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1. ERNST & YOUNG LLP 2007 MANAGEMENT LETTER AND 2008 AUDIT PLAN LETTRE DE RECOMMANDATIONS DE 2007 ET PLAN DE
VÉRIFICATION DE 2008 DE ERNST & YOUNG LLP |
Committee Recommendation
That Council
receive the attached reports, from Ernst & Young LLP, for information.
Recommandation du comité
Que le Conseil municipal prenne
connaissance des rapports de Ernst & Young LLP ci-joints.
Documentation
1. City Treasurer’s report dated 3 September
2008 (ACS2008-CMR-FIN-0043).
2. Extract of Draft Minutes, 16 September 2008.
Report to/Rapport au :
Corporate Services and Economic Development
Committee
Comité des services organisationnels et du développement économique
and Council / et au Conseil
3 September 2008 / le 3 septembre 2008
Submitted by/Soumis par : Marian Simulik,
City Treasurer/trésorière municipale
Contact Person/Personne ressource : Wayne Martin,
Manager, Accounting and Financial Reporting/Gestionnaire, Vérification et
rapports
Financial Services/Services financiers
(613) 580-2424 x25183, Wayne.Martin@ottawa.ca
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Ref N° :ACS2008-CMR-FIN-0043
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CRS-FIN
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SUBJECT: |
ERNST & YOUNG LLP 2007 management letter
AND 2008 AUDIT PLAN |
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OBJET
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Lettre de recommandations de
2007 ET PLAN DE VÉRIFICATION DE 2008
de Ernst & Young LLP |
REPORT RECOMMENDATION
That the Corporate Services and Economic Development Committee and Council receive the attached reports, from Ernst & Young LLP, for information.
RECOMMANDATION DU RAPPORT
Que le
Comité des services organisationnels et du développement économique ainsi que
le Conseil municipal prennent connaissance des rapports de Ernst & Young
LLP ci-joints.
BACKGROUND
The Municipal Act requires that the city prepare annual audited financial statements in accordance with accounting policies prescribed by the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants. These audited financial statements must be published publicly.
DISCUSSION
On September 13, 2006, Ernst & Young LLP was appointed as the external auditors of the City of Ottawa for the five year term ending December 31, 2010. As part of the 2007 audit, Ernst & Young LLP is providing its Management letter identifying areas where financial management and internal controls can be strengthened. The attached memorandum of observations and recommendations from Ernst & Young LLP includes responses from City Management.
In addition, as part of the 2008 audit, Ernst & Young LLP is also providing a planning memo for the information of Corporate Services and Economic Development Committee and Council that outlines the scope and key issues affecting the audit.
CONSULTATION
No public consultation was required.
FINANCIAL IMPLICATIONS
Fees are fixed as part of a five-year contract.
Not Applicable
SUPPORTING DOCUMENTATION
Document 1 - Ernst & Young LLP 2007 Management Letter
Document 2 - Ernst & Young LLP 2008 Audit Plan
DISPOSITION
Management will take appropriate action as described.
Lettre de recommandations de 2007 ET PLAN DE VÉRIFICATION DE 2008 de
Ernst & Young LLP
ACS2008-CMR-FIN-0043 city wide / À l’Échelle de la
ville
Ms. Marian Simulik, City Treasurer, spoke to a PowerPoint presentation in which she provided Committee with an overview of the report as well as an update on the Tangible Capital Asset reporting project. A copy of her presentation is held on file with the City Clerk.
Responding to a question from Councillor Wilkinson with respect to the Tangible Capital Asset reporting project, Ms. Simulik indicated she would be pleased to provide regular updates. In elaborating further on the project, she indicated staff planned to get Ernst & Young involved and to engage a change management specialist. She explained that, starting in 2009, Ernst & Young would be asked to audit some of the numbers coming out of the project. With respect to the change management specialist, the purpose was set-up education and information sessions to show Council what the change would be and its impact on the balance sheets and to ensure management staff understood the change in accounting and knew how to interpret the data.
Councillor Wilkinson posed questions with respect to changes in the property assessment appeal process and the impact these would have on the City. Ms. Simulik indicated the referenced changes would make a difference because they would affect appeal timelines and eliminate some duplication. Further, she confirmed that provisions were made in the City’s budget each year to deal with property assessment adjustments.
Mayor O’Brien stated it was his understanding that in the normal course of an audit, the outside auditors would meet with the independent audit committee without management present. He indicated it was also his understanding that this particular process did not occur at the City. Therefore, we wanted to kick off a discussion as to what, if any, the reasoning was behind not having a completely independent meeting between the auditors and the audit committee. Secondly, he wondered if colleagues would want to request that this become part of the on-going audit process. Ms. Deanna Monaghan, Partner, Ernst & Young LLP, confirmed that having a private meeting with the auditors was a best practice but that this practice had not been part of the regular process at the City. Further, she confirmed that the auditors would welcome such an addition to the process.
Responding to a follow-up question from Mayor O’Brien, Ms. Simulik indicated this had never been the practice at the City, nor at the former City. However, she indicated that if it was best practice, staff was fine with it.
Mayor O’Brien asked that staff take it as direction from this Committee, that it should be part of the audit process to have a completely independent meeting between the external auditors and the audit committee. He suggested the Council Audit Working Group (CAWG) could serve this function, perhaps with support from the Auditor General.
Mr. Kent Kirkpatrick, City Manager, echoed Ms. Simulik’s comments, indicating this had never been the practice at the City nor at the former Region. However, he felt it was an excellent idea. He suggested the CAWG or the Corporate Services Committee could be the venue and that this issue could be considered as part of the mid-term governance review, along with all the other oversight issues identified by members of Council.
Responding to questions from Councillor El-Chantiry with respect to references made at page 25 of the agenda package relative to retirement benefits, Ms. Simulik explained that in 2007, the City did not follow the requirements of PS 3250 because staff was notified of the change just a little too late to implement it in the 2007 statements. She confirmed there was no disagreement with the recommendation and that the change would be reflected in the 2008 statements.
In response to a question from Councillor El-Chantiry with respect to the references made to P3s on page 26 of the agenda package, Ms. Monaghan indicated there had not been any issues with respect to P3 arrangements entered into by the City. However, she explained the auditor was highlighting some transactions as areas of special attention because these could differ and because of the need to ensure they were accounted properly.
At this juncture, Committee voted to receive the report.
That the
Corporate Services and Economic Development Committee and Council receive the
attached reports, from Ernst & Young LLP, for information.
RECEIVED
DIRECTION TO STAFF:
That future audit
processes include a meeting with the outside auditors and the Audit Committee
(Council Audit Working Group, Corporate Services and Economic Development
Committee, or other) without management present.