DevelopmentConsolidatedRevenueTaxation$ 46,407 $- $- $- $- $- $- $- $- $- $ 46,407User fees-166 3,35533 1,985 13,694 4,102 11,094529 1,446 36,404Grants-71166- 2,981231433-45- 3,927Gain on disposal of land listed for sale- 6,036-------- 6,036Loss on disposal of tangible capital assets-35 - - - - - - - -35Assumed infrastructure assets- 4,306-------- 4,306Other- 4,958- 2,27311258649827653547 9,303Total Revenue46,40715,5723,5212,3065,07814,5115,03311,3706271,993106,418ExpensesSalaries, wages and benefits- 6,514- 2,775 3,117910 3,718 6,267 2,751 1,553 27,605Amortization- 4,631272- 3,587 5,158-840460- 14,948Materials and supplies-522-54 1,226 2,0262823652149 4,698Contracted services- 3,055 10,113197 2,153 20,401 1,095 4,352259167 41,792Interest on long-term liabilities-------329--329Other-140-3--847-139373Total Expenses-14,86210,3853,02910,08328,4955,17912,1603,6841,86889,745Annual Surplus (Deficit)$ 46,407$ 710$ (6,864)$ (723)$ (5,005)$ (13,984)$ (146)$ (790)$ (3,057)$ 125$ 16,673Attachment #146Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 51 of 93 –“ Year End Report for The Corporation of the Town of Aurora Presented by Giselle Bodkin, CPA, CA Emma Roy, CPA, CA Attachment #1 47 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 52 of 93 TABLE OF CONTENTS Where are you today? Key Performance Results...................................................................... 2-8 Audit Committee Best Practice Recommendations ................................................... 9 Summary of Audit Process........................................................................... 10-11 Attachment #1 48 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 53 of 93 TOTAL REVENUE, EXPENSES AND ANNUAL SURPLUS (IN THOUSANDS ‘000) 2014 2015 2016 2017 2018 2019 Revenue 96,654 119,372 122,593 91,859 106,418 108,428 Expenses 71,543 75,537 80,987 86,058 89,745 99,050 Annual Surplus 25,111 43,835 41,606 5,801 2,311 9,378 - 20,000 40,000 60,000 80,000 100,000 120,000 140,000 Attachment #1 49 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 54 of 93 ANNUAL SURPLUS PLUS AMORTIZATION AND TCA ADDITIONS 2014 2015 2016 2017 2018 2019 Annual Surplus + Amortization 36,018 55,494 55,440 20,529 17,259 24,468 TCA Additions 19,752 51,182 31,972 16,522 21,364 22,186 - 10,000 20,000 30,000 40,000 50,000 60,000 Attachment #1 50 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 55 of 93 TOTAL NET FINANCIAL ASSETS (IN THOUSANDS ‘000) 2014 2015 2016 2017 2018 2019 Net Financial Assets 45,843 53,348 76,988 81,215 91,531 89,109 - 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 Attachment #1 51 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 56 of 93 TOTAL ACCUMULATED SURPLUS AND TANGIBLE CAPITAL ASSETS (IN THOUSANDS ‘000) 2014 2015 2016 2017 2018 2019 Accumulated Surplus 444,356 488,191 529,797 535,069 551,742 561,120 Accumulated TCA 395,727 434,742 452,604 453,402 459,416 471,697 - 100,000 200,000 300,000 400,000 500,000 600,000 Attachment #1 52 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 57 of 93 2019 REVENUE 2014 REVENUE 43.78% 31.53% 1.89% -1.50%6.22% 1.72%13.36% Revenue Taxation User fees Grants Loss on disposal of TCA Gain on TCA adjustment Assumed infrastructure assets Other 36.42% 42.03% 2.58% -0.07% 8.90% 10.00% Revenue Taxation User fees Grants Loss on disposal of TCA Assumed infrastructure assets Other Attachment #1 53 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 58 of 93 FIVE YEAR EXPENSE COMPARISON (IN THOUSANDS ‘000) 2019 2018 2017 2016 2015 General government 17,790 14,862 15,232 13,329 12,006 Protection to person and property 13,434 13,414 12,855 12,749 12,654 Transportation services 10,513 10,083 9,526 9,107 8,399 Environmental services 32,001 28,495 26,050 24,638 21,478 Leisure and cultural services 23,191 21,023 20,327 19,058 19,056 Planning and development 2,121 1,868 2,068 2,106 1,944 99,050 89,745 86,058 80,987 75,537 Attachment #1 54 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 59 of 93 2019 EXPENSES 2014 EXPENSES 29.15% 15.23% 5.46% 49.44% 0.23%0.49% Expenses Salaries, wages and benefits Amortization Materials and supplies Contracted services Interest on long-term liabilities Others 34.91% 15.25% 6.24% 42.71% 0.32%0.58% Expenses Salaries, wages and benefits Amortization Materials and supplies Contracted services Interest on long-term liabilities Others Attachment #1 55 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 60 of 93 Audit Committee Best Practice Recommendations x 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 x 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. x 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. x 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? Attachment #1 56 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 61 of 93 Summary of Audit Process x 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. x 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 obtain a sample of revenue received and agree to supporting documents and cash receipts, following up on differences. We perform a test of controls in relation to water revenues. o Expenses Salaries, wages and employee benefits – we perform a 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 a test of controls on a cyclical basis. The test of controls focus on controls surrounding proper authorization of purchases. 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. Attachment #1 57 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 62 of 93 x 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 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 and test a sample to ensure revenue recognition criteria has been met. 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. Attachment #1 58 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 63 of 93 BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. AUDIT PLANNING REPORT TO THE AUDIT COMMITTEE June 23, 2020THE CORPORATION OF THE TOWN Attachment #21Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 64 of 93 Audit Planning Report for The Corporation of the Town of AuroraFor the year ended December 31, 2020TABLE OF CONTENTS EXECUTIVE SUMMARY.................................................................................................................................................. 2YOUR DEDICATED BDO AUDIT TEAM ................................................................................................................................ 3AUDIT TIMELINE ........................................................................................................................................................ 4SIGNIFICANT AUDIT RISKS AND PLANNED RESPONSES........................................................................................................... 5MATERIALITY ............................................................................................................................................................ 6FEES ....................................................................................................................................................................... 7USING THE WORK OF OTHERS ....................................................................................................................................... 