THE REGIONAL MUNICIPALITY OF PEEL

AUDIT SUBCOMMITTEE

M I N U T E S      ASC-2005-1

The Audit Subcommittee met on February 17, 2005, at 8:45 a.m. in the Council Chamber, Regional Administrative Headquarters, 10 Peel Centre Dr., Brampton.

Members Present: F. Dale*, designate for N. Iannicca; G. Miles, R. Paterak
   
Members Absent: N. Iannicca; E. Kolb, due to vacation; N. Stewart, due to vacation
   
Also Present:

D. Labrecque, Treasurer and Commissioner of Finance; M. Zamojc, Commissioner of Public Works; L. Nashman, Commissioner of People, Information and Technology; L. Hawes, Director, Internal Audit, Auditor; I. Murray, KPMG; K.Travers, KPMG; J. Payne, Legislative Co-ordinator

 

Chaired by Councillor G. Miles


A quorum of voting members was not present, and in accordance with section III-4(f.) of the Region of Peel Procedural By-law 54-1999, as amended, the Audit Subcommittee received information from staff.


Councillor Miles noted that Councillor Iannicca or a designate representing the City of Mississauga was not present, upon the arrival of Councillor Iannicca, or a designate, quorum would be achieved and at that time the Committee would formally approve the agenda and receive the reports.


1. DECLARATIONS OF CONFLICTS OF INTEREST


Items 4a and 4b were discussed by the Committee.

4. REPORTS

a) Internal Audit Risk Based Work Plan 2005 to 2007

Beate Wilson, Manager Internal Audit, provided an overview of the 2005 to 2007 Internal Audit Risk Based Work Plan in accordance with the Internal Audit Charter and the Audit Subcommittee Terms of Reference. The results of the risk assessment process conducted in 2004 were used to develop the priority of Regional programs to audit during the next three years, which are highlighted in the appendices to the report identifying the risk level, the date of the last audit completed and proposed dates for audits over the 2005 to 2007 period.

Councillor Miles thanked Beate Wilson for the report overview and her remarks. Further, she complimented the Audit division staff for preparing an extremely effective work plan report, noting that the report format was very intuitive, comprehensive and concise.


b) KPMG Audit Planning Report for the Year Ending December 31, 2004

Kevin Travers, Partner, KPMG, delivered a high level synopsis of the KPMG Audit Planning Report provided annually to the Audit Subcommittee. He identified key changes to the report over those of past years, in particular with reference to the expanded financial standards related to the consideration of fraudulent misrepresentation.

Councillor Miles inquired what, if any, implications were anticipated regarding the time required by Regional staff and KPMG to conduct this year's audit as a result of changes to the financial standards. Kevin Travers replied that while a precise timeframe was difficult to predict because this is the first year an audit will be conducted under the new standards, a 20 per cent increase in the time required to conduct the audit represents a reasonable estimate. Councillor Paterak asked what additional cost might be expected as a result. Kevin Travers stated that providing an exact figure would be difficult, reiterating that the audit requirements set out in the new financial standards as they relate to fraud were being implemented this year for the first time. Ian Murray, Partner, KPMG, added that the new financial requirements pertain to fraudulent misrepresentation and not to petty fraud, and as such the KPMG external audit function will be at a high level and will be conducted accordingly.

Kevin Travers identified the vital role played by the Internal Audit division at the Region of Peel and the function it performs by providing ongoing reviews and cooperative support to KPMG as it conducts its external audit function. He also noted that there were no new accounting requirements which would impact the external audit for the year ending December 31, 2004. He did, however, draw to the attention of the Audit Subcommittee that municipalities in Ontario currently do not capitalize infrastructure (for example, roads) on the balance sheet, but such is not the case for other levels of government in Canada or municipalities elsewhere in North America. As such, it was suggested that changes in this respect may be forthcoming. Councillor Paterak inquired if the suggested change to the balance sheet would result in infrastructure, such as roads, being identified as a depreciable asset. Kevin Travers responded saying that some form of amortization would be required but it would not represent a liability.

