MEETING OF THE DISTRICT OF TOFINO AUDIT COMMITTEE HELD IN THE COUNCIL CHAMBERS AGENDA: May 11, 9:15 a.m.

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1 MEETING OF THE DISTRICT OF TOFINO AUDIT COMMITTEE HELD IN THE COUNCIL CHAMBERS AGENDA: May 11, 9:15 a.m. 1. Call Meeting to Order 2. Additions to or Deletions from the Agenda 3. Adoption of Agenda 4. Announcements from the Mayor 5. Delegations 1. Meryl Chahley, C.A., Partner, Meyers Norris Penney, LLP - Draft 2008 Financial Statements for year ending December 31, 2008, Report from Director of Financial Services dated May 4, Reports Staff Reports: 1. Reports from Director of Financial Services (1) Finance Department 2008 Update, dated May 4, 2009 (2) Bad debts to be paid prior to hiring policy, dated May 4, 2009 (3) Bad debts to be paid prior to purchase of goods or services policy, dated May 4, (4) Development-related fees and charges due date policy, dated May 4, (5) Investment Guidelines policy, dated May 4, (6) Property Tax Accounts to be Current prior to Development policy, dated May 4, (7) Withdrawal of services for persons with bad debts or negotiated settlements policy, dated May 4, (8) Tangible Capital Asset policy amendment, dated May 4, New Business 1. Discuss ideas for proposed Conflict of Interest guidelines for purchasing goods and services. 2. Schedule next Audit Committee meeting 9. Adoption of In Camera Agenda Motion: That the In Camera agenda be adopted as circulated; that the In Camera meeting be closed and that the purpose of the meeting is to: (1) Review litigation or potential litigation affecting the municipality based on Section 90(1)(g) of the Community Charter. (2) Review progress on items affecting the security of the property of the municipality based on Section 90(1)(d) of the Community Charter. 10. Reconvene from In Camera Meeting 1

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25 1 The Corporation of the District of Tofino REPORT TO AUDIT COMMITTEE Audit Committee Agenda Item File: FIN To: From: Bob Long, CAO Edward Henley, Director of Financial Services SUBJECT: Finance Department Update of 2008 Initiatives RECOMMENDATION THAT THE COMMITTEE RECOMMEND TO COUNCIL to receive for information. CAO S COMMENTS I concur with this recommendation. DISCUSSION A number of areas requiring attention were identified in 2007 and scheduled for addressing in Summary List of Major 2008 initiatives Complete overhaul of Chart of Accounts Redesign of Public Works time sheets Payroll year-end adjustments Implementation of GST collection PSAB TCA information recording New Chart of Accounts The most significant change in 2008 was to the Chart of Accounts. The new system took a lot longer to create and implement than was originally anticipated due to a few issues. Firstly, no manuals or reference books were found commercially available that explain how to design a Chart of Accounts. The Federal government has a chart for their own system but nothing to explain how it works or the reasoning for the design. We could not use their system. Alberta has a suggested system for municipalities and provided some