8APPENDIX A: BDO AUDIT STRATEGY ............................................................................................................................... 10APPENDIX B: ENGAGEMENT LETTER ............................................................................................................................... 11APPENDIX C: INDEPENDENCE LETTER ............................................................................................................................. 12APPENDIX D: RESPONSIBILITIES ..................................................................................................................................... 15APPENDIX E: BDO RESOURCES ...................................................................................................................................... 18Attachment #22Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 65 of 93 Audit Planning Report for The Corporation of the Town of AuroraFor the year ended December 31, 2020EXECUTIVE SUMMARY Your BDO Audit TeamGiselle Bodkin, CPA, CA will be the lead on the engagement team, supported by experts as deemed necessary. Please refer to page 4 for contact information should you have any questions or concerns regarding the financial statement audit. TimelineThe audit is scheduled to start in April with final completion scheduled for the June. See the Audit Timeline section of the report for the detailed milestones. Significant Audit Risks Our audit is focused on risks specific to your business and key accounts. Specifically, we have identified the following areas on which to focus: XManagement override of controlsXRevenue recognition – assumed lands and developer chargesMaterialityWe have determined that materiality for the current year audit will be $9,400,000 based on 2% of tangible capital assets for financial statement areas surrounding tangible capital assets. We have determined a specific materiality for the remaining financial statement areas will be $2,080,000 based on 2% of revenues. FeesWe estimate our fees for 2020 will be $31,500 for the audit of the consolidated financial statements, based on the assumptions outlined in the Fees section of this report. Engagement Objectives Our overall responsibility is to form and express an opinion on the financial statements. The performance of this audit does not relieve management or those charged with governance of their responsibilities. Please see the attached engagement letter in Appendix B for specific details regarding the scope of our work. Fraud DiscussionThrough our planning process, and prior years’ audits, we have developed an understanding of your oversight processes. We are not currently aware of any fraud affecting the Town. Please see Appendix Dfor clarification of the auditor’s responsibilities for detecting fraud. If you are aware of changes to processes or are aware of any instances of actual, suspected or alleged fraud affecting the Town, we request that you provide us with this information. Attachment #23Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 66 of 93 Audit Planning Report for The Corporation of the Town of AuroraFor the year ended December 31, 2020YOUR DEDICATED BDO 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. We attempt to provide continuity of service to our clients to the greatest extent possible in accordance with mandated partner rotation rules. When rotation is required for key members of the engagement team, we will discuss this matter with the Audit Committee and determine the appropriate new individual(s) to be assigned to the engagement based on particular experience, expertise and engagement needs. NAMEROLEPHONENUMBEREMAILGiselle Bodkin, CPA, CAEngagement Partner705-797-3960gbodkin@bdo.caAndrea Nauss, CPA, CAAssurance Senior Manager705-797-3972anauss@bdo.cafname@bdo.caDirect: 403 213 2592 Attachment #24Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 67 of 93 Audit Planning Report for The Corporation of the Town of AuroraFor the year ended December 31, 2020AUDIT TIMELINE • June 2021Present audit planning report and agreed upon fees• January 2021Planning and interimfieldwork• April 2021Final audit fieldwork• June 2021Present final report to the Audit Committee• June 2021Release of Audit ReportThe following schedule outlines the anticipated timing of the audit of the consolidated financial statements of the Town. 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. Attachment #25Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 68 of 93 Audit Planning Report for The Corporation of the Town of AuroraFor the year ended December 31, 2020SIGNIFICANT AUDIT RISKS AND PLANNED RESPONSES AREAS OF FOCUSRISKS NOTEDAUDIT APPROACHManagement override of controls A common significant risk in all audit engagements is the risk of Management override of controls and fraud risk that may occur in the deferred revenue cycle.In accordance with auditing standards, BDO will perform specific procedures that include testing journal entries, reviewing accounting estimates for biases and obtaining and evaluating the business rationale for transactions that are outside the normal course of operations for the organization, if any.Revenue recognition – assumed lands and developer chargesThere is a significant risk regarding the fair value estimates of the land assumed by the town as the transactions are not officially made at arm’s length on the open market. Additionally, recorded developer charges and gas tax revenues represent a significant amount on the financial statements and are subject to greater scrutiny due to the elevated risk of fraud regarding the contributions. In accordance with auditing standards, BDO will performed specific procedures that include reviewing fair value estimates for bias, sampling developer charges and obtaining and evaluating the business rationale of transactions that are outside the normal course of operations for the organization, if any. BDO will also review deferred revenue recognition policies for the organization and assess whether they are consistent with Public Service Accounting Standards and management is applying the policy appropriately Based on our knowledge of the Town’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.Attachment #26Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 69 of 93 Audit Planning Report for The Corporation of the Town of AuroraFor the year ended December 31, 2020MATERIALITY 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 consolidated 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. Preliminary materiality was determined to be $9,400,000 based on 2% of tangible capital assets for financial statement areas surrounding tangible capital assets. A specific materiality for the remaining financial statement areas was determined to be $2,080,000 based on 2% of revenues. Our materiality calculation is based on the Town’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. Attachment #27Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 70 of 93 Audit Planning Report for The Corporation of the Town of AuroraFor the year ended December 31, 2020FEESWe estimate our fees for 2020 will be $31,500 for the audit of the consolidated financial statements, representing a fee of $35,000 less a 10% discount. Our estimated fees are based on the time expected to complete the