F!~ Peter Honeybome, Director of Treasury Services & Deputy Treasurer

Transcription

1 brampton.ca BRAMPTON FlOWef City F!~ Report Audit Committee Committee of the Council of The Corporation of the City of Brampton Date: December 6, 2011 File: F Subject: KPMG Audit Plan for The 2011 Fiscal Year Audit Committee Date: Pe 6»/J>ef l4,2plt Contact: Peter Honeybome, Director of Treasury Services & Deputy Treasurer Overview: Section 296 of the Ontario Municipal Act, 2001 requires the appointment of an auditor licensed under the Public Accounting Act, The City's Auditor, KPMG Llp, Chartered Accountants, will be performing the statutory audit of The Corporation of the City of Brampton and its Local Boards/Committees for the fiscal year ended December 31, The City's Auditor, KPMG Llp, Chartered Accountants, have prepared the attached Audit Planning Report for the Audit Committee's Information. Recommendations: 1. That the report from Peter Honeybome, Director of Treasury Services and Deputy Treasurer, Financial & Information Services Department dated December 6th 2011 to the Audit Committee of December 14th 2011 re: KPMG Audit Plan For the 2011 Fiscal Year, be received and 2. That the Audit Planning Report for the Year Ending December 31, 2011, prepared and submitted by KPMG LLP, Chartered Accountants, be received. Background: The Ontario Municipal Act, 2001 states that: 296 (1) A municipality shall appoint an auditor licensed under the Public Accounting Act, 2004 who is responsible for, (a) annually auditing the accounts and transactions of the municipality and its local boards and expressing an opinion on the financial statements of these bodies based on the audit

2 Fl-Z KPMG llp, Chartered Accountants are the external auditors for the Corporation of The City of Brampton and its Local Boards/Committees. The role of the external auditors is to audit the consolidated financial statements for the Corporation of The City of Brampton and express and independent opinion on these financial statements. The audit is conducted in accordance with Canadian Generally Accepted Auditing Standards. These standards require that the auditors plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluation of the overall financial statement presentation. In addition, the auditors are also responsible for advising management and City Council of any internal/financial controls or operational issues that may be identified during their audit. The consolidated financial statements are the responsibility of the management of the City of Brampton and are prepared in accordance with the accounting principles and disclosure requirements of the Public Sector Accounting Board (PSAB) of the Canadian Institute of Chartered Accountants. Current Situation: KPMG LLP, Chartered Accountants have prepared the attached Audit Planning Report. The Audit Planning Report provides information to the Audit Committee relating to the activities of KPMG LLP in discharging their audit responsibilities for the fiscal year ended December 31, Original Signed By Original Signed By Peter Honeybome Director of Treasury Services & Deputy Treasurer Report authored by: Shirley Gannon Manager, Accounting Services Treasury Services Division Tel: Mo Le/Wis Commissioner of Financial & Information Services and Treasurer

3 cutting through complexity' AUDIT The Corporation of the City of Brampton Audit Planning Report For the year ending December 31, 2011 KPMG LLP, Chartered Accountants, Licensed Public Accountants

4 FI-4 Dear Audit Committee members, Audit planning is the cornerstone of an effective, efficient and high quality audit. In developing our audit plan, we have worked with management to obtain a common understanding of the issues and related financial reporting risks facing The Corporation of the City of Brampton and have designed our audit to focus on those areas of risk. As members of the Audit Committee, you have a significant role to play in the oversight of our audit and we welcome any and all observations you may have regarding the decisions reflected in this audit plan. At KPMG, we are committed to audit quality and outstanding client service. Audit quality is integral to our business and is engrained in our training, our processes and our systems and controls. We believe this audit plan embodies our commitment to audit quality. We would like to take this opportunity to remind you that KPMG's Audit Committee Institute is committed to providing information, resources and knowledge-sharing opportunities to help audit committees and their boards of directors strengthen the integrity of their financial reporting process and the quality of their corporate governance practices. For more information, and to register to receive updates, publications and invitations to Audit Committee Institute events, please visit We sincerely hope this Audit Planning Report is of assistance to you, and we look forward to discussing it in detail and answering any questions you may have at the upcoming audit committee meeting. Yours sincerely, Kevin Travers At KPMG, we are passionate about earning your trust. We take deep personal accountability, individually and as a team, to deliver exceptional service and Partner value in all our interactions J with you. Ultimately we For KPMG's audit committee resources, please visit kpmq.ca/auditcommittee measure our success from the only perspective that matters yours. J

