Loading...
2015-06-24 Finance Committee MinutesFINANCE COMMITTEE CITY OF SAINT JOHN MINUTES WEDNESDAY, JUNE 24, 2015 — 4:00 pm Present: Councillor Merrithew Councillor Reardon Councillor MacKenzie Cathy Graham Hilary Nguyen Craig Lavigne Deloitte Lloyd Foote Jeremy Mallais Jessica Bragdon Jeff Cochran via conference call Regrets: Councillor Lowe, Councillor Strowbridge Also present - Sherry O'Connor, Recording Secretary Approval of Agenda Moved by Councillor MacKenzie Seconded by Councillor Reardon THAT the agenda of the June 24, 2015 meeting be approved as circulated. Approval of Minutes Moved by Councillor MacKenzie Seconded by Councillor Reardon THAT the minutes of the May 14, 2015 meeting be approved as circulated. CARRIED 2 The City of Saint John 2014 Trust Funds Financial Statements These are trust funds that the City has that are meant to be used. The O'Connell Fund is used annually. The City gives (the interest) to the Empty Stocking Fund on a yearly basis. Tucker Fund is used for maintenance and improvement of Tucker Park. Stockford Memorial Fund is used towards the upkeep and maintenance of King Square. L. R. Ross Fund used for rowing. A couple of years ago some of the funds were used to purchase rowing equipment and money was given to a team that was going to the Canada Games. The A. Carle Smith Fund - $15,000 was just approved to give to the Bird Sanctuary. Bi- Centennial Funds — being used for ceremonies marking the 200th anniversary of Canada in the year 2067. These funds are used for special occasions. All of these funds are at the will and approval of Council to use. It is always best to use those funds instead of our General Operating funds when possible. IIT, • • Moved by Councillor Merrithew Seconded by Councillor Reardon THAT The City of Saint John 2014 Trust Funds Financial Statements be received and filed. The City of Saint John 2014 Consolidated Financial Statements Finance reconciles and brings into the Consolidated Statements 17 entities. There was a slight change in the General Fund. The City received the funds from Disaster Recovery for Tropical Storm Arthur. The shortfall in the General Fund was going to be over $900,000 but it is now just down under $800,000. Nothing has changed on the water side. Some Highlights Accounts receivable changed from $18,556,841 (2013) to $26,804,419 (2014) that means the City has money out there and it is being collected. For example, monies due from PNB, federal government, water & sewer, other and allowance for doubtful accounts. 3 The accounts payable went down from $31,870,303 (2013) to $28,924,099 (2014). All entities seemed to do more collections and paying of the bills before the end of the year. The long term debt went up from $212,973,226 (2013) to $225,595,284 (2014). There was more borrowing. There is a total of $928,831,425 owned by the City in tangible capital assets. The City has debt but they have a substantial amount of assets as well. Net debt went down and has been going down, in 2013 it went from $199,788,721 to $183,686,607 and this year it is at $181,807,783. Motion Moved by Councillor MacKenzie Seconded by Councillor Reardon THAT The City of Saint John 2014 Consolidated Financial Statements be received and filed. Auditor's Year End Communication This is a continuation of the work with respect to the audit cycle and reporting out to the finance committee on the results of the year end audit. Executive Summary Audit Scope With respect to scope, there was nothing new. These were the areas of significant risks and there were no risk areas added. Materiality In the context of the audit Deloitte uses a materiality base for determining the extent of testing and the scope of findings that they consider reportable. So in that context the materiality levels are presented therein and there were no changes. Status and Outstanding Matters Deloitte is working and plan to be in a position to render their audit opinion to tie in with the July 6, 2015 Council meeting. Deloitte met with John Nugent to get an update with respect to any legal matters. The only matter that is not quantifiable at this point would be related to the Esterbrooks issue. Il Accountina Policies The accounting policies are represented and disclosed in the notes of the financial statements and Deloitte believes them to be acceptable under PSAS and appropriate to the circumstances of the City. Significant difficulties encountered in performing the audit Deloitte is also satisfied that management uses prudent approaches with respect to accounting estimates. Deloitte does not see a management bias in those determinations and doing so they believe that the estimates are appropriate. There were no significant issues in performing the audit. Deloitte developed a time table which was honored by both parties. Group audit In the context of the auditing standards the City's audit is considered a group audit. A group audit simply means that the consolidation has other entities and also involves other auditors. Deloitte's responsibility as the lead auditor of the group would be to provide instruction to the ABC auditors, assess materiality applied and access information to the extent that Deloitte considers necessary. Responses were received and except for some adjustments that Deloitte was made aware of through the ABC auditor findings, other information requested was complete. Fraud and Illegal acts No such matters were brought to Deloitte's attention nor did their procedures identify any such matters. Sianificant deficiencies in internal control The audit is conducted as a risk base and obviously given the number of transactions that the city processes in any given year the internal control environment is important so that there are checks and balances to ensure the accuracy and liability of the financial information that is produced. Any observations and findings that Deloitte have are vetted with management and Deloitte would be plan to bring them to a future Finance Committee meeting. That being said there were no material or significant findings that affected our ability to sign the audit report. Audit adiustments and uncorrected misstatements There were no uncorrected misstatements related to audit findings for the year ended December 31, 2014. 