audit and excludes taxes, out of pocket expenses, internal administration fees, and are based upon the following assumptions: XWe will be provided with the requested auditschedules, working papers and descriptions ofaccounting systems and processes as detailed in ourannual requirements letter upon the commencement offieldwork;XThe consolidation and draft financial statements,including notes, are prepared to a standard suitable foraudit with all balances reconciled to the underlyingaccounting records;XThere will be minimal adjusting entries; andXThe nature of the Town’s operations remain consistentwith the prior year and there have been no changes inaccounting personnel.In the event that we incur additional charges or we experience delays in completing the audit, we will advise management. AUDIT SERVICES THAT DIFFERENTIATEBDO FROM OUR COMPETITORSAlthough BDO and our larger competitors share many similarities, including our national and international structures, services and use of techniques and tools to manage engagements, it is how we deliver our services that truly differentiate us from our competition.We offer clients the full service expertise of a national firm, while maintaining a local community focus. This local presence combined with our partner to staff ratio creates the following key differentials that make us an excellent fit for our clients: fOur philosophy of “Big Enough to Know, Small Enough to Care” is paramount toour service model.fBDO is deliberately structured to allow one partner to every 6 staff (1:6). Thismeans easy access to senior staff and the “Partner in Charge” of the audit as wellas a quick turnaround on any questions.fOur partner-driven approach allows us to have our partners involved throughouteach stage of the audit. This ensures that we identify and resolve issues on atimely basis and provides you with a senior-level contact to address your concerns.fOne of our strengths that goes beyond the typical audit process is our use of in-field reviews. The benefit of these in-field reviews is that final decision makersare on site ensuring issue resolution prior to leaving the field. This guarantees thatqueries are cleared quickly so files are closed in a timely manner.fBDO’s accounting and management professionals are sensitive to meetingdeadlines. We commit to meeting the deadlines as mutually agreed upon by BDOand our clients.Attachment #28Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 71 of 93 Audit Planning Report for The Corporation of the Town of AuroraFor the year ended December 31, 2020USING THE WORK OF OTHERS ExpertsIn 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, Nexus Actuarial Consultants Ltd. Canadian generally accepted auditing standards require us to communicate with the expert. We propose to discuss the following with Nexus Actuarial Consultants Ltd.: XThe objective and nature of our audit engagement and how we intend to use the expert’s findings and report.XOur assessment of the significant and risk aspects of the engagement that will affect the expert’s work.XThe requirement to advise us if they have any relationship with the organization which could impair their judgment or objectivity in the conduct oftheir engagement.XThe nature, timing and extent of the expert’s work and our planned review of it, possibly including review of their working papers.XConfirmation that the assumptions used in their calculations are consistent with those used in the prior periods and with industry standards.XTheir 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 Nexus Actuarial Consultants Ltd. and that they also review the assumptions used and results reported by the expert for reasonableness. Attachment #29Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 72 of 93 Audit Planning Report for The Corporation of the Town of AuroraFor the year ended December 31, 2020APPENDICESAppendix A: BDO audit strategy Appendix B: Engagement letterAppendix C: Independence letterAppendix D: Responsibilities Appendix E: BDO resources Attachment #210Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 73 of 93 Audit Planning Report for The Corporation of the Town of AuroraFor the year ended December 31, 2020APPENDIX A: BDO AUDIT STRATEGYOur 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 Town. 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.Identify and Assess Risk: To assess risk accurately, we need to gain a detailed understanding of the Town’s business and the environment it operates in. As well, 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. Design Audit Response: 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. Obtain Audit Evidence / Form Opinion / Report:Having planned our audit, we will perform audit procedures, maintaining anappropriate degree of professional skepticism, in order to collect evidence to concludewhether or not the consolidated financial statements are presented fairly, in all material respects, in accordance with Canadian public sector accounting standards. ScopingIdentify and assess risk Design audit response Obtain audit evidence Form opinion ReportAttachment #211Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 74 of 93 Audit Planning Report for The Corporation of the Town of Aurora For the year ended December 31, 2020 APPENDIX B: ENGAGEMENT LETTER Attachment #2 12 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 75 of 93 Tel: 705-797-3960 BDO Canada LLP Fax: 705-722-6588 300 Lakeshore Drive www.bdo.ca Suite 300 Barrie, Ontario L4N 0B4 Page 1 of 11 BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. June 23, 2020 The Corporation of the Town of Aurora 100 John West Way Box 1000 Aurora, Ontario L4G 6J1 Dear Sirs/Mesdames: We understand that you wish for us to continue as the auditors of The Corporation of the Town of Aurora for its fiscal year ended December 31, 2020 and subsequent years. We are pleased to continue as your auditors subject to the terms and conditions of this Agreement, to which the attached Standard Terms and Conditions form an integral part. The definitions set out in the Standard Terms and Conditions are applicable throughout this Agreement. This Agreement will remain in place and fully effective for future years until varied or replaced by another relevant written agreement. Giselle Bodkin, CPA, CA will be the Engagement Partner for the audit work we perform for you. The Engagement Partner will call upon other individuals with specialized knowledge to assist in the performance of services. Our Role as Auditors We will conduct our audit(s) 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 consolidated financial statements ("financial statements") prepared in accordance with Canadian public sector accounting standards are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. Our audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by you, as well as evaluating the overall financial statement presentation. Because of the inherent limitations of an audit, together with the inherent limitations of internal control, there is an unavoidable risk that some material misstatements, whether by fraud or error, may not be detected, even though the audit is properly planned and performed in accordance with Canadian generally accepted auditing standards. In making our risk assessments, we