5 Fl-5 Contents Audit plan What has changed from last year... Accounting and auditing standards. Annual inquiries related to risks of fraud: Scope of the audit Our responsibilities Materiality 2 Significant financial reporting risks 2 Fees and assumptions 5 Timing of the audit 5 Appendix 6 Current developments 6 Financial Instruments 6 Tax Revenue 6 Government Transfers 6 Liability for Remediation and Mitigation of Contaminated Sites 7

6 PVfr Audit plan We have prepared this audit plan to informyou of the planned scope and timing of the audit for the purpose1 of carrying out and discharging your responsibilities and exercising oversight over ouraudit of the consolidated financial statements. What has changed from last year We have set out below a summary of changes that have been taken into consideration in planning the audit for the current year: Accounting and auditing standards There are no significant changes that might directly impact the audit for the current year. Annual inquiries related to risks of fraud: Canadian Auditing Standards require that we ask you the following questions in connection with your oversight of management's process for identifying and responding to the risks of fraud: How do you provide effective oversight of management's process for identifying and responding to fraud risks, including programs and controls to prevent, detect and deter fraud? Are you aware of any instances of actual, suspected or alleged fraud, including misconduct or unethical behaviour related to financial reporting or misappropriation of assets? If so, how have the allegations been addressed? Scope of the audit The purpose of an audit is to enhance the degree of confidence of the users of the financial statements through the expression of an opinion on whether the financial statements fairly present, in all material respects, the financial position, results of operations and accumulated surplus, change in net financial assets, and cash flows of The Corporation of the City of Brampton in accordance with Canadian public sector accounting standards. In planning our audit, we have considered the level of audit work required to support our opinion, including each of the following matters: Our responsibilities Our responsibilities in carrying out our audit, as well as management's responsibilities, are set out in the engagement letter dated February 22, KPMG shall have no responsibility or liability for loss or damages or claims, if any, to or by any third party as this document has not been prepared for, and is not intended for, and should not be used by, any third party or for any other purpose. Audit planning report to the audit committee Page 1

7 FK7 Materiality We determine materiality in order to plan and perform the audit and to evaluate the effects of identified misstatements on the audit and of any uncorrected misstatements on the financial statements. Forthe current year, materiality will be established at ya to 2% of budgeted total gross revenue. We will reassess materiality at year-end to confirm whether it remains appropriate for evaluating the effects of uncorrected misstatements on the financial statements. We will communicate uncorrected misstatements to you, other than those that are clearly trivial. Should uncorrected misstatements remain, in accordance with professional standards, we will: o o request that all uncorrected misstatements be corrected. communicate the effect that uncorrected misstatements, individually or in aggregate, may have on our audit opinion. Significant financial reporting risks As part of our audit planning, we identify significant financial reporting risks that, by their nature, require special audit consideration. Byfocusing on these risks, we are able to target our procedures and deliver a high quality audit that is both efficient and effective. Involvement of Internal Audit Division Consistent with previous years, we will be requesting the Internal Audit Division to perform certain audit procedures for the 2011 audit. This includes accounts/processes such as tangible capital assets, accounts payable and accruals, payroll expense, current and capital budget. The significant financial reporting risks identified during our audit planning are listed below: Audit planning report to the audit committee Page 2

8 Fl-6 Cash and short-term investments and long-term investments Completeness, existence, accuracy and presentation Substantive approach: Review of bank reconciliation Confirmation with third party Substantive approach on investment income Review of disclosure Tangible capital assets, Contributed assets and Amortization Completeness, existence, accuracy, valuation, and presentation Control/substantive approach: Substantive test of details over additions (including contributed assets), disposals and transfer of assets under construction. Recalculation of amortization expense Review of disclosure Use of Internal Audit: Review cutoff of tangible capital assets process Documentation of process surrounding transfer to Assets under construction to active projects Perform a walkthrough on a transfer to ensure compliance with tangible capital asset policy Tax receivable and taxation revenue Completeness, existence, and accuracy Substantive approach: Examination of tax receivable year-end reconciliation and perform subsequent receipt testing of significant tax receivables Substantive test of detail on tax revenue using approved tax rates and assessment Accounts receivable, Taxation from other government and Government grants Completeness, existence, accuracy, presentation Substantive approach: Test of details on significant receivables and related revenue Audit planning report to the audit committee Page 3

