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HomeMy WebLinkAboutFIN-2024-517 - External Audit Planning Report for Fiscal Year 2024Staff Report r NJ :R Financia( Services Department www.kitchener.ca REPORT TO: Audit Committee DATE OF MEETING: December 16, 2024 SUBMITTED BY: Katie Fischer, Director, Financial Reporting and ERP Solutions, 519-904- 9354 PREPARED BY: Greg Demacio, Manager, Financial Reporting and Analysis, 519-904- 9353 WARD(S) INVOLVED: All DATE OF REPORT: December 6, 2024 REPORT NO.: FIN -2024-517 SUBJECT: External Audit Planning Report for Fiscal Year 2024 RECOMMENDATION: That the Audit Planning Report for the year ended December 31, 2024 prepared by KPMG, attached as Attachment A to report FIN -2024-517, be approved. REPORT HIGHLIGHTS: • The purpose of this report is to approve the 2024 audit plan, prepared by the City's external auditors (KPMG). • The approach being proposed is consistent with previous years. • This report supports the delivery of core services. BACKGROUND: Item 4 (d) of the Audit Committee Terms of Reference states that one of the responsibilities of the audit committee is to "approve external audit plans". It is important to have open communication between the external auditor and the Audit Committee to ensure that both groups are kept up to date on changes in the organization, changes in the accounting/regulatory environment, and their related risks. In KPMG's proposal to serve as the External Auditor, they committed to meeting with the Audit Committee twice annually. This is the first of those meetings for the 2024 fiscal year. A second meeting will be held once their audit is complete to present results and offer an opportunity for questions. REPORT: KPMG will present their Audit Planning Report. Please see attached document titled "The Corporation of the City of Kitchener Audit Planning Report for the year ended December 31, 2024". STRATEGIC PLAN ALIGNMENT: This report supports the delivery of core services. *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. Page 3 of 101 FINANCIAL IMPLICATIONS: Capital Budget — The recommendation has no impact on the Capital Budget. Operating Budget — The recommendation has no impact on the Operating Budget. COMMUNITY ENGAGEMENT: INFORM — This report has been posted to the City's website with the agenda in advance of the council / committee meeting. It will provide the public with information to assist them in understanding the scope of the external audit to take place in the spring of 2025. The City's consolidated financial statements for the year ended December 31, 2024, will be the subject of this audit. The 2024 audited consolidated financial statements, once completed and approved, will be posted on the City website and notice will be provided to all residents through a widely distributed newspaper in accordance with Section 295 (1) of the Municipal Act, 2001. PREVIOUS REPORTS/AUTHORITIES: • Municipal Act, 2001 APPROVED BY: Jonathan Lautenbach, Chief Financial Officer, Financial Services ATTACHMENTS: Attachment A — The Corporation of the City of Kitchener Audit Planning Report for the year ended December 31, 2024 Page 4 of 101 C CD O � o O ■ � � ami o •- _CL cco O L O ON N N O N O N N rn m O m CCN Q Cc: -Q� • L M Q o v L .0 z D G1 o c ° 0Q ° N o 4—d - ° � U ° U E Q _COD cc CDV cm m CL R r. a� rn � U (6 00 E .E C Y ) r m ai t J Lo U 8 /= f k� .rrg 2 e k «o « co LO qt� ) \ . 2 � / 2 0 ■ m ® 2 z _ � � - � j kCL CL }\ �C" 2 � / 2 0 ■ m ® 2 z _ � � � cu / � � \ � .CM ) � cm . \ � ) T= � act ME co � CO E * \ \ \ 7 \ . . \ \ \ 0 ; E / 0 \ Z 0 0 ) ) : [ > § � � § \ U) E � 0 ƒ � f e § U) 0 \ § / } \ 2 / * § - / E 5 o E § 5, E / e \ og�\7 }//#E ME co � CO k &G & 2 G 2§ k CD C.2 � � o 9 E * \ \ \ 7 \ . . \ \ \ ; E / \ Z 0 k &G & 2 G 2§ k CD C.2 � � o 9 N N N Ncu N w cc cc cc O O O COD cc N C z 1+1 N C z 0 E � M� cc :L L -A �� \ _ \ \ § / E \ E 7 \ � 8 % 0 e— \ I � � � M- cc cc _rn t _rn 2 0 w cm ■ O 1 ■ cc O cm vi N 3 N U O Q U 7 (6 N t 7 C E O CL Q 7 O N t O C N E N (6 N N E (6 (6 E O N Y .N U) U) U) U) U) U) m c m a� a� U 0 c O Q U) a) 1: 0 � m 0 0 N 00— co 0— co 0 - E t F Rn - k (2) ® (2) (2) ® R \ q \ \ q § \ L L / >1L * G cu \ ƒ// e o a ® / E \ \ \ \ \ 77 � \ 3/\ 0 cc ) \ / / & 0 � � > 5a/ » / 5 R = \ � _ 0 \� \ /\\ CU E`y 7 \ //§ / k co/ /j§ \ k 7 \ \_\ Eco E 2 \ % _ q ®2f f o § / \ 0 k.- � / co\ O \ / a)} k £ \ 'E §cu / CD ƒ§ o / c- § [ \ ® E = o \ = _ ® _ � 2 = 2 # _ % \ 2 G ) \ E 0 I / O $ < ± / = o E ¥ S 4 C) % n e- _ 9 0- Rn � � � .� � � cc C.D � .� .cm � Yj ) \ 5f g §/ ®\j E \ E7oo 7 = o --o \ '— 2 '7 « / e 7 {1-= 2 » 0 ° /E ƒ ! o ww » 2 e = e q �88� b °\ «�2.� E -0;q\ ! —0 0 ® §� E \ '§ q .(nf ��§[§ §?ag\~ 2§ � \ a) 0 � } � 2 �0 m >) y=w7 \ k a) :3 # }.%] . . . _U) »ƒ 03\2\? )B§°°0E0 — \ ° I ,'c: Q)a)46 CL a-- f .2 a) / § m uu$�E.®�.� u § ±a—U) }E¥±_=eQ o®�®//k »3 4 §®§)a) §®_ S> ��e2_2¢ .\-4Ef2§c »oo>� - a) ao) 0 a) a) E a) U) § / 2=29«22 > §§W,CL e=oE.2 E�[2»} t6 E 2 | f= W0 Jff§G 6 8 % ,qt 0— co I o \) � � Rn m � � co � co � cc � � � ._ � � � co � cc � � � � � � � co � � LD ® f ® _ ƒ_ / §.� � a S.r / °2\ o- � ƒ / - E (7 2 o �U) ®U)j 2 /§§-\° :/t§7% U) 0U) m [ g §§ X 7a) 22a®- '-»j\ §( t _ a)U)M9 Eo6 ;m§E&.,2 �e �� } _ eG.,"� �£oE« roEm°m / / \ o24e0 k \ E N ƒ 7 / § / U) 'E S _ ] 0 o U) / q Q .% § t% 0 \ % _ ] �g o . =-2 ) 7 L / C � -0 j ) k )f /§a/ E /§ \j / ]0 / -a /» Bum §/{\§ L6 §G _0 §Z2 0 §( 0 \ \ �\ § ) 00 ` \ [- /\) F§ \� � )®± }] § $ S / 20 E § 2\ \ 70 - 2/\ - _� 2k % = g8 % Q2o Q2 § E§ g± o= - §� ]-f ) ± k / G \ / E \ e° a \ \ j.� Q m2 §) Ew- 22f 2 E2 § z§ $\ f 2 B / (/ / 7 7/}/k § ƒ&2ƒ§ LD ® f ® � ■ � 9 0 - E _ ƒ_ / §.� � a S.r / ; § g a E o- o= - \2 - E !\�k�� 2 §\ƒ� �U) ®U)j 2 /§§-\° :/t§7% U) 0U) 2 /®-_§ . lEo0 - Eo*&- �2«=U ® �� ®Eom2 « E27/� X 7a) 22a®- '-»j\ 0,=.,2 EL C: U) 5- (j])E§ §S2= a)U)M9 Eo6 ;m§E&.,2 �e �� oma -o -o 0 a2oSQE/ �o)E�@� §02 eG.,"� �£oE« roEm°m �-0mq=E- §�o;m�0 !4-a E w o o24e0 � ■ � 9 0 - E Rn m � � co � � � CD C.2 � � � C12 � C12 � cc � COD COD ._ � cc .= co � cc � � � � � � .