M I N U T E S ASC-2004-2
The Audit Subcommittee met on April 22, 2004, at 8:30 a.m. in the Council Chambers, Regional Administrative Headquarters, 10 Peel Centre Dr., Brampton.
N. Iannicca, E. Kolb, G. Miles, R. Paterak, N. Stewart
R. Maloney, Chief
Administrative Officer, D. Labrecque, Treasurer and Commissioner of Finance;
M. Zamojc, Commissioner of Public Works; L. Hawes, Director, Internal
Chaired by Councillor G. Miles
1. DECLARATIONS OF CONFLICTS OF INTEREST
2. APPROVAL OF AGENDA
That the agenda for April 22, 2004, Audit Subcommittee meeting be approved.
a) Region of Peel Audited 2003 Consolidated Financial Statements
Kevin Travers, Audit Senior Manager, KPMG, provided a summary to the Committee of the information contained in the KPMG Audit Findings Report. He noted that the audit was issued without reservation, that KPMG had full access to all necessary information and that there were no unadjusted differences.
Councillor Iannicca requested clarification of the term "Materiality" referenced in the Audit Findings Report and the statement that it is typically assessed as half of a percent of the gross expenditures for the year. Councillor Iannicca questioned if expenditures below this threshold were examined by KPMG. Ian Murray, Engagement Partner, KPMG, clarified that external audit focuses on the financial statement and that the auditors are not limited by the definition of the term "Materiality". Ian Murray confirmed that he felt the Region had all of the necessary internal safeguards in place from an audit perspective.
Councillor Iannicca asked Roger Maloney, Chief Administrative Officer, if the Region had fully considered future liability and monitoring costs for closed landfill sites. Roger Maloney confirmed that considerable work had been done in this area and that based on currently available information the Region has adequately covered future potential liability and monitoring costs.
In response to a question from Councillor Iannicca regarding the quality of the Region of Peel's financial investments, Ian Murray indicated that such matters were beyond the scope of external audit. Dan Labrecque, Treasurer and Commissioner of Finance, stated that all investments are closely monitored and a compiled report on the Region of Peel's financial investments is presented to Council on an annual basis.
b) 2003 External Audit Management Letter
That an independent review of the External Audit Management Letter be undertaken by KPMG;
And further, that the Treasurer and Commissioner of Finance and the Commissioner of Public Works facilitate the review process;
And further, that a presentation, by KPMG, to include the scope, budget and timetable of the review including the anticipated timing for the final written report, be presented to the Audit Subcommittee at an appropriate future Audit Subcommittee meeting.
Regional Chair Kolb noted that there is one item of concern identified by KPMG in the Management Letter. He requested that Ian Murray comment on what is required of staff to address the Management Letter. Ian Murray explained that the issues identified relate to how Public Works manages its financial reporting. Ian Murray indicated that the external auditors are very pleased that management is taking these concerns seriously and that there are new resources (staff) in place with the authority to take action regarding the concerns raised in the Management Letter.
Councillor Miles, Chair of the Audit Subcommittee, asked Roger Maloney what processes are in place to address these concerns. Roger Maloney responded that measures have and will be undertaken, including a recent meeting between himself, Regional Chair Kolb; Dan Labrecque, Treasurer and Commissioner of Finance; and Mitch Zamojc, Commissioner of Public Works and all of the Directors in Public Works on this matter. Roger Maloney stated that a memo has been sent to Mitch Zamojc regarding the actions that are expected. Further, a meeting has been held with KPMG to get more details on the concerns raised in the Management Letter. Roger Maloney also stated that the plan to address the issues identified in Public Works will be reviewed by KPMG and brought before Audit Subcommittee in June. In addition, Internal Audit will be evaluating progress at the three and six month intervals and KPMG will follow up during the 2004 External Audit process. Roger Maloney advised that Mitch Zamojc is preparing a memo to all Public Works managers to immediately address the concerns raised in the Management Letter. Roger Maloney concluded by saying that he believes that there is a good plan in place to address the concerns raised in the Management Letter.
Mitch Zamojc stated that he was concerned by the findings, of KPMG, in the Management Letter. He indicated that a formal presentation responding to the Management Letter will be brought to the next Audit Subcommittee meeting and that he will also be reporting to the Public Works Committee. Councillor Miles advised that the report should come back to the Audit Subcommittee and that Councillor Prentice, Chair of Public Works and Councillor Saito, Vice-Chair of Public Works, could be invited to attend that meeting.
Regional Chair Kolb requested that Mitch Zamojc address the concerns raised in the Management Letter during this Audit Subcommittee meeting, and that he provide a formal presentation at the next scheduled Audit Subcommittee meeting.
Firstly, Mitch Zamojc addressed the over expenditure of the water program pre-engineering work capital project. He explained that this capital project was used as a clearing house for pre-project design work which was later assigned to the appropriate project as soon as the project was initiated. Mitch Zamojc noted that at year end close this capital project was 6.7% over the $200,000 budget.
Secondly, regarding the issue of regular monitoring by project managers with respect to the level of spending on projects, Mitch Zamojc indicated that a new software system was now in place in Public Works that will make monitoring and tracking of such issues straight forward. He indicated that the expenditures identified were justified; adding that there was a diligence issue that required further attention.
Thirdly, Mitch Zamojc spoke to the concern of capital projects being left open after the scheduled close date as identified in the Management Letter. He explained that steps are being taken to ensure that all future projects are closed at the scheduled time.
Roger Maloney noted that Shaun Hewitt had recently joined Public Works in the new position of Director of Finance and that a new Capital Audit function within Public Works was being considered to assist Project Managers.
Regional Chair Kolb inquired if staff was taking the appropriate steps to address the concerns raised in the Management Letter. Ian Murray and Larry Hawes indicated that the response of staff was good. Dan Labrecque noted that there will be an update of the Financial Control By-law brought to the next Audit meeting which will improve compliance reporting in all areas of the corporation.
Councillor Iannicca asked that a formal resolution be prepared requesting KPMG, the External Auditors, to prepare a final report after the concerns raised in the Management Letter are addressed by staff.
Councillor Paterak indicated that
he also had concerns when he reviewed the Management Letter but indicated that
it is important that we do not over react given that KPMG found nothing irregular.
Councillor Miles reminded the Committee that as part of the process, KPMG will
provide an Opinion Letter and follow up on these concerns during the next audit
cycle. Councillor Iannicca emphasized that an independent review is necessary
to close the loop and ensure the issues identified are fully addressed. Regional
Chair Kolb indicated that he would support Councillor Iannicca's proposed resolution.
c) Internal Audit Charter
That the Internal Audit Charter be approved as outlined in the report of the Director, Internal Audit, dated April 6, 2004, titled Internal Audit Charter.
6. SCHEDULE OF FUTURE MEETINGS
a) Internal Audits in Progress (Oral)
Remarks by Larry Hawes, Director, Internal Audit
Larry Hawes provided a schedule of pending reports for future meetings to the Audit Subcommittee members in response to the request from Councillor Stewart.
7. OTHER BUSINESS
The meeting adjourned at 9:30 a.m.