9 t=i-q Accounts payable and accrued liabilities and Expenses Completeness, existence, accuracy, presentation Control/substantive approach: Substantive approach recalculating significant accrued liabilities base on supporting documentation. Use of Internal Audit Review internal audit reports related to current and capital budgets approval and perform budget variance analysis with management. Perform the search of unrecorded liabilities, which includes reviewing disbursements and invoices processed or received subsequent to year-end to ensure significant accrued liabilities are accounted for properly. Deferred revenue - obligatory reserve funds and Development levies earned Completeness, existence, and accuracy Control/substantive approach: Test and evaluate design and operating effectiveness of controls surrounding development charges and development charges related deferred revenue balance. Review of the City prepared calculation of deferred revenue balance with the responsible individuals and agreeing to supporting documentation for significant cash receipts and disbursements. Employee benefits liability and Payroll expenses Completeness, existence, accuracy, and presentation Control/substantive approach: Substantive approach recalculating payroll-related accruals Use of management's expert: Obtain actuarial report to support employee future benefit amounts recorded. Review actuarial report for reasonableness on assumptions used for valuation of the liability and substantive testing on payroll data submitted for actuarial valuation. Use of Internal Audit Test of controls surrounding payroll budgetary oversight Examination of monthly reconciliation between general ledger and payroll register Contingencies Accuracy and presentation Audit planning report to the audit committee Page 4

10 F\-lo Substantive approach: Review of Council Meeting minutes Direct communication with legal counsel to ensure that all significant contingent liabilities are appropriately disclosed and/or recorded Significant findings review with management and internal legal counsel Fees and assumptions In determining the fees for our services, we have considered the nature, extent and timing of our planned audit procedures as described above. For our fees analysis, refer to the previous Report approved by the City Council. Timing of the audit We have discussed the key audit deliverables with management and the expected dates indicated below have been agreed upon: Key deliverables and expected dates Deliverables Expected date(s) Present the Audit Planning Report to the Audit Committee December 14, 2011 Conduct interim audit field work Week of November 28, 2011 Conduct year-end audit field work March 12 to 30, 2012 Present the consolidated financial statements and the Audit June 6, 2012 Findings Report to the Audit Committee Provide audit opinion on financial statements TBD Performance improvement observations During the course of our audit, we may become aware of opportunities for improvements in financial or operational processes or controls. We will discuss any such opportunities with management and provide our recommendations for performance improvement. We will also include a synopsis of these issues and our recommendations in our Audit Findings Report to be delivered to you at the completion of the audit. Audit planning report to the audit committee Page 5

11 Fl-ll Appendix Current developments Financial Instruments PS Financial Instruments was approved by PSAB in March Sets out principles to be used in establishing an accounting standard with respect to financial instruments and derivative instruments. Fairvalue measurement proposed for derivatives and portfolio investments that are equity instruments quoted in an active market. Fair value can be applied to non-equity instruments through an accounting policy choice. amortized cost. All other financial instruments are carried at cost or Transaction costs for instruments carried at fair value are expensed while transaction cost for instruments carried at cost or amortized cost are capitalized. This is standard effective for fiscal years beginning on or after April 1, Tax Revenue PS Tax Revenue was approved by PSAB in November This standard sets out revenue recognition principles for tax revenue. Provides principles for recognition of taxes collected on behalf of others. This is standard effective for fiscal years beginning on or after April 1, Government Transfers PS Government Transfers was approved in June Sets out recognition principles for government transfers to individuals, organizations, government from both a transferring government and receipt government perspective. Transferring governments recognize an expense when the transfer has been authorized and all eligibility criteria have been met by the recipient. Page

12 ?\-\2. Recipient governments recognize revenue when the transfer is authorized and all eligibility criteria have been met, except when a transfer gives rise to a liability. This standard is effective for fiscal years beginning on or after April 1, Liability for Remediation and Mitigation of Contaminated Sites PS Liability for Contaminated Sites was approved by PSAB in March A liability for remediation of contaminated sites should be recognized when an environmental standard exists, the contamination exceeds the environmental standard, the government is directly responsible or accepts responsibility, it is expected future economic benefits will be given up and a reasonable estimate of the amount can be made. This standard is effective for fiscal years beginning on or after April 1, Page 7