� � co � � 8 ± o \ a\j \ ( / k ° U) _< x § § .2 2 / 7 m N 2= § §m 2 B /f § )\ E 8 «_ ± /7 o E° g 0& « q f Rm'/ k� k ;o E a 7± m f § § o - -� #\]§] go } / / (u { / 2 » L » S o 8- E \ oEgo = 2y / E \ / \ § / ) u) ~\ ~w \ d®k \ ///(J 7(f ƒ \� / 4 _ \\ _ f oE _: }{ ± ± &J / / ({ 0 .� &U) ~2 -0 {0 �\ § §( § $L2/§ ■�\ e«= neo �`E$ )\\o )\§ d t t � m � m m � o N N _ O t N a) m a) a3 U 3 O) ! 6 C', N p � N U Q C 3 N .2 0 d Cm O O O a3 as u U o d 3 N a) m t y C C E O O E Q O O O m U C N O E t '•^— N N U Eo V o .2) E 0)) E m UN a5 E O U C-' Q m U N N 0) N N O O -6 >, p ->, -C U t U Qa3 U N N N Q I E N y O L o N O N N U O o Cu a y a3 Q N E N y N N N y O UO N E Oi 0- m t a3 O C C d Q O a3 t U N C t, Q - U .— N N N a3 t m m C v d > d O .0 .t. 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[ = | /7\® | co _\ �@� | 3gjj | �S°° § §/ o~ k22 2�` U \ | � \ ^ � -0 \ � L \0 � | )� c E 0 /ƒ /m§§ | /k m 7 �� \ \�\/ \\ | �/b k �\ ƒ j\ | � \ 2)) 0-0 _0 /2 E I 0� 0 Co Ln / m L0 | \\£_o | U)_ co _ 0| | 0 (k \ (UD/) ----- ---- ---- ---- - | - - - -� � � wA 9 I 2{ ZZ E I Fn w U C a � d d n o E O N 3 N N U N NU 6 Cu Cu N N o E m O E N Q - O N N C t t O H H U 0 0 N ao N co 0- � T � y � O .a O L R t W Z N H V! C O O C N R � E t E y � V � 00 � w co v E� W Z N \,`JCC act T co co co co cc W act i N t 0) t 01 2 0 0 O N N 0) co d E KPMG LLP 120 Victoria Street South Suite 600 Kitchener, ON N2G OE1 Canada Telephone 519 747 8800 Fax 519 747 8811 PRIVATE & CONFIDENTIAL Mr. Ryan Scott Chief Procurement Officer City of Kitchener 200 King Street West P.O. Box 1118 Kitchener, ON N2G 4G7 October 22, 2024 Re: Q24-122 Audit Services The purpose of this letter is to outline the terms of our engagement for the City of Kitchener (the "Entity"), commencing for the periods ending December 31, 2024. We will issue reports on the financial statements of the Entity as follows: KPMG LLP,an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP. Page 25 of 101 Entity Report Basis of Financial Statements 1 The Corporation of Audit Consolidated the City of Kitchener 2 Kitchener Gasworks Audit Enterprise 3 The Corporation of Audit the City of Kitchener Trust Funds 4 Belmont Audit Improvement Area Board of Management KPMG LLP,an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP. Page 25 of 101 11191 -MIR The Corporation of the City of Kitchener October 22, 2024 This letter supersedes our previous letter to the Entity dated December 20, 2022. The terms of the engagement outlined in this letter will continue in effect from period to period, unless amended or terminated in writing. The attached Assurance Terms and Conditions and any exhibits, attachments and appendices hereto and subsequent amendments form an integral part of the terms of this engagement and are incorporated herein by reference (collectively the "Engagement Letter"). FINANCIAL REPORTING FRAMEWORK FOR THE FINANCIAL STATEMENTS The annual financial statements will be prepared and presented in accordance with Canadian public sector accounting standards (hereinafter referred to as the "financial reporting framework"). The annual financial statements will include an adequate description of the financial reporting framework. MANAGEMENT'S RESPONSIBILITIES Management responsibilities are described in Appendix — Management's Responsibilities. An audit of the annual financial statements does not relieve management or those charged with governance of their responsibilities. AUDITOR'S RESPONSIBILITIES Our responsibilities are described in Appendix — Auditor's Responsibilities. If management does not fulfill the responsibilities above, we cannot complete our audit. 2 Page 26 of 101 Entity Report Basis of Financial Statements 5 Kitchener Audit Downtown Improvement Area Board of Management This letter supersedes our previous letter to the Entity dated December 20, 2022. The terms of the engagement outlined in this letter will continue in effect from period to period, unless amended or terminated in writing. The attached Assurance Terms and Conditions and any exhibits, attachments and appendices hereto and subsequent amendments form an integral part of the terms of this engagement and are incorporated herein by reference (collectively the "Engagement Letter"). FINANCIAL REPORTING FRAMEWORK FOR THE FINANCIAL STATEMENTS The annual financial statements will be prepared and presented in accordance with Canadian public sector accounting standards (hereinafter referred to as the "financial reporting framework"). The annual financial statements will include an adequate description of the financial reporting framework. MANAGEMENT'S RESPONSIBILITIES Management responsibilities are described in Appendix — Management's Responsibilities. An audit of the annual financial statements does not relieve management or those charged with governance of their responsibilities. AUDITOR'S RESPONSIBILITIES Our responsibilities are described in Appendix — Auditor's Responsibilities. If management does not fulfill the responsibilities above, we cannot complete our audit. 2 Page 26 of 101 11191 -MIR The Corporation of the City of Kitchener October 22, 2024 ADDITIONAL RESPONSIBILITIES REGARDING "OTHER INFORMATION" "Other information" is defined in professional standards to be the financial or non-financial information (other than the financial statements and the auditor's report thereon) included in the "annual report'. An "annual report" is defined in professional standards to comprise a document or combination of documents. Professional standards also indicate that: • an annual report is prepared typically on an annual basis in accordance with law, regulation or custom (i.e., is reoccurring) • an annual report contains or accompanies the financial statements and the auditor's report thereon • an annual report's purpose is to provide owners (or similar stakeholders) with information on the Entity's: -operations; and/or -financial results and financial position as set out in the financial statements. Based on discussions with management, the following are expected to meet the