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HomeMy WebLinkAbout2012-06-25AUDIT COMMITTEE MINUTES JUNE 25, 2012 CITY OF KITCHENER The Audit Committee met this date commencing at 2:30 p. m. Present: Mayor C. Zehr -Chair Councillors S. Davey, Y. Fernandes, K. Galloway, J. Gazzola, B. loannidis, P. Singh, F. Etherington, D. Glenn-Graham, Z. Janecki and B. Vrbanovic. Staff: J. Willmer, Chief Administrative Officer D. Chapman, Deputy CAO/Finance & Corporate Services M. Selling, Interim Deputy CAO/Community Services J. Witmer, Acting Deputy CAO/Infrastructure Services R. Hagey, Director, Financial Planning B. Johnson, Director, Accounting R. Lebrun, Manager, Accounting S. Brisbane, Supervisor, Financial Reporting S. Agnello, Supervisor, Stores C. Tasker, Internal Auditor J. Billett, Committee Administrator 1. 2012 - 2ND QUARTER AUDIT STATUS REPORT The Committee considered Finance and Corporate Services Department report FCS-12-112 dated May 31, 2012 which provides a summary of the Internal Auditor's activities completed during the period of March 2012 to May 2012. Ms. C. Tasker presented the findings of a follow-up audit for the Stores Division now located at the Kitchener Operations Facility (KOF). Concerns were raised regarding an issue identified with respect to poor lighting. Mr. S. Agnello, Supervisor of Stores, advised that plans for lighting were completed in advance of moving into the facility and prior to determining layout of sections /shelving for parts. Discussions are in progress with Facilities Management to consider options to improve lighting. Mr. J. Witmer spoke to questions concerning limited use of the weigh scales at KOF relative to storage of aggregates off-site at the Battler Yards. He advised that storage at Battler Yards is currently under review to understand what and how much is being stored there and why, with a report to come back for consideration at a later date on results of the review. Mr. Witmer further advised that a process for use of the weigh scales at KOF is currently being developed. Councillor D. Glenn-Graham raised concerns with certain types of materials being stored in regard to theft and/or issues of safety and was advised that no copper piping is stored at KOF; and fertilizers are only ordered and applied as needed which saves on storage space. Ms. Tasker provided further clarification of the accounting practice currently in use for Fleet, Utilities and Operations, noting that each has their own budgets charged to 3 different cost centres within the City's SAP program and 3 filing cabinets are used for ease of file retrieval. Several members of Council commented that they had hoped to see efficiencies resulting from merging these areas into the one facility and questions were raised concerning indications given that more staffing is needed. Ms. Tasker advised that it is not necessarily that more staff is needed but with a larger space staff is finding it difficult to monitor and track all activities as they cannot be in all places at once. Councillor B. loannidis questioned if use of vending machines with controlled access via a card or coding system to retrieve tools needed to do work has been considered to address the issue of missing materials. Mr. Agnello advised that a number of source suppliers were investigated; however, all sources indicated that they would want to place all types of stock they offer within the machines. He stated that it was decided to monitor over a period of 1 to 2 years to determine volumes and perhaps pursue aCity-owned and managed card/coding system. He added that at this time it is considered not financially feasible to implement a vending machine system and the purpose of a monitoring period is to determine if costs can be justified. Councillor P. Singh inquired if installation of security cameras would help to address monitoring of the site in lieu of adding more staff. Ms. Tasker responded that security cameras would still require staffing to monitor the video display and suggested that this would be more of a reactive approach than proactive. Ms. Tasker further clarified that the focus of the follow- up audit was on controls and how they can be mitigated with a report on efficiencies to come at a later date. Mr. D. Chapman added that prior to relocating to KOF, only 2 shifts were in place but now a third shift has been added which is a service level increase with no change in AUDIT COMMITTEE MINUTES JUNE 25, 2012 - 5 - CITY OF KITCHENER 2. 