consider internal control relevant to your preparation and fair presentation of the 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 your internal controls. However, we will communicate to you concerning any significant deficiencies in internal controls relevant to the audit of the financial statements that we have identified during the audit. We will also communicate matters required by professional standards, to the extent that such matters come to our attention, to you, those charged with governance and/or the board of directors. Attachment #2 13 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 76 of 93 Page 2 of 11 Reporting Our audit will be conducted on the basis that the financial statements have been prepared in accordance with Canadian public sector accounting standards. Our independent auditor’s report will be substantially in the form set out in Canadian Auditing Standard (CAS) 700. The form and content of our report may need to be amended in the light of our audit findings. If we are unable to issue or decline to issue an audit report, we will discuss the reasons with you and seek to resolve any differences of view that may exist. Role of Management and Those Charged with Governance You acknowledge and understand that you have responsibility for: (a) the preparation and fair presentation of the financial statements in accordance with Canadian public sector accounting standards. The audit of the financial statements does not relieve you of your responsibilities; (b) such internal controls as you determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; and (c) providing us with: x access, in a timely manner, to all information of which you are aware that is relevant to the preparation of the financial statements such as records, documentation and other matters; x additional information that we may request for the purpose of the audit; x unrestricted access to persons within the entity from whom we determine it is necessary to obtain audit evidence; x financial and non-financial information (other information) that will be included in document(s) containing financial statements and our audit report thereon prior to the date of our auditor’s report. If it is not possible to provide all the other information prior to the date of our auditor's report, you are responsible for provision of such other information as soon as practicable; and x written confirmation concerning representations made to us in connection with the audit. If appropriate and adequate written representations are not provided to us, professional standards require that we disclaim an audit opinion. Financial Statement Services We will obtain your approval, if during the course of our engagement we: (a) prepare or change a journal entry; or (b) prepare or change an account code or a classification for a transaction. As agreed, we will provide assistance in the preparation of the financial statements. These services create a threat to our independence. We, therefore, require that the following safeguards be put into place: Attachment #2 14 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 77 of 93 Page 3 of 11 (a) that you create the source data for all accounting entries; (b)that you develop any underlying assumptions for the accounting treatment and measurement of entries; and (c)that you review and approve the draft financial statements, including the notes to the financial statements. Tax Services Our audit is conducted primarily to enable us to express an opinion on the financial statements. The audit process is not designed to provide us with a full understanding of your tax situation and in particular, to allow us to determine whether the entity has specific tax compliance issues. We understand that you are not looking to BDO to provide you with any guidance or advice in regard to tax planning or compliance. Additional Services We are available to provide a wide range of services beyond those outlined in this Agreement. To the extent that any additional services that we provide to you that are not provided under a separate written engagement agreement, the provisions of this Agreement will apply to the services. Fee Estimation The estimated fee for this engagement is as follows: Audit services: $31,500 For each future year we will issue a Summary of Services providing details of our Services and fees. We will notify you on a timely basis if there are any circumstances we encounter which could significantly affect our initial estimate of professional fees. Our fees will be invoiced and payable as follows: x $10,500 interim payment; x $10,500 prior to issuance of assurance report; and x $10,500 within 10 days after issuance of our final invoice along with any additional required final payments. We reserve the right to suspend our Services if any of our invoices become delinquent. Fees that are not paid within 30 days of an invoice or by a specified payment deadline will be considered delinquent. Additional information relating to our fees is provided in the Standard Terms and Conditions. Standard Terms and Conditions A copy of our Standard Terms and Conditions is attached as Appendix 1. You should ensure that you read and understand them. The Standard Terms and Conditions include clauses that limit our professional liability. Attachment #2 15 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 78 of 93 Page 4 of 11 Please sign and return the attached copy of this Agreement to indicate your agreement with it. If you have any questions concerning this Agreement, please contact us before signing it. It is a pleasure for us to be of service and we look forward to many future years of association with you. Yours truly, Chartered Professional Accountants, Licensed Public Accountants Agreement of all the terms and conditions in this Agreement is hereby acknowledged by: ________________________________________________________________________ Signature Date ________________________________________________________________________ Name (please print) Position Please carefully review this Agreement, which includes the attached Standard Terms and Conditions, prior to signing it. A complete copy of the signed engagement letter should be returned to us. Attachment #2 16 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 79 of 93 Page 5 of 11 Appendix 1 - Standard Terms and Conditions 1. Overview and Interpretation 1.1 This Agreement sets forth the entire agreement between the parties in relation to Services and it supersedes all prior agreements, negotiations or understandings, whether oral or written, with respect to Services. To the extent that any of the provisions of the accompanying letter conflict with these Standard Terms and Conditions, these Standard Terms and Conditions shall prevail. This Agreement may not be changed, modified or waived in whole or part except by an instrument in writing signed by both parties. 