definition of an "annual report" under professional standards: • The document likely to be entitled Annual Report Management agrees, when possible, to provide us with the final versions of the document(s) comprising the "annual report' prior to the date of our auditors' report on the financial statements. If that timing is not possible, management agrees to provide us with the final versions of the document(s) comprising the "annual report" prior to the entity's issuance so that we can complete our responsibilities required under professional standards. Management is responsible for the "other information". Our responsibility is to read the "other information" and, in doing so, consider whether such information is materially inconsistent with: • the financial statements; or • our knowledge obtained in the audit. Our responsibility is also to remain alert for indications that the "other information" appears to be materially misstated. Our auditors' report on the financial statements, when applicable under professional standards, will contain a separate section where we will report on this "other information". AUDITOR'S DELIVERABLES Unless otherwise specified, our report(s) will be in writing and the expected content of our report(s) are provided in Appendix - Expected Form of Report. However, there may be circumstances in which a report may differ from its expected form and content. 3 Page 27 of 101 11191 -MIR The Corporation of the City of Kitchener October 22, 2024 In addition, if we become aware of information that relates to the information we reported on after we have issued our report, but which was not known to us at the date of our report, and which is of such a nature and from such a source that we would have investigated that information had it come to our attention during the course of our engagement, we will, as soon as practicable: (1) communicate such an occurrence to those charged with governance; and (2) undertake an investigation to determine whether the information is reliable and whether the facts existed at the date of our report. Further, management agrees that in conducting that investigation, we will have the full cooperation of the Entity's personnel. If the subsequently discovered information is found to be of such a nature that: (a) our report would have been affected if the information had been known as of the date of our report; and (b) we believe that the report may have been distributed to someone who would attach importance to the information, appropriate steps will be taken by KPMG, and appropriate steps will also be taken by the Entity, to advise of the newly discovered facts and the impact to the information we reported on. NON -AUDIT SERVICE - CERTAIN ASSISTANCE RELATING TO WORD PROCESSING AND/OR PREPARATION OF FINANCIAL STATEMENTS FOR ENTITY #5, KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Word Processing We will assist management by providing word processing for the Kitchener Downtown Improvement Area Board of Management financial statements and related notes. Assistance in Preparing Financial Statements We will assist management in preparing the financial statements and related notes in accordance with the financial reporting framework. We will use information from the trial balance and/or other source documents provided by management to assist management in preparing the financial statements and related notes. We may also provide advice and recommendations to assist management of the Entity in performing its responsibilities. We will not assume management responsibilities on behalf of the Entity. The Entity agrees to: • Assume all management responsibilities, including determining the accuracy and completeness of the financial statements and notes. • Assign a suitable employee with appropriate skills, knowledge and/or experience to oversee the financial statement preparation assistance and evaluate the adequacy and results of the services. • Accept responsibility for the results of the financial statement preparation assistance. 4 Page 28 of 101 11191 -MIR The Corporation of the City of Kitchener October 22, 2024 INCOME TAX COMPLIANCE AND ADVISORY SERVICES Tax compliance and advisory services are outside the scope of this letter. These services will be subject to the terms and conditions of a separate engagement letter. USE OF KPMG CLARA FOR CLIENTS The terms and conditions for use of KPMG Clara for clients apply to the use of the collaboration tool and are available at https:Hkcfcdocumentstore.blob.core.windows.net/documents/KCfc terms and conditions%20Can ada%20J u ne%2024. pdf. FEES The Entity and KPMG agree to a fee based on actual hours incurred at mutually agreed-upon rates for the audit as described in our pricing proposal to your RFP Q24-122 dated August 23, 2024. Our fees will be billed as the work progresses. Harmonized Sales Tax (HST) will be computed and shown separately on our invoices, together with our firm's HST registration number, so that you will have the information required to claim input tax credits and input tax refunds, if applicable. The Entity agrees, by accepting the terms of this engagement, to pay all invoices to KPMG upon receipt. We are available to provide a wide range of services beyond those outlined above. Additional services are subject to separate terms and arrangements. 