26 2 useful information, however it did not take into account the differences in legislation for BC. As such, it took approximately 5-6 months to create the template. The template took into account the new financial plan legislation and also the new PSAB regulations. The new Chart was designed not to just provide consistent object codes, but to also have the numbering system to fit into the Federal and Provincial reporting structures in a sequential manner through the grouping of like GLs. Ensuring that the chart of accounts was designed correctly was imperative. To replace a functional, yet inefficient and inconsistent chart of accounts with a dysfunctional one would have had serious negative implications on the organization and extra care had to be taken to ensure success. Secondly, the relative lack of experience in years for the Director of Financial Services led to a number of false starts and renumbering in the initial design of the Chart of Accounts. It was not possible to find any recent examples of a community in BC that had redone their Chart of Accounts. The assistance of the GFOA BC and also Sidney, Sechelt and Courtenay was important in the conceptualization. It was found that Campbell River was in the midst of redesigning their Chart of Accounts and had assigned a senior accountant with more than a decade of experience to work on this task over a period of a year in addition to their PSAB TCA project. Thirdly, due to the lack of flexibility of the accounting software with regards to report production, the Finance Department uses a template report on Muniware to produce raw numbers that are then loaded into a spreadsheet that is more interactive. With the changes in the layout and the numbers, both the template report and the spreadsheet had to be redesigned from scratch. This took approximately 2 months. This also involved the spreadsheet used for the budget process. Fourthly, with the establishment of cost centres for most areas, the ability to produce meaningful reports for management has increased, however some historical context was lost as many items were grouped together in the past. Sometimes items in one area were grouped together and it is easy to relate, however in some cases items from several divergent areas were billed to the same GL and a decision had to be made as to which of the several areas to place that one GL for future referencing. All GL entries in 2008 were reviewed to determine if the entry was in the appropriate GL or if it needed to be shifted to a new, more appropriate GL. Entries prior to 2008 were not shifted as the audit for those years had already been produced and changes to items prior to 2008 were locked-out. This part of the change involved 3 staff members and took approximately 1 ½ - 2 months. Finally, the Public Works time sheets had to be completely overhauled and training on how to code the new time sheets with the new numbers had to be held. This took approximately 1 month from design to implementation and training. More details are below. In summary, it was originally estimated to take about 3 months to accomplish the change however it took the better part of the year from start to finish. Redesign of Public Works Time Sheets and GL billings The method of tracking PW wages and labour was criticized for years by the Auditors as the District was not able to actually identify how much we paid in wages and benefits for various areas. The main reason for this was that the expenses were buried in every type of GL rather than specially designated Wages and Benefits GLs. This became more

27 3 important with the new requirement to file T2s with Canada Revenue Agency and to declare total wages paid. A secondary, but also very important reason to revise the old method was that due to the method used to divide up the costs (a complicated multi-page spreadsheet was used which resulted in a doubling of the work) the benefits portion of the wages were averaged out amongst all PW employees rather than individually. This resulted in an under-reporting of the cost of the Foreman to do a job and an overreporting of the cost of the Labourer to do the same job. The new redesign also gave better ability to track usage of PW equipment to provide for data for the eventual charging out of the equipment. Payroll year-end adjustments Sick time, sick bank, and Vacation Payables had been identified for years as an item that needed to be addressed. The auditors noted in interim audit notices that for a number of years there did not seem to be a connection between the amounts in the GLs and the amounts actually owed. The District was not presenting documentation to confirm how much was truly owed and the GLs were adjusted according to an assumed amount. Actual year-end numbers were produced for The District had switched from using the accounting software to track this information to a manual system in approximately It is not known why the change occurred. The Finance Department is currently exploring moving back to having it tracked using the accounting software and is first ensuring that the software is capable of doing it properly. Implementing the collection of GST The GST took effect on January 1, If an organization charged less than a certain amount in GSTable items in a particular period (amounts and time frames have changed over the years) then the organization had the option to not collect GST. The risk in this is that if the organization had not collected GST for most of the year and then it was later determined that they now exceeded the exempt limit, that the organization itself was responsible for remitting the entire amount of GST due for that year whether they collected it or not. As such, by not collecting GST the organization was taking on the risk of having to pay the GST on behalf of persons that it could have collected it from. This is what happened to the District for the 2006, 2007 and part of the 2008 fiscal years. In March 2008 the Canada Revenue Agency (CRA) audited the District of Tofino. The District had dutifully filled out the forms requesting a refund of all GST paid (as permitted by law) however did not fill out the portion on the same forms regarding the amount of GST collected as no efforts to collect were being made. The effect of this was two-fold. Firstly, CRA determined that the District should have been collecting GST since at least They did not check years prior to 2006 as CRA s policy, according to the CRA site auditor, is to only go back 2 years prior to the current year. Through the determination that the non-collection of GST was not done maliciously and not an act of tax evasion (a criminal code violation), no additional fine was levied, however all GST that should have been remitted for those two years (plus the portion of 2008) was determined and paid. Secondly, a few months after the conclusion of the audit, CRA wrote a letter to Council announcing that they had decided to spend a week performing an audit on businesses in Tofino to ensure that they too were collecting GST. At least one business is known to have not been collecting and remitting GST and changed their practices.