1.2 In this Agreement, the following words and expressions have the meanings set out below: This Agreement – these Standard Terms and Conditions, the letter to which they are attached, and any supporting schedules or other appendices to the letter, and any Summary of Services letters issued in future years. Services – the services provided or to be provided under this Agreement We, us, our, BDO – refer to BDO Canada LLP, a Canadian limited liability partnership organized under the laws of the Province of Ontario You, your – the party or parties contracting with BDO under this Agreement, including the party’s or parties’ management and those charged with corporate governance. You and your does not include BDO, its affiliates or BDO Member Firms BDO Member Firm or Firms – any firm or firms that form part of the international network of independent firms that are members of BDO International Limited Confidential Information - information that contains identifying features that can be attributed to you or individual personnel 2. BDO Network and Sole Recourse 2.1 BDO is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international network of independent member firms (i.e. BDO Member Firms), each of which is a separate legal entity. 2.2 We may use other BDO Member Firms or subcontractors to provide Services; however, we remain solely responsible for Services. You agree not to bring any claim or action against another BDO Member Firm (or their partners, members, directors, employees or subcontractors) or our subcontractors in respect of any liability relating to the provision of Services. 2.3 You agree that any of our affiliates, subcontractors, and other BDO Member Firms and any subcontractors thereof whom we directly or indirectly involve in providing Services have the right to rely on and enforce Section 2.2 above as if they were a party to this Agreement. 3. Respective Responsibilities 3.1 We will use reasonable efforts to complete, within any agreed-upon time frame, the performance of Services. Attachment #2 17 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 80 of 93 Page 6 of 11 3.2 You shall be responsible for your personnel’s compliance with your obligations under this Agreement. We will not be responsible for any delays or other consequences arising from you not fulfilling your obligations. 4. Working Papers and Deliverables 4.1 Ownership – Any documents prepared by us, or for us, in connection with Services belong solely to us. 4.2 Oral advice and draft deliverables – You should not rely upon any draft deliverables or oral advice provided by us. Should you wish to rely upon something we have said to you, please let us know and, if possible, we will provide the information that you require in writing. 4.3 Translated documents - If you engage us to translate any documents, advice, opinions, reports or other work product of BDO from one language to another, you are responsible for the accuracy of the translation work. 4.4 Reliance by Third Parties – Our Services will not be planned or conducted in contemplation of or for the purpose of reliance by any party other than you. Items of possible interest to a third party will not be addressed and matters may exist that would be assessed differently by a third party, possibly in connection with a specific transaction. 4.5 Consent to use the Report - Nothing in this Agreement shall be construed as consent to the use of our report in connection with a continuous disclosure document, a public or private offering document, an annual report or any other document and we expressly do not provide such consent. If you request consent for the use of our report, we will consider, at the relevant time, providing consent and any conditions that we may attach to such consent. Our consent must be in writing. 4.6 Consent requests - In order to provide consent, professional standards require that we read the other information in the related document and consider whether such information is materially inconsistent with the related financial statements. Any consent request must be made on a sufficiently timely basis to allow us to consider your identification and resolution of events occurring in the period since the date of our report, and to obtain updated written representation letters. Such procedures will be performed at your cost and will be documented in a separate engagement letter. 5. Confidentiality 5.1 We agree to use Confidential Information provided by you only in relation to the Services in connection with which the information is provided and we will not disclose the information, except where required by law, regulation or professional obligation. We may however, give Confidential Information to other BDO Member Firms or other subcontractors assisting us in providing Services. Any party to whom we subcontract work will be required to keep Confidential Information confidential either by professional obligation or contract with us. Any BDO Member Firms or other subcontractors we use will be bound by the same confidentiality obligations. 5.2 BDO shall be entitled to include a description of the work we render to or for you in marketing and research materials and disclose such information to third parties, provided that all such information will be made anonymous and not associated with you. Additionally, we may analyze information on an industry or sector basis for internal purposes or to provide industry/sector wide information to our clients or potential clients. Attachment #2 18 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 81 of 93 Page 7 of 11 You consent to our using information obtained from you in this way provided that the outputs therefrom will not contain any identifying features that can be attributed to you. 6. Independence 6.1 Professional and certain regulatory standards require us to be independent, in both fact and appearance, with respect to our clients in the performance of our Services. We will communicate to you any relationships between BDO (including its related entities) and you that, in our professional judgment, may reasonably be thought to bear on our independence. 7. Offers of Employment 7.1 Any discussions that you, or any party acting on your behalf, have with professional personnel of our Firm regarding employment could pose a threat to our independence. Your recruitment of an engagement team member from the current or prior year's engagement may compromise our independence and our ability to render agreed Services to you. Engagement team members may include current and former partners and staff of BDO, other BDO Member Firms and other firms who work under our direction. Therefore, you agree to inform us prior to any such discussions so that you and we can implement appropriate safeguards to maintain our independence. 8. Professional and Regulatory Oversight 8.1 As required by legal, regulatory, or professional authorities (both in Canada and abroad) and by BDO policy, our client files must periodically be reviewed by practice inspectors to ensure that we are adhering to professional and BDO standards. It is understood that by entering into this Agreement, you provide your consent to us providing our files relating to your engagement to the practice inspectors for the sole purpose of their inspection. 8.2 Certain regulatory bodies may also have the right to conduct investigations of you, including the Services provided by us. To the extent practicable and permitted by law, we will advise you of any such investigation request or order prior to providing our working papers. 