5 Adiusted and unadiusted disclosure deficiencies With respect to disclosure deficiencies there are none that Deloitte would advise of. The Financial Statements do and make note to reference to the fact that the budget figures do not include eliminations and in an ideal world that would be the case but that is an onerous task and Deloitte is not quite sure that it has significant value at the end of the day. Legal and regulatory compliance Deloitte's procedures did not identify any areas of non - compliance with laws and regulations by the City. Use of the work of experts They did use experts in particular areas where they needed subject matter experts. Deloitte's IT specialists assessed the computerized IT processes and procedures and they have an internal resource to help them with the pension accounting. Goina Concern It was concluded that management's assessment of the City's ability to continue as a going concern is appropriate. Subsequent events Management is responsible for assessing subsequent events up to the date of the release of the consolidated financial statements. Deloitte at the time of writing were not aware of any events subsequent to year end that would have an impact on either the financial statements amounts or disclosure. Cathy Graham was asked by Lloyd Foot and she advised there were no subsequent events to date. Basis for aualified oaionion Without being able to make a definitive conclusion with respect to the defined contribution, Deloitte's auditor's report, as it was last year, is qualified to make reference to the fact that the determination with respect to the shared risk pension plan as a defined contribution plan was not achieved. That being said for decision making purposes and for what the Finance Committee and Council do "in all due respect" an accounting exercise that Lloyd does not believe diminishes your financial statements. Conclusion In conclusion no restrictions were placed on the scope of Deloitte's audit other than as noted above. In performing the audit, Deloitte was given full and complete access to the accounting records, supporting documentation and other information requested. n Audit Risks Financial disclosure and presentation Deloitte looks at these for proper disclosure and they feel that management has put together a great financial statement package on these consolidated statements. Deloitte is very satisfied with the end result of disclosures that are there. Retirement, post - employment and other employee benefits Deloitte was unable to obtain sufficient appropriate audit evidence to support the treatment of the shared risk model as a defined contribution plan as described in the basis of the qualified opinion section of the Executive Summary. Deloitte looks at those estimates and make sure that they are comfortable that the estimate is reasonable. Accountina for controlled entities The complexity of dealing with 17 entities has its challenges to make sure that it balances from every entity and that every entity is properly picked up. Deloitte felt management did a great job with that and are satisfied. Accountina for and valuation of tanaible capital assets The City has $928,000,000 worth of assets that are on the books of these consolidated financial statements. Deloitte was satisfied that the overall balance that was presented in the financial statements is accurate and complete. Lloyd stated that with respect to the valuation of the tangible capital assets Deloitte did have dialogue with the parking commission with respect to the new garage and looked at the criteria that is under PSAS with respect to recognizing potential impairment. Finance has undertaken to carry out some cash flow analysis and this will be an annual review process in making that determination work with City management. Revenue Recoanition There is a presumed risk of material misstatement relating to revenue recognition. The reason for that is this is a typical area where Deloitte could potentially see fraudulent types of activities occur therefore they use much more detailed testing there. Deloitte was satisfied that the revenue that had been presented on the financial statements is complete and accurate. Management override of controls Management override of controls is another area of presumed risk. Deloitte looked into the journal entries as well as the management estimate area and did not see any concern. Deloitte is satisfied that is not a concern and a risk at this time. They are satisfied what Management has done with the overall statement. N Auditor's Report The Auditor's Report is similar to what the City has seen in the past. There is a qualified opinion piece and that relates to the pension. It is a clean audit report. Management Representation Letter This letter states most of the significant matters that Deloitte covers in their audit. This gets that accountability back to management stating the City provided Deloitte with everything Deloitte needed to complete the audit to satisfaction. Moved by Councillor Merrithew Seconded by Councillor MacKenzie THAT The Report to Mayor and Council along with the 2014 Audited Financial Statements to be presented to Common Council during open session on July 6, 2015. The meeting adjourned at 5:30 p.m. Councillor David Merrithew, Chairperson