AGENDA Audit Committee - St. John's...Councillor Bruce Tilley Mr. Robert Smart, City Manager Mr. Neil Martin, Deputy City Manager, Corporate Services/City Clerk Mr. Bob Bishop, Director

AGENDA

Audit Committee

Tuesday, November 13, 2013 12 noon

Conference Room A 4th Floor, City Hall

AGENDA

Audit and Accountability Committee Tuesday, November 12, 2013 at noon

Conference Room A, 4th Floor, City Hall 1. Call to Order

2. Adoption of the Agenda 3. Adoption of the Minutes – July 18, 2013 4. Business Arising 5. New Business

a. Confirmation of revised committee mandate

b. Confirmation of meeting schedule

c. Committee compositions

d. Appointment of external auditors – recommendation to Council

6. Other Business

7. Adjournment

MINUTES OF MEETING

AUDIT COMMITTEE Thursday, July 18, 2013 at 11:00 am

Conference Room A, 4th Floor, City Hall

1. CALL TO ORDER:

In Attendance: Councillor Sandy Hickman, Chairperson Councillor Danny Breen Councillor Bruce Tilley Mr. Robert Smart, City Manager Mr. Neil Martin, Deputy City Manager, Corporate Services/City Clerk Mr. Bob Bishop, Director of Finance and City Treasurer Ms. Diane Winsor, Director, Human Resources Mr. Nathan Barrett, Manager, Accounting Services Mr. Sean Janes, City Internal Auditor Mr. David Royle, Auditor I Mr. Harold Squires, Citizen Representative Ms. Sandy Abbott, Recording Secretary

2. ADOPTION OF AGENDA

The agenda was adopted as presented. 3. ADOPTION OF MINUTES – November 6, 2012

Moved by Sandy Hickman, seconded by Danny Breen: To adopt the Minutes of the Audit Committee meeting held on November 6, 2012. Motion Carried

4. NEW BUSINESS

a) Presentation of the Review of the 2011 Travel Claims Report

i. Travel Expense Policy:

Dave Royle gave a PowerPoint presentation on travel expense claims for 2011. He advised that there were no significant problems found with the travel claims.

A number of revisions and additions were recommended to the Policy such as:

Approval of travel expenses outside of the budget by the City Manager Revise the travel forms and policy to be consistent

Minutes - Audit Committee: July 18, 2013 Page 1 of 4

Add references to expenses for baggage fees, collision damage waiver, internet, etc. Develop an electronic travel expense statement Modify the travel expense statement to include separate lines for exchange rates, etc.

Management advised the majority of the recommendations will be implemented except for the electronic travel expense statement and modifying the statement for exchange rates.

ii. Testing of Travel Expense Statements (TES):

As a result of the testing of the actual TES, Internal Audit recommended:

Registration and conference programs be attached to the statements Employees claim for their own expenses Employees provide explanations when actual expenses are higher than those in the

conference program, etc.

Management advised all recommendations will be implemented except for employees claiming for their own expenses.

iii. Internal Audit advised that overall travel expenses were underspent by $82,734 in

2011; however, seven departments overspent their travel budgets by slightly more than $1,000 and did not request approval from the City Manager/Council. Finance officials will write to the department heads reminding them to seek prior approval.

After the presentation of this Report, a comparison of per diem amounts was presented to the Committee. Some discussion took place around raising the per diem amount for the City. Councillor Hickman raised the point that Mount Pearl pays $100 per diem and CBS pays $75 per diem, while the City pays $55 per diem. He felt that the per diem amount should be raised to be more in line with those amounts. However, the consensus of the Committee was that $55 per diem paid by the City was reasonable.

b) Presentation of the Salary Administration Audit Report

Sean Janes presented a PowerPoint presentation on the Salary Administration function of the Human Resources Division and indicated that management has agreed to all recommendations given in the Report. It was also noted that as a part of the audit procedures, a reasonableness test was performed on the amount paid for management car allowances, but that this test only included cars and not trucks or 4x4’s because of the lack of availability of this information. In addition, the scope of the review did not include ensuring that employees who were receiving an allowance actually used their vehicles for work as this would be deemed to be an investigative procedure and not an audit procedure.