28 4 The implementation of GST took approximately 1 month to make the changes to the cash receipting system to become compliant and was done in conjunction with the anticipated overhaul of the Chart of Accounts. Ongoing updates are made whenever there is a new service that requires GST and the amount of time to maintain compliance is negligible. Debit Machine Change of Benefits Provider This initiative was initiated due to management s agreement to explore the option of switching from Sunlife to a new benefit provider with Pacific Blue Cross as a preference. At the same time several areas of risk to the District were removed. Firstly, the District was using employee s SIN numbers to identify them for benefit purposes. This was a violation of the Government of Canada s Policy requirements related to the SIN" section of the "Policy on Privacy Protection (1993)". Fines can and have been levied by the federal government for breaching privacy legislation. Employee numbers are now used. Secondly, the benefit levels provided matched the requirements set out in the Collective Bargaining agreement however did not match the requirements in the employment contracts for managers. In general, management employees, since at least 2004 (the start date of the then current provider), were insured for approximately half of the benefits they were entitled to by contract. As such, the District was left open to having to pay the difference should a claim have been approved. In the case of life insurance the amount of exposure was upwards of $110,000. Rectifying this did not necessitate a change to the benefit provider and could have been done with an amendment to the service provided however no action had been taken until the benefit provider was changed. The research of the various options and providers took approximately 2 months and the implementation took another 2 months. PSAB TCA data gathering and establishment of an Inventory This project is ongoing and must be completed for the 2009 year-end. Most infrastructure information for roads, sewers, sidewalks and water transmission have been entered. A lot more additional work needs to be done with regards to valuing the items, adding buildings, vehicles and other miscellaneous items. An inventory system also needs to be completed in order to be compliant with the new PSAB 3150 TCA regulations.

29 initiatives Computerization of payroll tracking that is currently performed manually Complete PSAB TCA reporting Prepare for planned 2010 implementation of hourly charging of various PW equipment Continue expanding integrated spreadsheets and reports to enable the Finance Department to move closer towards producing their own year-end financial statements Document most financial processes and procedures in writing Explore the need to implement PST Expand Director of Financial Services manual Expand Accounting Assistant manual Respectfully submitted, Edward Henley Director of Financial Services

30 1 The Corporation of the District of Tofino REPORT TO AUDIT COMMITTEE Audit Committee Agenda Item File: FIN To: From: Bob Long, CAO Edward Henley, Director of Financial Services SUBJECT: Bad debts to be paid prior to hiring policy RECOMMENDATION THAT THE COMMITTEE RECOMMEND TO COUNCIL to approve the Bad debts to be paid prior to hiring policy. CAO S COMMENTS I concur with this recommendation. DISCUSSION The District endeavours to collect all unpaid and outstanding debts. In the past there have been instances of person(s) gaining employment with the District while they had outstanding bad debts or unpaid written off amounts. The person(s) failed to make payment of any amount on the written off child care bills or other debts owing to the District either during or following their tenure of employment and the amount still remains with the collection agency. By permitting this situation to occur the District unintentionally gave the impression that it does not take the collection of monies owing to it seriously. It should be noted that this policy does not preclude the hiring of a person who has outstanding debt that is less than ninety (90) calendar days past due. This policy would not restrict the hiring of a person who is currently late in the payment of any debts to the District of Tofino so long as the length of the lateness is not more than eighty-nine (89) calendar days.