5 Page 29 of 101 I� The Corporation of the City of Kitchener October 22, 2024 We are proud to provide you with the services outlined above and we appreciate your confidence in our work. We shall be pleased to discuss this letter with you at any time. If the arrangements and terms are acceptable to the Entity, please sign the duplicate of this letter in the space provided and return it to us. Yours very truly, kAw'�� Z4P Matthew Betik, CPA, CA Partner, responsible for the engagement and its performance, and for the report that is issued on behalf of KPMG LLP, and who, where required, has the appropriate authority from a professional, legal or regulatory body 519-747-8245 Enclosure cc: Audit Committee Jonathan Lautenback, CFO The terms of the engagement set out are as agreed: Ryan Scott, Chief Procurement Officer (having the appropriate authority to engage the Entity as defined above) Date (DD/MM/YY) 6 Page 30 of 101 11191 -MIR The Corporation of the City of Kitchener October 22, 2024 Appendix - Management's Responsibilities Management acknowledges and understands that they are responsible for: (a) the preparation and fair presentation of the financial statements in accordance with the financial reporting framework referred to above. (b) providing us with all information of which management is aware that is relevant to the preparation of the financial statements ("relevant information") such as financial records, documentation and other matters, including: - the names of all related parties and information regarding all relationships and transactions with related parties - complete minutes of meetings, or summaries of actions of recent meetings for which minutes have not yet been prepared, of shareholders, board of directors, and committees of the board of directors that may affect the financial statements. All significant actions are to be included in such summaries. (c) providing us with unrestricted access to such relevant information. (d) providing us with complete responses to all enquiries made by us during the engagement. (e) providing us with additional information that we may request from management for the purpose of the engagement. (f) providing us with unrestricted access to persons within the Entity from whom we determine it necessary to obtain evidence. (g) such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Management also acknowledges and understands that they are responsible for the design, implementation and maintenance of internal control to prevent and detect fraud. (h) ensuring that all transactions have been recorded and are reflected in the financial statements. (i) providing us with written representations required to be obtained under professional standards and written representations that we determine are necessary. Management also acknowledges and understands that, as required by professional standards, we may disclaim an audit opinion when management does not provide certain written representations required. (j) ensuring that internal auditors providing direct assistance to us, if any, will be instructed to follow our instructions and that management, and others within the entity, will not intervene in the work the internal auditors perform for us. 7 Page 31 of 101 11191 -MIM The Corporation of the City of Kitchener October 22, 2024 Appendix - Auditor's Responsibilities Our function as auditors of the Entity is: to express an opinion on whether the Entity's annual financial statements, prepared by management with the oversight of those charged with governance, are, in all material respects, in accordance with the financial reporting framework referred to above to report on the annual financial statements We will conduct the audit of the Entity's annual financial statements in accordance with Canadian generally accepted auditing standards and relevant ethical requirements, including those pertaining to independence (hereinafter referred to as applicable "professional standards"). We will plan and perform the audit to obtain reasonable assurance about whether the annual financial statements as a whole are free from material misstatement, whether due to fraud or error. Accordingly, we will, among other things: identify and assess risks of material misstatement, whether due to fraud or error, based on an understanding of the Entity and its environment, including the Entity's internal control. In making those risk assessments, we consider internal control relevant to the Entity's preparation of the annual financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control obtain sufficient appropriate audit evidence about whether material misstatements exist, through designing and implementing appropriate responses to the assessed risks form an opinion on the Entity's annual financial statements based on conclusions drawn from the audit evidence obtained communicate matters required by professional standards, to the extent that such matters come to our attention, to the appropriate level of management, those charged with governance and/or the board of directors. The form (oral or in writing) and the timing will depend on the importance of the matter and the requirements under professional standards 8 Page 32 of 101 11191 -MIR The Corporation of the City of Kitchener October 22, 2024 Appendix - Expected Form of Report INDEPENDENT AUDITOR'S REPORT To Council, Inhabitants and Ratepayers of The Corporation of the City of Kitchener Opinion We have audited the consolidated financial statements of The Corporation of the City of Kitchener (the Entity), which comprise: • the consolidated statement of financial position as at December 31, 2024 • the consolidated statement of operations for the year then ended • the consolidated statement of remeasurement gains and losses for the year then ended • the consolidated statement of changes in net debt for the year then ended • the consolidated statement of cash flows for the year then ended • and notes to the consolidated financial statements, including a summary of significant accounting policies (Hereinafter referred to as the "financial statements"). In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at December 31, 2024, and its consolidated results of operations, its consolidated remeasurement gains and losses, its consolidated changes in net debt and its consolidated cash flows for the year then ended in accordance with Canadian public sector accounting standards. Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the "Auditor's Responsibilities for the Audit of the Financial Statements" section of our auditor's report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. 