Councillor Dale arrived at 9:05 a.m.

A quorum of voting members was achieved.

The Audit Subcommittee formalized receipt of the reports previously received for information.


2. APPROVAL OF AGENDA

RECOMMENDATION ASC-1-2005:

That the agenda for February 17, 2005, Audit Subcommittee meeting be approved.


3. DELEGATIONS/PRESENTATIONS


4. REPORTS

a) Internal Audit Risk Based Work Plan 2005 to 2007

Received


b) KPMG Audit Planning Report for the Year Ending December 31, 2004

Received


c) KPMG's Review of Public Works Internal Financial Controls Follow Up to 2003 Management Letter

Received

Kevin Travers explained that the KPMG report, attached as Appendix I to the report from the Commissioner of Public Works, dated February 1, 2005, titled "KPMG's Review of Public Works Internal Financial Controls Follow Up to the 2003 Management Letter" is in response to the request from the Audit Subcommittee to undertake a review of certain financial internal controls in the Public Works department. Kevin Travers indicated that Public Works has initiated policies which respond to the concerns identified but as KPMG understands it, formal documentation will be prepared when resources are available.

Kevin Travers added that strong cooperation was received from all levels within the Public Works department and from Senior Management at the Region of Peel.



d) Review of Employee Expense Reimbursements

Received

Dan Labrecque, Treasurer and Commissioner of Finance, explained that some areas for improvements were identified with respect to employee expense reimbursements. Larry Hawes, Director of Internal Audit, noted that it had been sometime since an audit of employee expenses was last conducted, no fraud was identified during this recent audit and management has aggressively addressed the areas identified for improvement. He further clarified that the audit did not include Councillor expenses.

Councillor Paterak inquired when the last audit of employee expenses occurred. Larry Hawes replied that it had been approximately five to six years ago. Councillor Paterak suggested that in future more frequent audits would be prudent given the potential for fraud. Councillor Miles concurred suggesting an audit of employee expenses, approximately every three years, should be considered. She also remarked that the various checks and balances that the Region currently has in place are effective given that no fraudulent activity was identified. Councillor Dale asked how far back the audit went. Larry Hawes replied that the audit went back one year. Councillor Dale also suggested that more frequent audits of employee expenses would be prudent and would act as a deterrent.


e) Internal Audit Division Quality Assurance Process

Received

Larry Hawes provided a high level overview of the Quality Assurance Process implemented by the Region of Peel Internal Audit division which ultimately has resulted in the Independent External Validation required under Standard 1300 of the Quality Assurance and Improvement Program for the Profession of Internal Auditing. As a result, the Internal Audit division at the Region of Peel is the first municipality in Canada to conform fully with the requirements of Standard 1300. He noted that the report from the Independent Internal Audit Consultant, Ron Dell'Agnese, would be formally presented at the February 17, 2005 Regional Council meeting immediately after the Audit Subcommittee meeting.

Councillor Miles recognized the significance of this accomplishment, the leadership of Larry Hawes, Director, Internal Audit for the Region of Peel, and the hard work and dedication of the Internal Audit division in achieving this milestone well in advance of the January 1, 2007 requirement.

Dan Labrecque informed the Audit Subcommittee that this would likely be the last meeting that Larry Hawes would be attending as the Director of Internal Audit for the Region of Peel, as he has provided notice of his intent to retire after 30 years of service to the Region and citizens of Peel.

Councillor Miles, Chair of Management Section and Chair of the Audit Subcommittee, expressed her appreciation on behalf of the Audit Subcommittee and stated that she has always had the utmost of confidence in Larry Hawes and wished him well in his future endeavours.



5. COMMUNICATIONS


6. SCHEDULE OF FUTURE MEETINGS

a) Summary of Internal Audits in Progress

Received


7. OTHER BUSINESS


8. ADJOURNMENT

The meeting adjourned at 9:20 a.m.