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HomeMy WebLinkAbout2006-06-12AUDIT COMMITTEE MINUTES JUNE 12, 2006 CITY OF KITCHENER The Audit Committee met this date commencing at 1:35 p.m. Present: Mayor C. Zehr and Councillors J. Smola, B. Vrbanovic, J. Gazzola and C. Weylie. Councillor G. Lorentz was in attendance for part of the meeting. Staff: C. Ladd, Chief Administrative Office P. Houston, General Manager, Financial Services & City Treasurer R. Browning, General Manager, Development & Technical Services & Fire Chief A. Pappert, General Manager, Community Services D. Chapman, Director of Financial Planning & Reporting R. LeBrun, Manager of Financial Planning & Reporting John Herhalt, KPMG Chartered Accountants Matthew Betik, KPMG Chartered Accountants J. Billett, Committee Administrator 1. 2005 ANNUAL FINANCIAL REPORT The Committee considered Financial Services Department report FIN-06-017, dated May 17, 2006, concerning the 2005 Annual Financial Report. Copies of the 2005 Annual Financial Report were circulated this date. Mr. D. Chapman gave a presentation highlighting various aspects of the Financial Report. He reviewed the consolidated revenue and the current and capital expenditures, noting that revenues have remained constant over the previous year. At the request of Councillor J. Gazzola, Mr. Chapman agreed to provide consolidated revenue figures with gas revenues excluded. Mr. Chapman then reviewed the key balance sheet items, noting a large increase in the cash and temporary investments and a slight reduction in tax receivables. He advised that an increase in accounts receivable is due to collection in early January of a single letter of credit amounting to $3.4M and the amount listed under `Other' is comprised of seven separate items (i.e. taxes to school boards, gas billing index, etc.). Mr. Chapman then reviewed the surplus balances for the gas works, golf courses, waterworks, sewer surcharges and others; and the unexpended capital balance. At the request of Mayor C. Zehr, Mr. Chapman agreed to confirm how the balance of the Bingeman Park account would be shown in 2006. Key performance indicators were then reviewed including reserve and reserve fund benchmarks, debt per capita, debt level benchmarks and tax arrears. It was noted that the debt per capita increased from $133. to $159. based on tax-supported figures assisted by the Economic Development Investment Fund. The debt level benchmark indicates a slightly higher level than the Provincial median and a 1.1 % reduction in tax arrears was achieved over last year. Mr. Chapman then commented on new reporting standards commencing in 2007 through 2009, requiring note disclosure of continuity of capital assets, if information is available, followed by disclosure of functional segments and reporting of tangible capital assets at cost less accumulated depreciation /depreciation expenses. Mayor C. Zehr inquired how assets of Kitchener Utilities and their value would be dealt with. Mr. Chapman advised that the Utility will be shown as a line item in the balance sheet and staff will look at identifying and evaluating any tangible assets of the Utility. Mayor Zehr also inquired how the new standard reporting would be applied to avoid double accounting. Mr. Chapman advised that the Ministry of Municipal Affairs is working with municipalities and agencies to determine an approach and will likely require modifications to existing legislation. In the interim, in 2006 staff will commence development of a work plan for implementation of the new reporting standards. Councillor J. Gazzola questioned the value of historical disclosure of assets if not all information is available. Mr. Chapman noted that the Public Sector Accounting Board (PSAB) considered the new reporting standards vital to the successful delivery of public services and the health, well being and safety of citizens. Ms. P. Houston added that the value is not so much in costing but in the process itself, wherein the City will compile a complete inventory of its assets which will assist in ascertaining reserve needs for future replacement. AUDIT COMMITTEE MINUTES JUNE 12, 2006 - 7 - CITY OF KITCHENER 1. 2005 ANNUAL FINANCIAL REPORT - tCONT'D) Messrs. John Herhalt and Matthew Betik, KMPG Chartered Accountants, attended as the City's Auditors to provide a review of their report on the 2005 Financial Statement. They advised on their approach to auditing and reported on transactions which should be recognized for future years, regarding expenses recognized in 2005 that relate to future periods and liabilities (i.e. secondment accrual, reserve for utility accounts receivable) established at the direction of Council, that do not meet the accounting definition of a liability. These transactions were not considered material to the Consolidated Financial Statements and no adjustments were made as it is anticipated they will be cleared in 2006. No other significant unusual transactions were identified. The delegation and staff responded to questions, clarifying issues regarding liabilities established at Council direction, noting that approval for two secondment positions were approved late in 2005 but the funds not expended until this year and provided a number of other examples of similar expenses. Mr. Herhalt commented on the new reporting standards stating that it will afford the Auditors the ability to give practical views based on something that is materially correct in regard to historical values of assets. He added that they have no disagreements with management and all auditing, accounting and presentation issues have been resolved to their satisfaction. On motion by Councillor J. Gazzola - it was resolved: "That the 2005 Annual Financial Report of the City of Kitchener be received." 2. ADJOURNMENT On motion, the meeting adjourned at 2:25 p.m. Janet Billett Committee Administrator