9 Page 33 of 101 11191 -MIR The Corporation of the City of Kitchener October 22, 2024 AUDIT ENGAGEMENTS Appendix - Expected Form of Report (continued) In preparing the consolidated financial statements, management is responsible for assessing the Entity's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity's consolidated financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such 10 Page 34 of 101 11191 -MIM The Corporation of the City of Kitchener October 22, 2024 AUDIT ENGAGEMENTS Appendix - Expected Form of Report (continued) disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Entity's to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 11 Page 35 of 101 1111RAIMN TERMS AND CONDITIONS FOR ASSURANCE ENGAGEMENTS (NON -LISTED COMPANY CLIENTS) These Terms and Conditions are an integral part of the accompanying engagement letter or proposal from KPMG that identifies the engagement to which they relate (and collectively form the "Engagement Letter"). The Engagement Letter supersedes all written or oral representations on this matter. The term "Entity" used herein has the meaning set out in the accompanying engagement letter or proposal. The term "Management" used herein means the management of Entity. 1. DOCUMENTS AND LICENSES. a. All working papers, files and other internal materials created or produced by KPMG in relation to this engagement and all copyright and intellectual property rights therein are the property of KPMG. b. Only in connection with the services herein, Entity hereby grants to KPMG a limited, revocable, non-exclusive, non- transferable, paid up and royalty -free license, without right of sublicense, to use all logos, trademarks and service marks of Entity solely for presentations or reports to Entity or for internal KPMG presentations and intranet sites. Further, Entity agrees that KPMG may list Entity as a customer in KPMG's internal and external marketing materials, including KPMG websites and social media, indicating the general services rendered (e.g., "Client is an Audit, Advisory, and/or Tax client of KPMG LLP"). 2. ENTITY'S RESPONSIBILITIES. a. Entity agrees that all management responsibilities will be performed and all management decisions will be made by Entity, and not by KPMG. b. Entity's provision of documents and information to KPMG on a timely basis is an important factor in our ability to issue any reports under this Engagement Letter. KPMG is not responsible for any consequences arising from Entity's failure to deliver documents and information as required. c. To the extent that KPMG personnel are on Entity's premises, Entity will take all reasonable precautions for their safety. d. Entity understands and acknowledges that KPMG's independence may be impaired if any KPMG partner, employee or contractor accepts any offer of employment from Entity. e. Except as required by applicable law or regulation, Entity shall keep confidential the terms of this Engagement Letter, and such confidential information shall not be distributed, published or made available to any other person without KPMG's express written permission. f. Management agrees to promptly provide us with a copy of any comment letter or request for information issued by any securities or other regulatory authority in respect of information on which KPMG reported, including without limitation any continuous disclosure filings. 3. FEE AND OTHER ARRANGEMENTS. a. KPMG's estimated fee is based in part on the quality of Entity's records, the agreed-upon level of preparation and assistance from Entity's personnel, and adherence by Entity to the agreed-upon timetable. KPMG's estimated fee also assumes that Entity's financial statements and/or other financial information, as applicable, are prepared in accordance with the relevant financial reporting framework or the relevant criteria, as applicable, and that there are no significant changes to the relevant financial reporting framework or the relevant criteria, as applicable; no significant new or changed accounting policies; no significant changes to internal control; and no other significant issues. b. Additional time may be incurred for such matters as significant issues, significant unusual and/or complex transactions, informing management about new professional standards, and any related accounting advice. Where these matters arise and require research, consultation and work beyond that included in the estimated fee, Entity and KPMG agree to revise the estimated fee. Our professional fees are also subject to an additional charge to cover information technology infrastructure costs and administrative support of our client service personnel. Disbursements for items such as travel, accommodation and meals will be charged based on KPMG's actual disbursements. c. KPMG's invoices are due and payable upon receipt. In order to avoid the possible implication that unpaid fees might be viewed as creating a threat to KPMG's independence, it is important that KPMG's bills be paid promptly when rendered. If a situation arises in which it may appear that KPMG's independence is threatened because of significant unpaid bills, KPMG may be prohibited from signing any applicable report and/or consent. d. Fees for any other services will be billed separately from the services described in this Engagement Letter and may be subject to written terms and conditions supplemental to those in the Engagement Letter. e. Canadian Public Accountability Board ("CPAB") participation fees, when applicable, are charged to Entity based on the annual fees levied by CPAB. 4. USE OF MEMBER FIRMS AND THIRD PARTY SERVICE PROVIDERS; STORAGE AND USE OF INFORMATION. a. KPMG is a member firm of the KPMG International Cooperative ("KPMG International"). Entity acknowledges that in connection with the provision of services hereunder, KPMG may use the services of KPMG International member firms, as well as other third party service providers or subcontractors, and KPMG shall be entitled to share with them all documentation and information related to the engagement, including Entity's