i. Salary Systems:

Issue 1 on Salary Systems recommended the development of an overall compensation policy to consolidate the City’s current compensation policies and also recommended

Minutes - Audit Committee: July 18, 2013 Page 2 of 4

the development of a procedure for a regular comparison of the remuneration paid for jobs at the City with similar positions in the market.

ii. Management Car Allowances:

Issue 2 on Management Car Allowances recommended that management:

Review the rationalization for the provision of management car allowances Review the rates paid for management car allowances Devise a new method for adjusting the rates of management car allowances and

the maximum reimbursement amount for business use insurance Create a single, comprehensive policy on management car allowances.

iii. City’s Management Car Allowances Policy:

Issue 3 dealt with the City Management Car Allowances Policy and included the following recommendations:

Add a definition for the term, “frequent basis”, to the policy Include guidelines in the policy for determining which job classifications require

the use of a personal vehicle Provide guidance on the method to be used for estimating the annual mileage driven Develop a standardized form to be used for the justification of management car

allowances Add a section to the policy on mileage claims Revise Section II of the policy on mileage brackets so that it is more user-friendly Add a section to the policy on business use insurance Review section III of the policy to determine if it is still appropriate Add a section to the policy on how management car allowance payments are to be

handled when an employee is absent from work

iv. Management Overtime Allowances:

Issue 4 on Management Overtime Allowances contained the following recommendations:

A new single, comprehensive policy should be developed A review of management overtime allowances should be conducted A section should be added to the policy regarding how management overtime

allowances are to be handled when an employee is absent from work

c) Presentation of the 2013-2015 Audit Plan

A spreadsheet showing the Audit Plan for 2013 to 2015 was shared by Sean Janes. A copy is attached to these Minutes.

Some discussion ensued as to whether it would be feasible to hire a third auditor; it was generally felt that the cost savings associated with the implementation of the recommendations in the Salary Administration report would be enough to pay for a new position for a year. It was also noted that it appears the potential for additional savings

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and increased revenues related with the Inspection Services Division Audit, which is currently in the report writing stage, would also be significant.

In response to a question from Councillor Hickman, Neil Martin noted that any documentation regarding compensation and overtime allowances would be discussed at a private meeting of Council rather than a public meeting as these are employee relations issues.

Moved by Sandy Hickman, seconded by Bruce Tilley: To approve the 2013-2015 Audit Plan as presented. Motion Carried.

5. ADJOURNMENT

As there was no further business, the meeting adjourned at 12:35 pm. Councillor Sandy Hickman Chairperson

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Purpose

City of St. John's Audit and Accountability

Standing Committee Mandate

The Audit and Accountability Standing Committee is appointed by Council to assist Council in fulfilling its oversight responsibilities with respect to : internal audit, the e>cternal audit process, the City's internal controls and procedures and the preparation of the City's ar..nual financial statements.

• Overseeing the City 's financial reporting process including internal control processes, procedures for financial reporting, and the monitoring of the integrity and appropriateness of the City 's financial statements,·

• Ensuring and monitoring the adequacy of financial, operational and compliance internal controls and risk management processes designed to manage significant business risk exposures;

• The selection, compensation, independence and performance of the external auditors,· and

• Monitoring of compliance against corporate business and strategic plans and budgetary objectives.

Membership

Membership shall be comprised of a minimum of ffiuf two members of Council and at least one citizen representative. The Committee shall elect its chair. The term of the Committee shall coincide with the term of Council.

Qualifications

The citizen representative shall have an accounting and/or auditing designation and have experience in the public sector, either directly or indirectly as a consultant or auditor. The Citizen Representative must be independent of the City and the City's internal and external auditors.

Meetings

The Committee shall meet at least twice annually once a month. Additional meetings may be authorized at the request of management, any member of the Committee, or at the request of the external or internal auditors.

Reporting

Minutes shall be kept of each meeting and supplied to Council at its next meeting.