31 2 POLICY No potential employee may have their hiring finalized prior to the payment in full of any outstanding bad debts or unpaid written off amounts. All employment is conditional upon the payment in full of any outstanding bad debts or unpaid written off amounts. INTENT To ensure that potential employees are not in a conflict of interest at the time of hiring by having outstanding bad debts or unpaid written off amounts with the District of Tofino. BACKGROUND A bad debt is defined as monies owing that are ninety (90) or more days past due. It is at this point that outstanding debts are generally classified as bad debts and sent to collections. Unpaid bad debts are also referred to Council for writing off as uncollectable. The District has, in the past, granted employment to person(s) who had outstanding bad debts or unpaid written off amounts and the employees, throughout their tenure, did not make payment in full or in part. The District could have gone to court to seek garnishment of wages however this is a time-consuming and costly method of collection. It is not desirable for the District to have to seek a garnishment of wages on a prospective employee and thus enacts this policy to ensure that the above-mentioned debts are paid prior to employment. This policy also ensures that the public understands that the District takes the collection of outstanding bad debts and unpaid written off amounts seriously and that gaining employment with the District does not exempt you from paying. AUTHORITY TO ACT Delegated to staff. REVIEW Respectfully submitted, Edward Henley Director of Financial Services

32 1 The Corporation of the District of Tofino REPORT TO AUDIT COMMITTEE Audit Committee Agenda Item File: FIN To: From: Bob Long, CAO Edward Henley, Director of Financial Services SUBJECT: Bad debts to be paid prior to purchase of goods or services policy RECOMMENDATION THAT THE COMMITTEE RECOMMEND TO COUNCIL to approve the Bad debts to be paid prior to purchase of goods or services policy. CAO S COMMENTS I concur with the recommendation. DISCUSSION The District endeavours to collect all unpaid and outstanding debts. In the past there have been instances of persons, companies or organizations selling goods or services to the District while they had outstanding bad debts or unpaid written off amounts. The persons, companies or organizations were subsequently convinced to make full payment of the amount owing however there is a need for a formal policy codifying this requirement. By permitting this situation to occur the District unintentionally gave the impression that it does not take the collection of monies owing to it seriously. It should be noted that this policy does not preclude the purchasing of goods or services from a person, company, or organization which has outstanding debt that is less than ninety (90) calendar days past due. This policy would not restrict the purchase of goods or services from a person, company, or organization which is currently late in the payment of any debts to the District of Tofino so long as the length of the lateness is not more than eighty-nine (89) calendar days.

33 2 POLICY No purchases of goods or services may be made from a person, company, or organization prior to the payment in full of any outstanding bad debts or unpaid written off amounts. All purchases by the District or any of its commissions are conditional upon the prior payment in full of any outstanding bad debts or unpaid written off amounts. INTENT To ensure that the persons, companies, or organizations that the District purchases goods and services from are not in a conflict of interest at the time of purchase by having outstanding bad debts or unpaid written off amounts with the District of Tofino. BACKGROUND A bad debt is defined as monies owing that are ninety (90) or more days past due. It is at this point that outstanding debts are generally classified as bad debts and sent to collections. Unpaid bad debts are also referred to Council for writing off as uncollectable. The District has, in the past, purchased goods and services from persons, companies, or organizations which had outstanding bad debts or unpaid written off amounts. It is not desirable for the District to purchase goods and services and provide revenue to persons, companies, or organizations who have not yet paid the above-mentioned debts. This policy also ensures that the public understands that the District takes the collection of outstanding bad debts and unpaid written off amounts seriously and that these persons, companies, or organizations are not rewarded with further business with the District. AUTHORITY TO ACT Delegated to staff. REVIEW Respectfully submitted, Edward Henley Director of Financial Services