confidential information and personal information ("information"). KPMG may also: (i) directly, or using such aforementioned KPMG International member firms, third party service providers or subcontractors, perform data analytics in respect of the information; and (ii) retain and disclose to KPMG International member firms the information to share best practices or for knowledge sharing purposes. In all such cases, such information may be used, retained, processed, or stored outside of Canada by such KPMG International member firms, other third party service providers or subcontractors, and may be subject to disclosure in accordance with the laws applicable in the jurisdiction in which the information is used, retained, processed or stored, which laws may not provide the same level of protection for such information as will Canadian laws. KPMG represents that such KPMG International member firms, other third party service providers or subcontractors have agreed or shall agree to conditions of confidentiality with respect to Entity's confidential information, and that KPMG is responsible to ensure their compliance with those conditions. Any services performed by KPMG International member firms or other third party service providers or subcontractors shall be performed in accordance with the terms of this Engagement Letter, but KPMG remains solely responsible to Entity for the delivery of the services hereunder. Entity agrees that any claims that may arise out of the engagement will be brought solely against KPMG, the contracting party, and not against any other KPMG International member firms or other third party service providers or subcontractors referred to TERMS AND CONDITIONS FOR ASSURANCE ENGAGEMENTS - NON -LISTED COMPANY CLIENTS MARCH 2023 12 Page 36 of 101 1111RAIMN TERMS AND CONDITIONS FOR ASSURANCE ENGAGEMENTS (NON -LISTED COMPANY CLIENTS) above. b. Certain information (including information relating to time, billing and conflicts) collected by KPMG during the course of the engagement may be used, retained, processed and stored outside of Canada by KPMG, KPMG International member firms or third party service providers or subcontractors providing support services to KPMG for administrative, technological and clerical/organizational purposes, including in respect of client engagement acceptance procedures and maintaining engagement profiles; and to comply with applicable law, regulation or professional standards (including for quality performance reviews). Such information may be subject to disclosure in accordance with the laws applicable in the jurisdiction in which the information is used, retained, processed or stored, which laws may not provide the same level of protection for such information as will Canadian laws. KPMG may also share information with its legal advisers and insurers for the purposes of obtaining advice. c. Entity acknowledges that KPMG aggregates anonymous information from sources including the Entity for various purposes, including to monitor quality of service, and Entity consents to such use. KPMG may also use Entity's information to offer services that may be of interest to Entity. 6. PERSONAL INFORMATION CONSENTS AND NOTICES. KPMG may be required to collect, use and disclose personal information about individuals during the course of the engagement. Any collection, use or disclosure of personal information is subject to KPMG's Privacy Policy available at www.kpmq.ca. Entity represents and warrants that (i) it will obtain any consents required to allow KPMG to collect, use and disclose personal information in the course of the engagement, and (ii) it has provided notice to those individuals whose personal information may be collected, used and disclosed by KPMG hereunder of the potential processing of such personal information outside of Canada (as described in Section 4 above). KPMG's Privacy Officer noted in KPMG's privacy policy is able to answer any individual's questions about the collection of personal information required for KPMG to deliver services hereunder. 6. THIRD PARTY DEMANDS FOR DOCUMENTATION AND INFORMATION / LEGAL AND REGULATORY PROCESSES. a. Entity on its own behalf hereby acknowledges and agrees to cause its subsidiaries and affiliates to acknowledge that KPMG or a foreign component auditor which has been engaged in connection with an assurance engagement ("component auditor") may from time to time receive demands from a third party (each, a "third party demand"), including without limitation (i) from CPAB or from professional, securities or other regulatory, taxation, judicial or governmental authorities (both in Canada and abroad), to provide them with information and copies of documents in KPMG's or the component auditor's files including (without limitation) working papers and other work -product relating to the affairs of Entity, its subsidiaries and affiliates, and (ii) summons for production of documents or information related to the services provided hereunder; which information and documents may contain confidential information of Entity, its subsidiaries or affiliates. Except where prohibited by law, KPMG or its component auditor, as applicable, will advise Entity or its affiliate or subsidiary of the third party demand. Entity acknowledges, and agrees to cause its subsidiaries and affiliates to acknowledge, that KPMG or its component auditor, as applicable, will produce documents and provide information in response to the third party demand, without further authority from Entity, its subsidiaries or affiliates. b. KPMG will use reasonable efforts to withhold from production any documentation or information over which Entity asserts privilege. Entity must identify any such documentation or information at the time of its provision to KPMG by marking it as "privileged". Notwithstanding the foregoing, where disclosure of such privileged documents is required by law, KPMG will disclose such privileged documents. If and only if the authority requires such access to such privileged documents pursuant to the laws of a jurisdiction in which express consent of Entity is required for such disclosure, then Entity hereby provides its consent. c. Entity agrees to reimburse KPMG for its professional time and any disbursements, including reasonable legal fees and taxes, in responding to third party demands. d. Entity waives and releases KPMG from any and all claims that it may have against KPMG as a result of any disclosure or production by KPMG of documents or information as contemplated herein. e. Entity agrees to notify KPMG promptly of any request received by Entity from any third party with respect to the services hereunder, KPMG's confidential information, KPMG's advice or report or any related document. 