RESPONSIBILITIES

The Committee is responsible for the following:

Financial Statements

• Review significant accounting and reporting issues, including complex or unusual transactions and highly judgmental areas, and recent professional and/or regulatory pronouncements, and understand their impact on the financial statements.

• Review with management and the external auditors the results of the audit, including any difficulties encountered.

• Review the annual financial statements, and consider whether they are complete, consistent with information known to committee members, and reflect appropriate accounting principles.

• Review other sections of the annual report before release and consider the accuracy and completeness of the information. Review with management and the external auditors all matters required to be communicated to the committee under generally accepted auditing standards.

• Understand how management develops interim financial information, and the nature and extent of internal and external auditor involvement.

• Review interim financial reports with management and consider whether they are complete and consistent with the information known to committee members.

Internal Control

• Consider the effectiveness of the City's internal control system, including information technology security and control.

• Understand the scope of internal and external auditors' review of internal control over financial reporting, and obtain reports on significant findings and recommendations, together with management's responses.

Internal Audit

• Review with management and the City Internal Auditor the charter, activities, staffing, and organizational structure of the internal audit function.

• Review and recommend approval of the annual audit plan and all major changes to the plan.

• Ensure there are no unjustified restrictions or limitations, and review and concur in the appointment, replacement, or dismissal of the City Internal Auditor.

• At least once per year, review the performance of the City Internal Auditor. • Review the effectiveness of the internal audit function.

• On a regular basis, meet separately with the City Internal Auditor to discuss any matters that the committee or internal audit believes should be discussed privately.

External Audit

• To satisfy itself as to the existence and terms of an Engagement Letter from the external auditors.

• Review the external auditors' proposed audit scope and approach, including coordination of audit effort with internal audit, including the materiality limits incorporated into the audit.

• Review the performance of the external auditors, and recommend approval on the appointment or discharge of the auditors.

• Review and confirm the independence of the external auditors by obtaining statements from the auditors on relationships between the auditors and the City, including non-audit services, and discussing the relationships with the auditors.

• To review the auditor's report and audited financial statements and to satisfy itself that these financial statements present fairly the financial position and results of operations and that the external auditors have no reservations about them and to make such recommendations thereon to Council as deemed necessary by the Committee.

• To satisfy itself that there are no unresolved issues between management and the external auditors, which could affect the financial statements and that generally, there is a good working relationship between management and the auditors.

• To review the external auditors ' management letter together with the implementation plans as advised by management.

• On a regular basis, meet separately with the external auditors to discuss any matters that the committee or auditors believe should be discussed privately.

Comoliance

• Review the effectiveness of the system for monitoring compliance with laws and regulations and the results of management's investigation and follow-up (including disciplinary action) of any instances of non-compliance.

• Review the findings of any examinations by regulatory agencies, and any auditor observations.

• Review the process for communicating the code of conduct to City personnel, and for monitoring compliance therewith.

• Obtain regular updates from management and City legal counsel regarding compl iance matters.

Risk Management (new)

• Review and discuss with management their responsibility for assessing and managing the City 's exposure to business risk.

• Review policies governing risk management. • Review and discuss with management the City 's major business risk exposures.

Business and Strategic Plan Monitoring (new)

• Review the corporate business and strategic plans as prepared by management and approved by Council.

• Meet with management on a semi-annual basis and review compliance with corporate business plans.

• Meet with management on an annual basis and review compliance with the corporate strategic plan.

Reportine Responsibilities

• Regularly report to Council about committee activities, issues, and related recommendations.

• Provide an open avenue of communication between internal audit, the external auditors, the senior management team and Council.

• Review any other reports the City issues that relate to committee responsibilities.

Other Responsibilities

• Perform other activities related to this mandate as requested by Council. • Institute and oversee special investigations as needed.

• Review and assess the adequacy of the Audit Charter annually, requesting Council approval for proposed changes.

• Confirm annually that all responsibilities outlined in this mandate have been carried out.

• Evaluate the committee's and individual members' performance on a regular basis.