8.3 You agree to reimburse us for our time and expenses, including reasonable legal fees, incurred in responding to any investigation that is requested or authorized by you or investigations of you undertaken under government regulation or authority, court order or other legal process. 9. Privacy and Consents 9.1 You agree we will have access to all personal information in your custody that we require to complete our engagement. We may collect, use, transfer, store, or process such information disclosed by you of a personal nature (personal information). Our Services are provided on the understanding that: (a) you have obtained any consents for collection, use and disclosure to us of personal information required under all applicable privacy legislation; and (b) we will hold all personal information in compliance with our Privacy Statement. Attachment #2 19 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 82 of 93 Page 8 of 11 10. Electronic Communications 10.1 Both parties recognize and accept the security risks associated with email communications, including but not limited to the lack of security, unreliability of delivery and possible loss of confidentiality and privilege. Unless you request in writing that we do not communicate by internet email, you assume all responsibility and liability in respect of risk associated with its use. 10.2 By signing this Agreement, you provide BDO with express consent to communicate with you and your employees, as applicable, electronically, including sending BDO newsletters, publications, announcements, invitations and other news and alerts that may be of interest to you. You and your employees may withdraw such consent at any time by contacting BDO at www.bdo.ca/unsubscribe. 11. Limitation of Liability 11.1 In any dispute, action, claim, demand for losses or damages arising out of the Services performed by BDO pursuant to this Agreement, BDO shall only be liable for its proportionate share of the total liability based on degree of fault as determined by a court of competent jurisdiction or by an independent arbitrator as a result of the dispute resolution procedures, notwithstanding the provisions of any statute or rule of common law which create, or purport to create, joint and several liability. 11.2 Our liability shall be restricted to damages of a direct and compensatory nature and shall not include indirect, consequential, aggravated or punitive damages, or damages for loss of profits or expected tax savings, whether or not the likelihood of such loss or damage was contemplated. 11.3 You agree that BDO shall in no event be liable to you for any actions, damages, claims, liabilities, costs, expenses, or losses in any way arising out of or relating to the Services performed hereunder for an aggregate amount of more than the higher of: (a) three times the fees paid to BDO by you, in a twelve consecutive month period, for the Services provided pursuant to this Agreement giving rise to the claim; and (b) $25,000. 11.4 No exclusion or limitation on the liability of other responsible persons imposed or agreed at any time shall affect any assessment of our proportionate liability hereunder, nor shall settlement of or difficulty enforcing any claim, or the death, dissolution or insolvency of any such other responsible persons or their ceasing to be liable for the loss or damage or any portion thereof, affect any such assessment. 11.5 You agree claims or actions relating to the delivery of Services shall be brought against us alone, and not against any individual. Where our individuals are described as partners, they are acting as one of our members. 12. Indemnity 12.1 To the fullest extent permitted by applicable law and professional regulations, you agree to indemnify and hold harmless BDO from and against all losses, costs (including solicitors' fees), damages, expenses, claims, demands or liabilities arising out of or in consequence of: Attachment #2 20 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 83 of 93 Page 9 of 11 13. Alternative Dispute Resolution 13.1 Both parties agree that they will first attempt to settle any dispute arising out of or relating to this Agreement or the Services provided hereunder through good faith negotiations. 13.2 In the event that the parties are unable to settle or resolve their dispute through negotiation, such dispute shall be subject to mediation pursuant to the National Mediation rules of the ADR Institute of Canada Inc. All disputes remaining unsettled for more than 60 days following the parties first meeting with a mediator or such longer period as the parties mutually agree upon shall be subject to arbitration pursuant to the National Arbitration Rules of the ADR Institute of Canada Inc. Such arbitration shall be final, conclusive and binding upon the parties, and the parties shall have no right of appeal or judicial review of the decision. The parties hereby waive any such right of appeal which may otherwise be provided for in any provincial arbitration statute made applicable under the National Arbitration Rules. 14. Limitation Period 14.1 You shall make any claim relating to Services or otherwise under this Agreement no later than one year after you became aware or ought reasonably to have become aware of the facts giving rise to any such claim. 14.2 You shall in no event make any claim relating to the Services or otherwise under this Agreement later than two years after the completion of the Services under this Agreement. 14.3 To the extent permitted by law, the parties to this Agreement agree that the limitation periods established in this Agreement replace any limitation periods under any limitations act and/or any other applicable legislation and any limitation periods under any limitations act and/or any other applicable legislation shall not alter the limitation periods sp ecified in this Agreement. 15.Québec Personnel 15.1 We may sometimes have individual partners and employees performing Services within the Province of Québec who are members of the Ordre des comptables professionnels agréés du Québec. Any such members performing professional services hereunder assumes full personal civil liability arising from the practice of their profession, regardless of their status within our partnership. They may not invoke the liability of our partnership as grounds for excluding or limiting their own liability. The provisions in Sections 11 (Limitation of Liability) and 14 (Limitation Period) shall therefore not apply to limit the personal civil liability of partners and employees who are members of the Ordre des comptables professionnels agréés du Québec. (a) a misrepresentation by a member of your management or board of directors, regardless of whether such person was acting in your interest; (b) the Services performed by BDO pursuant to this Agreement, unless, and to the extent that, such losses, costs, damages and expenses are found by a court of competent jurisdiction to have been due to the gross negligence of BDO. In the event that the matter is settled out of court, we will mutually agree on the extent of the indemnification to be provided by you, failing which, the matter may be referred to dispute resolution in accordance with the terms of this Agreement. Attachment #2 21 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 84 of 93 Page 10 of 11 16. Termination 16.1 This Agreement applies to Services whenever performed (including before the date of this Agreement). 