7. CONNECTING TO THE ENTITY'S IT NETWORK; EMAIL AND ONLINE FILE SHARING AND STORAGE TOOLS. a. Entity authorizes KPMG personnel to connect their computers to Entity's IT Network and the Internet via the Network while at the Entity's premises for the purpose of conducting normal business activities. b. Entity recognizes and accepts the risks associated with communicating electronically, and using online file sharing, storage, collaboration and other similar online tools to transmit information to or sharing information with KPMG, including (but without limitation) the lack of security, unreliability of delivery and possible loss of confidentiality and privilege. Entity assumes all responsibility or liability in respect of the risk associated with the use of the foregoing, and agrees that KPMG is not responsible for any issues that might arise (including loss of data) as a result of Entity using the foregoing to transmit information to or otherwise share information with KPMG and, in the case of online tools other than email, KPMG's access to and use of the same in connection with obtaining Entity information and documents. E:311111111111111LVA Ik1FAIIQL,t•]L,RTITI N:IML,kI1*11 THIS IS A SERVICES ENGAGEMENT. KPMG WARRANTS THAT IT WILL PERFORM SERVICES HEREUNDER IN GOOD FAITH WITH QUALIFIED PERSONNEL IN A COMPETENT AND WORKMANLIKE MANNER IN ACCORDANCE WITH APPLICABLE INDUSTRY STANDARDS. SUBJECT TO SECTION 14, KPMG DISCLAIMS ALL OTHER WARRANTIES, REPRESENTATIONS OR CONDITIONS, EITHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, WARRANTIES, REPRESENTATIONS OR CONDITIONS OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 9. LIMITATION ON LIABILITY AND INDEMNIFICATION. a. Subject to Section 14: (i) Entity agrees that KPMG shall not be liable to Entity for any actions, damages, claims, fines, penalties, complaints, demands, suits, proceedings, liabilities, costs, expenses, or losses (collectively, "Claims") in any way arising out TERMS AND CONDITIONS FOR ASSURANCE ENGAGEMENTS - NON -LISTED COMPANY CLIENTS MARCH 2023 13 Page 37 of 101 1111RAIMN TERMS AND CONDITIONS FOR ASSURANCE ENGAGEMENTS (NON -LISTED COMPANY CLIENTS) of or relating to the services performed hereunder for an aggregate amount in excess of the lesser of one million dollars ($1,000,000) or two times the fees paid by Entity to KPMG under the engagement; and (ii) on a multi -phase engagement, KPMG's liability shall be based on the amount actually paid to KPMG for the particular phase that gives rise to the liability. b. Subject to Section 14, in the event of a Claim by any third party against KPMG that arises out of or relates to the services performed hereunder, Entity will indemnify and hold harmless KPMG from all such Claims, including, without limitation, reasonable legal fees, except to the extent finally determined to have resulted from the intentional, deliberate or fraudulent misconduct of KPMG. c. Subject to Section 14: (i) in no event shall KPMG be liable for consequential, special, indirect, incidental, punitive or exemplary damages, liabilities, costs, expenses, or losses (including, without limitation, lost profits and opportunity costs); (ii) in any Claim arising out of the engagement, Entity agrees that KPMG's liability will be several and not joint and several; and (iii) Entity may only claim payment from KPMG of KPMG's proportionate share of the total liability based on degree of fault. d. For purposes of this Section 9, the term KPMG shall include its subsidiaries, its associated and affiliated entities and their respective current and former partners, directors, officers, employees, agents and representatives. The provisions of this Section 9 shall apply regardless of the form of Claim, whether in contract, statute, tort (including, without limitation, negligence) or otherwise. 10. CONSENT TO THE USE OF THE KPMG NAME OR KPMG REPORT. Except as otherwise specifically agreed in this Engagement Letter, KPMG does not consent to: i. the use of our name or our report in connection with information, other than what we have reported on as part of this engagement letter or our report thereon, that contains, incorporates by reference, or otherwise accompanies our report or our name; ii. the use of our report in another language, or the use of our report in connection with information that we reported on that has been translated into another language, or the use of our name in connection with information that we reported on that has been translated into another language; iii. the use of our report in connection with an offering document or other securities filing, including continuous disclosure filings; or iv. the use of our name or our report in connection with the interim financial statements (or other interim financial information) to any statement by the Entity regarding the services that we provided on the interim financial statements or other interim financial information. Any communication, report, statement or conclusion on the interim financial statements may not be included in, or otherwise referred to in any public document or public oral statements except when the interim review conclusion contains a modified conclusion, in which case our interim review report will accompany the interim financial statements. If the Entity wishes to obtain KPMG's consent regarding the matters above or other matters not otherwise specifically covered by this Engagement Letter, we will be required to perform procedures as required by applicable professional standards, and such procedures would be a separate engagement and subject to separate engagement terms. 