34 1 The Corporation of the District of Tofino REPORT TO AUDIT COMMITTEE Audit Committee Agenda Item File: FIN To: From: Bob Long, CAO Edward Henley, Director of Financial Services SUBJECT: Development-related fees and charges due date policy RECOMMENDATION THAT THE COMMITTEE RECOMMEND TO COUNCIL to approve the Developmentrelated fees and charges due date policy. CAO S COMMENTS I concur with this recommendation. DISCUSSION The District has not been consistent in its method of demanding payment for development and there is a need for transparency and consistency. In some instances, payments are required in full prior to issuance of the permit. In other instances payment plans have been put in place with differing rates of interest and some with no interest required at all. Deferring payments to future years has a negative effect on the District due to the reduced value of the funds through the effects of inflation, the loss of interest income on the funds, an increased risk of non-payment, and the hampering of spending initiatives for projects that the funds might be related to. It has been noted that the lack of consistency in the collection of funds has permitted some developers a monetary advantage over others who have to pay prior to the issuance of the permits as they can redirect the funds otherwise due to the District, elsewhere. This policy will provide consistency, transparency and greater compliance with various District and Provincial Acts and Regulations.

35 2 POLICY In addition to the guidelines set out by the Community Charter and any other Provincial Acts and Regulations, the District of Tofino requires full payment of all developmentrelated fees and charges prior to and as a condition of the issuance of the related permit, and that the permit will be withdrawn or rescinded if the payment instrument is returned unpaid for any reason. INTENT The intent is to ensure that the District receives full payment from developers and/or property owners. It is further desired that all persons seeking to develop property are treated in the same manner as to due dates and payment terms and conditions. BACKGROUND This policy will provide consistency, transparency and greater compliance with various District and Provincial Acts and Regulations. AUTHORITY TO ACT Delegated to staff. REVIEW Respectfully submitted, Edward Henley Director of Financial Services

36 1 The Corporation of the District of Tofino REPORT TO AUDIT COMMITTEE Audit Committee Agenda Item File: FIN To: From: Bob Long, CAO Edward Henley, Director of Financial Services SUBJECT: Investment Guidelines Policy RECOMMENDATION THAT THE COMMITTEE RECOMMEND TO COUNCIL to approve the Investment Guidelines policy. CAO S COMMENTS I concur with this recommendation. POLICY In addition to the guidelines set out by the Community Charter and any other Provincial Acts and Regulations, the District of Tofino will restrict its investments to the following: Bank accounts; Guaranteed Investment Certificates (GICs); Term Deposits (TDs); Securities of Canada or of a province; Savings class pooled investment funds (Money Market funds, T-Bill funds, etc.). When investing in GICs or TDs, the preference will be for instruments which are for a period no longer than one (1) year and one (1) week and cashable in full or in part without penalty excepting an initial period of two (2) months. Any exceptions to this policy require approval by Council resolution on a case-by-case basis.

37 2 INTENT To regulate the types of investments that the District of Tofino invest in, to ensure flexibility for budgeting, and to provide for a more conservative risk profile for the District s investment portfolio. BACKGROUND The District has had a history of and currently holds investments that meet the criteria of the recommended policy. While Provincial Acts and regulations permit less conservative investments, including bond funds, which may provide a potential for higher returns, the lack of guarantee to the underlying principal is not desired at this time. Less conservative investments require the ability to delay or defer redemption in times when there is a unrealized capital loss (paper loss) which in turn requires strong reserves and a solid long-range financial plan. These less conservative investments should only be engaged in when there is at least a three (3) year investment time horizon, and preferably a five (5) year or longer investment horizon. While it is recognized that the District may not be covered in full by CDIC or other deposit or investment insurances, the recommended investments provide the liquidity (if the GICs and TDs are in cashable form) to redeem and transfer the funds to another financial institution should the need arise. It is also recognized that while pooled investment funds are not guaranteed for principal or interest, that Savings class pooled investment funds are the most conservative and rarely, if ever, have posted any capital losses on an annual basis. The District has not traditionally had a solid, agreed-upon financial plan beyond one (1) year and as such this policy is recommended to ensure that investments which may lock-in or restrict the District s financial options, be limited in scope. AUTHORITY TO ACT Delegated to staff. REVIEW Respectfully submitted, Edward Henley Director of Financial Services