16.2 You or we may terminate this Agreement at any time upon written notice of such termination to the other party. We will not be liable for any loss, cost or expense arising from such termination. You agree to pay us for all Services performed up to the date of termination, including Services performed, work-in-progress and expenses incurred by us up to and including the effective date of the termination of this Agreement. 17. Fees and Billings 17.1 Our estimated fee is based on an assumed level of quality of your accounting records, the agreed upon level of preparation and assistance from your personnel and adherence to the agreed-upon timetable. Our estimated fee also assumes that your financial statements are in accordance with the applicable financial reporting framework and that there are no significant new or changed accounting policies or issues or internal control or other reporting issues. We will inform you on a timely basis if these factors are not in place. 17.2 Should our assumptions with respect to the quality of your accounting records be incorrect or should the conditions of the records, degree of cooperation, results of audit procedures, or other matters beyond our reasonable control require additional commitments by us beyond those upon which our estimated fees are based, we may adjust our fees and planned completion dates. Delays in providing the complete list of agreed upon working papers/schedules to BDO will result in additional fees as follows: x 1 week delay – additional 10% of estimated fees x 1 month delay – additional 20% of estimated fees Should a delay occur, we cannot guarantee completion of our work by your deadline. 17.3 Our professional fees will be based on our billing rates which depend on the means by which and by whom our Services are provided. We also will bill you for our out-of-pocket expenses, our administrative charge (described below), and applicable Goods and Services Sales Tax, Harmonized Sales Tax, Quebec Sales Tax and Provincial Sales Tax. 17.4 Our administrative charge is calculated as a percentage of our professional fee and represents an allocation of estimated costs associated with our technology infrastructure, telephone charges, photocopying and some support staff time costs. 17.5 Our accounts are due when rendered and invoiced amounts are deemed to be earned when paid. BDO may suspend the performance of Services in the event that you fail to pay an invoice when it is due. Interest may be charged at the rate of 12% per annum on all accounts outstanding for more than 30 days. 18. Governing Laws 18.1 The terms of our engagement shall remain operative until amended, terminated, or superseded in writing. They shall be interpreted according to the laws of the province or territory in which BDO’s principal Canadian office performing the engagement is located, without regard to such province/territory’s rules on conflicts of law. Attachment #2 22 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 85 of 93 Page 11 of 11 19. Survival 19.1 The provisions of this Agreement that give either of us rights or obligations beyond its termination shall continue indefinitely following the termination of this Agreement. Any clause that is meant to continue to apply after termination of this Agreement will do so. 20. Force Majeure 20.1 We will not be liable for any delays or failures in performance or breach of contract due to events or circumstances beyond our reasonable control, including acts of God, war, acts by governments and regulators, acts of terrorism, accident, fire, flood or storm or civil disturbance. 21. Assignment 21.1 No party may assign, transfer or delegate any of the rights or obligations hereunder without the written consent of the other party or parties. BDO may engage independent contractors and BDO Member Firms to assist us in performing the Services in this Agreement without your consent. 22. Severability 22.1 If a court or regulator with proper jurisdiction determines that a provision of this Agreement is invalid, then the provision will be interpreted in a way that is valid under applicable law or regulation. If any provision is invalid, the rest of this Agreement will remain effective. Version: 202002 Attachment #2 23 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 86 of 93 Audit Planning Report for The Corporation of the Town of Aurora For the year ended December 31, 2020 APPENDIX C: INDEPENDENCE LETTER Attachment #2 24 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 87 of 93 Audit Planning Report for The Corporation of the Town of Aurora For the year ended December 31, 2020 June 23, 2020 Members of the Audit Committee The Corporation of the Town of Aurora Dear Audit Committee Members: We have been engaged to audit the consolidated financial statements of The Corporation of the Town of Aurora (the “Town”) for the year ended December 31, 2020. Canadian generally accepted auditing standards (GAAS) require that we communicate at least annually with you regarding all relationships between the Town and our Firm that, in our professional judgment, may reasonably be thought to bear on our independence. In determining which relationships to report, we have considered the applicable legislation and relevant rules and related interpretations prescribed by the appropriate provincial institute/order, covering such matters as: •Holding a financial interest, either directly or indirectly in a client; •Holding a position, either directly or indirectly, that gives the right or responsibility to exert significant influence over the financial or accounting policies of a client; •Personal or business relationships of immediate family, close relatives, partners or retired partners, either directly or indirectly, with a client; •Economic dependence on a client; and •Provision of services in addition to the audit engagement. We have prepared the following comments to facilitate our discussion with you regarding independence matters arising since March 18, 2020, the date of our last letter. We are aware of the following relationships between the Company and us that, in our professional judgment, may reasonably be thought to have influenced our independence. The following relationships represent matters that have occurred from March 18, 2020 to June 23, 2020. •We have provided assistance in the preparation of the consolidated financial statements, including adjusting journal entries. These services created a self-review threat to our independence since we subsequently expressed an opinion on whether the consolidated financial statements presented fairly, in all material respects, the financial position, results of operations and cash flows of the organization in accordance with (relevant GAAP). •We, therefore, required that the following safeguards be put in place related to the above: •Management provided us with a trial balance and draft consolidated financial statements, including notes, prior to completion of our audit. •Management created the source data for all the accounting entries. •Management developed any underlying assumptions required with respect to the accounting treatment and measurement of the entries. •Management reviewed advice and comments provided and undertook their