11. ALTERNATIVE DISPUTE RESOLUTION. Any dispute or claim between the parties arising under or relating to this Engagement Letter or the services provided hereunder (the "Dispute") shall be submitted to non-binding mediation. If mediation is not successful within 90 days after the issuance by a party of a request for mediation, then the Dispute shall be referred to and finally resolved by arbitration under the Arbitration Rules of the ADR Institute of Canada in force at that time. The Seat of Arbitration shall be the province where KPMG's principal office performing this engagement is located. The language of the arbitration shall be English. The Arbitral Tribunal shall be made up of a single Arbitrator. The arbitration award shall be final, conclusive and binding upon the parties, and not subject to appeal. 12. POTENTIAL CONFLICTS OF INTEREST. a. KPMG is or may be engaged by entities and individuals who have potentially conflicting legal and business interests to Entity. Entity agrees that, without further notice or disclosure to Entity, KPMG may: (i) accept or continue such engagements on matters unrelated to KPMG's engagement for Entity; and (ii) provide advice or services to any other person or entity making a competing bid or proposal to that of Entity whether or not KPMG is providing advice or services to Entity in respect of Entity's competing bid or proposal. b. In accordance with professional standards, KPMG will not use any confidential information regarding Entity in connection with its engagements with other clients, and will establish confidentiality and other safeguards to manage conflicts, which may include, in KPMG's sole discretion, the use of separate engagement teams and data access controls. C. In no event shall KPMG be liable to Entity, or shall Entity be entitled to a return of fees or disbursements, or any other compensation whatsoever as a result of KPMG accepting or continuing a conflicting engagement in accordance with the terms of this Engagement Letter. d. Entity agrees that KPMG may, in its sole discretion, disclose the fact and nature of its engagement for Entity to (i) KPMG International member firms to inform conflict searches, and (ii) to the extent reasonably required in order to obtain the consent of another entity or individual in order to permit KPMG to act for such entity or individual, or for Entity, in connection with the engagement or any future engagement. e. In the event that circumstances arise that place KPMG into a conflict of interest as between Entity and a pre-existing client, which in KPMG's sole opinion cannot be adequately addressed through the use of confidentiality and other safeguards, KPMG shall be entitled to immediately terminate the engagement with Entity, without liability. f. Other KPMG International member firms are or may be engaged by entities and individuals who have potentially conflicting legal and business interests to Entity. Entity agrees that (i) it will not assert that other KPMG International member firms are precluded from being engaged by those other entities or individuals, and (ii) those engagements of other KPMG International member firms do not conflict with KPMG's engagement for Entity. 13. LOBBYING. Unless expressly stated in this Engagement Letter, KPMG will not TERMS AND CONDITIONS FOR ASSURANCE ENGAGEMENTS - NON -LISTED COMPANY CLIENTS MARCH 2023 14 Page 38 of 101 TERMS AND CONDITIONS FOR ASSURANCE ENGAGEMENTS (NON-LISTED COMPANY CLIENTS) Ilks undertake any lobbying activity, as that term is defined in all applicable federal, provincial and municipal lobbyist registration statutes and regulations, in connection with the engagement. In the event that KPMG and Entity agree that KPMG will undertake lobbying activity in connection with the engagement, such agreement shall be set out in an amendment to this Engagement Letter. 14. SEVERABILITY. The provisions of these Terms and Conditions and the accompanying proposal or engagement letter shall only apply to the extent that they are not prohibited by a mandatory provision of applicable law, regulation or professional standards. If any of the provisions of these Terms and Conditions or the accompanying proposal or engagement letter are determined to be invalid, void or unenforceable, the remaining provisions of these Terms and Conditions or the accompanying proposal or engagement letter, as the case may be, shall not be affected, impaired or invalidated, and each such provision shall remain valid and in effect and be enforceable and binding on the parties to the fullest extent permitted by law. 15. GOVERNING LAW. This Engagement Letter shall be subject to and governed by the laws of the province where KPMG's principal office performing this engagement is located (without regard to such province's rules on conflicts of law). 16. LLP STATUS. KPMG is a registered limited liability partnership ("LLP") established under the laws of the Province of Ontario and, where applicable, has been registered extra -provincially under provincial LLP legislation. 17. INDEPENDENT LEGAL ADVICE. Entity agrees that it been advised to retain independent legal advice at its own expense prior to signing this Engagement Letter (including without limitation with respect to Entity's rights in connection with potential future conflicts) and agrees that any failure on its part to retain such independent legal counsel shall not affect (and it shall not assert that the same affects) the validity of the provisions of this Engagement Letter. 18. SURVIVAL. All sections hereof other than Section 7(a) shall survive the expiration or termination of the engagement. 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