38 1 The Corporation of the District of Tofino REPORT TO AUDIT COMMITTEE Audit Committee Agenda Item File: FIN To: From: Bob Long, CAO Edward Henley, Director of Financial Services SUBJECT: Property Tax Accounts to be Current prior to Development policy RECOMMENDATION THAT THE COMMITTEE RECOMMEND TO COUNCIL to approve the Property Tax Accounts to be Current prior to Development policy. CAO S COMMENTS I concur with this recommendation. DISCUSSION The District consistently has a number of properties for which the property taxes are in arrears or are delinquent. Occasionally a property owner whose property taxes are in arrears or are delinquent will apply for and pay for applications to develop or improve the property instead of first paying the property taxes. Recently there have been instances where property owners, who are currently and consistently in arrears or delinquent and flirted with having their properties sold at tax sale, have criticized Council and staff for not prioritizing or approving their particular development or improvement application. A property owner should first demonstrate that they have the funds to ensure that property taxes are current before applying for development or improvement related permits. Arrears - Taxes are deemed to be in arrears effective January 1 following the year that property taxes were levied. Arrears interest is calculated on and deemed owing on the taxes in arrears. Delinquent Taxes are deemed to be delinquent effective January 1 of the second year

39 2 following the year that property taxes were levied. Delinquent interest is calculated on and deemed owing on the delinquent taxes. POLICY Applications for development or improvement related permits will not be processed if property taxes for the property in question are in arrears or delinquent. Upon such time that the property taxes are made current, the application will be considered to be acceptable for consideration and will enter the development queue. If the payment is returned unpaid then all work on the application will cease and will leave the queue only to re-enter the queue as a new item once the taxes are brought up to date. If an application which is currently in the queue is for a property whose property taxes, during processing, become in arrears then all work on the application will cease and other applications may move ahead of it until such time that the arrears are paid. INTENT The intent is to ensure that the property taxes are up to date prior to acting upon requests for development or improvement of the property in question. BACKGROUND Developers or property owners seeking to develop or improve their properties often require funds to do so. The interest rates for taxes in arrears or delinquent taxes are set by the Province and are typically very reasonable and comparable to rates for secured loans. As such, it can be to the advantage of a person to not keep the property taxes up to date rather than borrow funds to develop or improve the property. As a result, the District is acting as an unintentional low-cost lender to the developer and this is not a desired outcome. AUTHORITY TO ACT Delegated to staff. REVIEW Respectfully submitted, Edward Henley Director of Financial Services

40 1 The Corporation of the District of Tofino REPORT TO AUDIT COMMITTEE Audit Committee Agenda Item File: FIN To: From: Bob Long, CAO Edward Henley, Director of Financial Services SUBJECT: Withdrawal of services for persons with bad debts or negotiated settlements policy RECOMMENDATION THAT THE COMMITTEE RECOMMEND TO COUNCIL to approve the Withdrawal of services for persons with bad debts or negotiated settlements policy. CAO S COMMENTS I concur with this recommendation. DISCUSSION The District endeavours to collect all unpaid and outstanding debts. In the past there have been instances of persons, companies or organizations refusing to pay for outstanding bad debts or unpaid written off items while paying the District for new, discretionary goods or services. This has given the public the impression that they have the power to determine what debts they wish to pay to the District and that there are no consequences with refusing to pay certain debts. By permitting this situation to occur the District unintentionally gave the impression that it does not take the collection of monies owing to it seriously. Additionally, the District has made agreements to accept less than the full amount of money owing, due to varying reasons, in exchange for full payment of the outstanding indebtedness. The payees have then been permitted to immediately start obtaining goods or services from the District on credit and the goods or services were subsequently again unpaid and written off and a partial payment was made in exchange for full payment, for varying reasons. This has given the impression that the District is not interested in full payment for goods or services rendered and leaves it vulnerable to