own analysis considering the Company’s circumstances and generally accepted accounting principles. •Management reviewed and approved all journal entries prepared by us, as well as changes to financial statement presentation and disclosure. •Someone other than the preparer reviewed the proposed journal entries and consolidated financial statements. Attachment #2 25 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 88 of 93 Audit Planning Report for The Corporation of the Town of Aurora For the year ended December 31, 2020 We hereby confirm that we are independent with respect to the Town within the meaning of the Code of Professional Conduct of the Chartered Professional Accountants of Ontario as of June 23, 2020. This letter is intended solely for the use of the Audit Committee, the Board of Directors, management and others within the Town and should not be used for any other purposes. Yours truly, Chartered Professional Accountants, Licensed Public Accountants Attachment #2 26 Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 89 of 93 Audit Planning Report for The Corporation of the Town of AuroraFor the year ended December 31, 2020APPENDIX D: RESPONSIBILITIES It is important for the Audit Committee to understand the responsibilities that rest with the Town and its management, those that rest with the external auditor, and the responsibilities of those charged with governance. BDO’s responsibilities are outlined below and within the annual engagement letter attached as Appendix B to this letter. The oversight and financial reporting responsibilities of management and the Audit Committee are also summarized below.AUDITOR’S ENGAGEMENT OBJECTIVES Year-End Audit WorkOther InformationXWork with management towards the timely issuance of consolidatedfinancial statements, tax returns and consents for offering documents.XProvide timely and constructive management letters. This will includedeficiencies in internal control identified during our audit.XPresent significant findings to the Audit Committee including key auditand accounting issues, any significant deficiencies in internal controland any other significant matters arising from our work.XRead the other information included in the Town’s Annual Report toidentify material inconsistencies, if any, with the audited consolidatedfinancial statements.Year-Round WorkXConsult regarding accounting, income tax and reporting matters asrequested throughout the year.Our overall objective is to express an opinion as to whether the consolidated financial statements present fairly, in all material respects, the financial position, financial performance and cash flows of the Town in accordance with Canadian public sector accounting standards. Attachment #227Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 90 of 93 Audit Planning Report for The Corporation of the Town of AuroraFor the year ended December 31, 2020AUDITOR’S 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: XIdentifying and assessing the risks of material misstatement due to fraud;XObtaining sufficient and appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing andimplementing appropriate responses; andXResponding 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.Response to Assessed Fraud Risks XInquire of management, the Audit Committee, and others related toany knowledge of fraud, suspected fraud or alleged fraud;XPerform disaggregated analytical procedures and consider unusual orunexpected relationships identified in the planning of our audit;XIncorporate an element of unpredictability in the selection of thenature, timing and extent of our audit procedures; andXPerform additional required procedures to address the risk ofmanagement’s override of controls including:oTesting internal controls designed to prevent and detect fraud;oTesting the appropriateness of a sample of adjusting journalentries and other adjustments for evidence of the possibility ofmaterial misstatement due to fraud;oReviewing accounting estimates for biases that could result inmaterial misstatements due to fraud, including a retrospectivereview of significant prior years’ estimates; andoEvaluating the business rationale for significant unusualtransactions.Fraud Risk Assessment Procedures XManagement’s assessment of the risk that theconsolidated financial statements may be materiallymisstated due to fraud, including the nature, extent andfrequency of such assessments;XManagement’s process for identifying and responding tothe risks of fraud in the Town, including any specificrisks of fraud that management has identified or thathave been brought to its attention, or classes oftransactions, account balances, or disclosures for whicha risk of fraud is likely to exist;XManagement’s communication, if any, to those chargedwith governance regarding its processes for identifyingand responding to the risks of fraud in the Town; andXManagement’s communication, if any, to employeesregarding its view on business practices and ethicalbehaviour.Attachment #228Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 91 of 93 Audit Planning Report for The Corporation of the Town of AuroraFor the year ended December 31, 2020AUDIT COMMITTEE RESPONSIBILITIES MANAGEMENT RESPONSIBILITIES ENTITYAuditCommitteeBDOManagementXOversee the work of the external auditor engaged for the purpose of issuing anindependent auditor’s report.XFacilitate the resolution of disagreements between management and theexternal auditor regarding financial reporting matters.XPre-approve all non-audit services to be provided to the Town or its subsidiariesby the external auditor.XReview the consolidated financial statements, MD&A and annual and interimearnings press releases before the Town publicly discloses this information.XMaintain adequate accounting records and maintain anappropriate system of internal control for the Town.XSelect and consistently apply appropriate accountingpolicies.XPrepare the annual consolidated financial statements inaccordance with Canadian public sector accountingstandards.XSafeguard the Town’s assets and take reasonable steps forthe prevention and detection of fraud and otherirregularities.XMake available to us, as and when required, all of theTown’s accounting records and related financialinformation.Attachment #229Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 92 of 93 Audit Planning Report for The Corporation of the Town of AuroraFor the year ended December 31, 2020APPENDIX E: BDO RESOURCES BDO is a leading provider of professional services to clients of all sizes in virtually all business sectors. Our team delivers a comprehensive range of assurance, accounting, tax, and advisory services, complemented by a deep industry knowledge gained from nearly 100 years of working within local communities. As part of the global BDO network, we are able to provide seamless and consistent cross-border services to clients with global needs. 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.Public Sector Accounting Standards (PSAS) Update 2019 https://www.bdo.ca/BDO/media/AAPublications/PSAS_Update_09Sep19.pdf TAX BULLETINS, ALERTS AND NEWSLETTERSBDO Canada’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 CanadaPSAS PublicationsAttachment #230Audit Committee Meeting Agenda Tuesday, June 23, 2020 Item 1 Page 93 of 93