CITY WIDE IMPLICATIONS CITY OF HAMILTON CORPORATE SERVICES DEPARTMENT

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CITY WIDE IMPLICATIONS CITY OF HAMILTON CORPORATE SERVICES DEPARTMENT Powered By Docstoc
					                                                                        CITY WIDE
                                                                        IMPLICATIONS


                          CITY OF HAMILTON
                       CORPORATE SERVICES DEPARTMENT
                           Financial Services Division

Report to: Mayor and Members             Submitted by: Joseph L. Rinaldo
           Strategic Planning &                        General Manager
           Budgets Committee                           Finance and Corporate
                                                       Services

Date:        October 20, 2005            Prepared by:     Brian McMullen
                                                          Ext 4467

SUBJECT:      2004 Audit Management Letters of City of Hamilton Boards
              (FCS05109) (City Wide)


RECOMMENDATION:

That the internal control findings and management responses in the 2004 audit
management letters of the City of Hamilton Boards as outlined in Appendix A to O be
received.




Joseph L. Rinaldo
General Manager
Finance and Corporate Services


EXECUTIVE SUMMARY:

The audit committee of most organizations is required to provide oversight of the
organization’s financial reporting. This responsibility includes review of the financial
statements, control structures and internal controls. The Strategic Planning & Budgets
Committee has that role for the City of Hamilton’s consolidated operations. The City of
Hamilton’s related entities have boards for each of their organizations that review and
approve the financial statements and any audit management letters.

The City of Hamilton’s 2004 consolidated financial statements were approved by this
Committee at its meeting of June 8th, 2005 and the 2004 audit management letter was
approved on June 22nd, 2005.
SUBJECT:       2004 Audit Management Letters of City of Hamilton Boards
               (FCS05109) (City Wide)                               - Page 2 of 4


The 2004 financial statement approval dates for the boards are as follows:
   • CityHousing Hamilton                                              May 16th, 2005
   • Hamilton Entertainment and Convention Facilities Inc.
       (“H.E.C.F.I.”)                                                  May 26th, 2005
   • Tourism Hamilton                                                  May 27th, 2005
   • Business Improvement Areas (BIA’s)                               June 14th, 2005
   • Hamilton Utilities Corporation (H.U.C.)                          June 23rd, 2005
   • Hamilton Public Library                                   September 21st, 2005

The 2004 audit management letters from the City of Hamilton’s separate boards are
attached to Report FCS05109, with the exception of Hamilton Utilities Corporation which
were presented to Council on June 29th as Item #1 of Committee of the Whole Report
05-006. Management responses are not included for Hamilton Public Library, Tourism
Hamilton or some of the BIA's as management did not yet respond to the auditors.
Management of the Hamilton Public Library responded to their Board in the attached
Appendix C2. The outstanding audit management letters will be forwarded back to
Strategic Planning and Budgets Committee once the boards have reviewed them.


BACKGROUND:

Every year the external auditors communicate to each governing body of City of
Hamilton operation and related entities their responsibilities in an External Audit Plan
Communication. The Strategic Planning & Budgets Committee has responsibility of the
integrity of financial information for the City of Hamilton consolidated operations in the
City of Hamilton’s governance structure. The respective governing boards of the City of
Hamilton’s related entities have responsibility for the integrity of financial information for
their entities. This includes review of the financial statements, control structures and
internal controls.

The City’s external auditors, Grant Thornton LLP, Chartered Accountants, recommended
to the Strategic Planning & Budgets Committee and Council that the City’s control of
oversight bodies needs to be strengthened. The auditors’ recommendation was included
in Grant Thornton’s 2004 audit management letter approved by the Strategic Planning &
Budgets Committee (item 7.2) at its meeting of June 22nd, 2005. Management’s
response in that correspondence indicated that any internal control findings would be
forwarded to this Committee.

Consequently, City staff have contacted CityHousing Hamilton, HECFI, Hamilton’s
Business Improvement Areas (“BIAs”), Tourism Hamilton , Hamilton Utilities Corporation
(”HUC”) and Hamilton Public Library for their auditors’ management letters. The
auditor’s management letters for the City’s related entities are attached to Report
FCS05109, 2004 Management Letters of City of Hamilton Boards. Management
responses are included in the 2004 audit management letters for CityHousing Hamilton,
HECFI, H.U.C. and some of Hamilton’s BIA’s. The Hamilton Public Library Board
considered management responses at their meeting of September 21st, 2005.
SUBJECT:      2004 Audit Management Letters of City of Hamilton Boards
              (FCS05109) (City Wide)                               - Page 3 of 4

Management at Tourism Hamilton and Hamilton’s BIA’s will be contacted regarding the
status of their responses to the 2004 audit management letters.


ANALYSIS/RATIONALE:

Audit management letters provide committee members and board members with the
auditors’ findings in their review of internal controls. The management responses
provide the action plan to address the weaknesses and deficiencies in internal controls
as identified by the auditors.

The committee members and board members have the opportunity to clarify the issues
in the audit management letters annually. Since the City of Hamilton’s consolidated
operation includes Hamilton Public Library, HECFI, CityHousing Hamilton, Tourism
Hamilton, Hamilton’s BIA’s and HUC, it was recommended that any management letters
for those organizations be submitted to the City. The auditors’ recommendation was
included in Grant Thornton’s 2004 audit management letter approved by the Strategic
Planning & Budgets Committee (item 7.2) at its meeting of June 22nd, 2005.


ALTERNATIVES FOR CONSIDERATION:

N/A


FINANCIAL/STAFFING/LEGAL IMPLICATIONS:

Financial Implications: Many of the Internal Control Findings have financial implications
associated with them in that they point out areas where financial controls could be
strengthened.

Staffing Implications: A few of the Internal Control Findings could have an impact on
staffing as they deal with the segregation of incompatible duties to strengthen internal
controls.

Legal Implications: None.


POLICIES AFFECTING PROPOSAL:

N/A


RELEVANT CONSULTATION:

Planning & Development staff are following-up with management of Hamilton’s BIA’s
and Tourism Hamilton for their responses to the internal control findings in the 2004
audit management letters.
SUBJECT:        2004 Audit Management Letters of City of Hamilton Boards
                (FCS05109) (City Wide)                               - Page 4 of 4


CITY STRATEGIC COMMITMENT:

By evaluating the “Triple Bottom Line”, (community, environment, economic implications) we can make
choices that create value across all three bottom lines, moving us closer to our vision for a sustainable
community, and Provincial interests.

Evaluate the implications of your recommendations by indicating and completing the sections below.
Consider both short-term and long-term implications.

Community Well-Being is enhanced.                 Yes      No
Public services and programs are delivered in an equitable manner, coordinated, efficient, effective and
easily accessible to all citizens.

Environmental Well-Being is enhanced.             Yes       No

Economic Well-Being is enhanced.                     Yes      No
Audit management letters provide management, board members and committee members with potential
weaknesses in the internal controls of the organization. Management’s responses to these internal
control findings ensure that the organization’s financial resources are being protected and economic well-
being is enhanced.


Does the option you are recommending create value across all three bottom lines?
                                                   Yes      No
Do the options you are recommending make Hamilton a City of choice for high performance
public servants?                          Yes      No