41 2 persons who would exploit this opportunity. It is proposed that the District make it conditional that partial payments in exchange for payment in full also include restricting the person from future goods and services for a period of 24 months. This policy will exempt unpaid water and sewer utilities if they can be added to the taxes of a property. Not all unpaid water and sewer utilities can be added to the taxes of a property. Examples of properties that cannot have unpaid water and sewer utilities added to the taxes are: mobile home leaseholds, foreshore tenures, among others. It should be noted that this policy does not preclude the sale of goods or services to a person, company, or organization which has outstanding debt that is less than ninety (90) calendar days past due. This policy would not restrict the purchase of goods or services from a person, company, or organization which is currently late in the payment of any debts to the District of Tofino so long as the length of the lateness is not more than eighty-nine (89) calendar days. POLICY No sale of goods or services may be to a person, company, or organization prior to the payment in full of any outstanding bad debts or unpaid written off amounts. All sales by the District or any of its commissions are conditional upon the prior payment in full of any outstanding bad debts or unpaid written off amounts. Additionally, if the District agrees to accept partial payment in consideration of full payment of a bad debt or written off amount from a person, company, or organization, that a condition of this agreement be that the person, company, or organization agrees that the District will not sell any future goods or services to them for a period of 24 months unless the difference between the partial payment and the full payment is made first. This policy will exempt unpaid water and sewer utilities if they can be added to the taxes of a property. INTENT To ensure that the persons, companies, or organizations that the District sells goods and services to are not in the position at the time of sale of having outstanding bad debts or unpaid written off amounts with the District of Tofino. BACKGROUND A bad debt is defined as monies owing that are ninety (90) or more days past due. It is at this point that outstanding debts are generally classified as bad debts and sent to collections. Unpaid bad debts are also referred to Council for writing off as uncollectable. The District has, in the past, sold goods and services to persons, companies, or organizations which had outstanding bad debts or unpaid written off amounts. It is not desirable for the District to sell additional goods or services to a person, company, or

42 3 organization that has not yet paid the above-mentioned debts. This policy also ensures that the public understands that the District takes the collection of outstanding bad debts and unpaid written off amounts seriously and that these persons, companies, or organizations are not permitted further goods or services from the District. Not all unpaid water and sewer utilities can be added to the taxes of a property. Examples of properties that cannot have unpaid water and sewer utilities added to the taxes are: mobile home leaseholds, foreshore tenures, among others. AUTHORITY TO ACT Delegated to staff. REVIEW Respectfully submitted, Edward Henley Director of Financial Services

43 1 The Corporation of the District of Tofino REPORT TO AUDIT COMMITTEE Audit Committee Agenda Item File: FIN To: From: Bob Long, CAO Edward Henley, Director of Financial Services SUBJECT: Tangible Capital Asset policy amendment RECOMMENDATION THAT THE COMMITTEE RECOMMEND TO COUNCIL to approve the amendment to the Tangible Capital Asset policy. CAO S COMMENTS DISCUSSION It was determined that some wording was switched in the leases section and requires correction. POLICY AMENDMENT Existing wording: Leases There are two types of leases that exist: operating leases; and capital leases. Account for an operating lease when the net present value of the future minimum lease payments or fair value, whichever is less, is less than $10,000. All others are capital leases which are accounted for by recording both the asset and the liability.

44 2 Recommended amendment: Leases There are two types of leases that exist: operating leases; and capital leases. Account for a capital lease when the net present value of the future minimum lease payments or fair value, whichever is less, is greater than $10,000. If the lease meets the capital lease criteria, but the Net Present Value (NPV) of the minimum lease payments or fair value is less than $10,000, then record the item as an operating lease. If the lease does not meet the capital lease criteria, then the item is recorded as an operating lease. Respectfully submitted, Edward Henley Director of Financial Services