2012 - 2ND QUARTER AUDIT STATUS REPORT - (CONT'D1 existing staffing levels. The benefit of adding the third shift is reduction in overtime costs wherein previously during evening hours staff would be called in to service the Stores area where now the Stores area is staffed during that time negating the need to call someone in on an overtime basis. Councillor F. Etherington questioned how access to fuel is handled. Mr. Witmer advised that all staff required to drive a vehicle as part of their job functions has an access card for fuel and Mr. Agnello agreed to confirm that a security camera is located in the area of fuel supply. Councillor Y. Fernandes questioned that if no further audit is to be completed how Council will see results from recommendations coming from this follow-up audit. Ms. Tasker advised that she is to receive quarterly reports from Mr. Agnello and can provide updates as to the status in future audit reports. She added that it is not that another audit of Stores will never be done but rather that there are a number of other audits yet to be started that have been identified to be done. 3. 2011 AUDITED FINANCIAL STATEMENTS The Committee considered Finance and Corporate Services Department report FCS-12-117 dated June 12, 2012, regarding the 2011 Audited Financial Statements for the City of Kitchener. Ms. S. Brisbane presented the findings of the Audited Financial Statements, including results of the tax based operations, enterprises, local boards, capital activity and reserves /reserve funds activities. Messrs. M. Betik and T. Mennill, KPMG, the City's Auditors, presented their audit report, advising that there is no change in their audit plan from what was presented to the Audit Committee previously at the interim stage. Matters highlighted included: Storm Water Management fee rebate accruals; Development Charge revenues; control deficiencies of which none were identified; and requirements of independent communication/services under which KPMG is permitted to be the City's external Auditor. Mr. Betik responded to questions, advising that KPMG found no concerns with the financial statements as audited, noting that while there are some issues of control at KOF as previously identified by the City's Internal Auditor, they have no great concerns with the whole of the City's financial reporting and controls around financial reporting. He spoke to movement in Europe to make regular change in Auditors mandatory to enhance independent reporting, commenting that KPMG believe they have sufficient procedures in place to ensure independent reporting and suggested that frequent changes in external Auditors could result in increased costs to the City. Councillor J. Gazzola questioned the value of PSAB reporting in regard to the average citizen's ability to understand. Mr. Betik responded that prior to PSAB reporting the average citizen had no idea of the scope of City assets, which are in excess of $1 B, and this type of reporting has brought the value of assets into context. He added that there is a need to ensure that the City is raising sufficient tax dollars and building its reserves to provide for replacement of its assets. PSAB reporting provides information around the age of assets and accumulated amortization, enabling the City to determine life expectancy and see developing trends that will assist in knowing when assets need to be replaced. Mr. D. Chapman also noted that content of the Audited Financial Statements has been enhanced by including the section entitled "City Treasurer's Message" which provides management discussion and analysis of the Financial Statements to help the average citizen to understand its content. Suggestions were made to enhance charts included in the statements and to use less technical terminology in the management discussion and analysis piece. Councillor P. Singh referred to the Debt to Reserve Ratios, noting that Kitchener has assets in Hydro which places the City more in line with those it is being compared to. He questioned how many of the comparator cities have hydro assets. Mr. D. Chapman advised that most of the comparator cities have retained common shares but have monetized their loan receivable either fully or partially. He advised that among the cities in the Region, the City of Cambridge has fully monetized their loan and Waterloo has monetized approximately half of its loan; which is the difference between the three cities. Mr. Chapman agreed to obtain information in respect to this matter on all comparator cities referenced and include same in future presentations. AUDIT COMMITTEE MINUTES JUNE 25, 2012 - 6 - CITY OF KITCHENER AUDITED FINANCIAL STATEMENTS - (CONT'D) Councillor Y. Fernandes questioned if the Auditor was of the view that the practice of transferring capital close-out funds to operating was an acceptable practice. Mr. M. Betik responded that this practice is acceptable, acknowledging that Council has the authority to decide where those funds will go. On motion by Councillor K. Galloway - itwas resolved: That the 2011 Audited Financial Statements of the City of Kitchener be approved." ADJOURNMENT This meeting adjourned at 4:05 p. m. J. Billett, AMCT Committee Administrator