STRENGTHENING MUNICIPAL AUDITS

1. STRENGTHENING MUNICIPAL AUDITS Portage la Prairie January 20, 2011 Manitoba Local Government Municipal Finance & Advisory Services

2. AGENDA • Introductions • Updating Template /Review of Common Errors and Omissions • Staying Current – PSAB • Controlled Entities and Government Partnerships • BREAK • Discussion Forum – Ways to Improve • Federal Gas Tax Transfers • T2 Filing Requirements • Supplement to Audit Report • Questions and Adjournment Manitoba Local Government Municipal Finance & Advisory Services

3. STAYING CURRENT Final “New” Handbooks Sections: • Amendments to the Introduction • PS4200 to PS4270 – Government Not for Profit Orgs • PS2125 – First Time Adoption by Government Organizations • PS3260 – Liability for Contaminated Sites • PS3510 – Tax Revenue • PS3800 – Government Assistance (withdrawn) Manitoba Local Government Municipal Finance & Advisory Services

4. STAYING CURRENT Exposure Drafts: • Financial Instruments & Foreign Currency Translation • Government Transfers Manitoba Local Government Municipal Finance & Advisory Services

5. STAYING CURRENT Amendments to the Introduction: • In effect for 2011 • Government Business Type Organizations (GBTO) no longer exist • Government Organizations are either: • Government Business Enterprises (GBE) • Government Not For Profit Organization (GNFPO) • Other Government Organizations (OGO) Manitoba Local Government Municipal Finance & Advisory Services

6. Amendments to the Introduction CICA Handbook Is the Org Part of the Public Sector? No Yes Governments GBE GNFPO Other Government Organizations PSA Handbook CICA HB IFRS PSA HB or 4200 series in PSA HB PSA HB or CICA HB IFRS Manitoba Local Government Municipal Finance & Advisory Services

7. STAYING CURRENT PS4200 to PS4270 – GNFPO: • GNFPO can continue to use the 4400 series from the “old” CICA handbook • 4400 series has been incorporated into the PSA HB • In effect for 2011 Manitoba Local Government Municipal Finance & Advisory Services

8. STAYING CURRENT PS2125 – First Time Adoption by Gov’t Orgs: • Many government organizations will be transitioning from the CICA HB to the PSA HB • Adoption of PSA standards are to be accounted for retroactively • 5 exemptions available to government organizations: • Retirement benefits • Business combinations • Investment in GBE’s • Government business partnerships • TCA impairment Manitoba Local Government Municipal Finance & Advisory Services

9. STAYING CURRENT PS3260 – Liability for Contaminated Sites: • Fiscal years beginning April 1, 2014 • Municipalities – Year Ended December 31, 2015 • Early adoption is encouraged • Addresses the recognition criteria, measurement & disclosure requirements for liabilities associated with the remediation of contaminated sites Manitoba Local Government Municipal Finance & Advisory Services

10. STAYING CURRENT PS3510 – Tax Revenue; • Fiscal years beginning after April 1, 2012 • Municipalities – Year ended December 31, 2013 • Early adoption is encouraged • Sets out recognition criteria and reporting requirements of tax revenue • For the most part munis are currently complying with PS3510 Manitoba Local Government Municipal Finance & Advisory Services

11. STAYING CURRENT – Exposure Drafts Financial Instruments & Foreign Currency Translation: • Issued in the Fall of 2009 • Comments requested by January 17, 2011 • Fair value measurement of derivatives & portfolio investments quoted in an active market • Present changes in fair value separately (i.e. OCI) • Will be of little relevance to most municipalities Manitoba Local Government Municipal Finance & Advisory Services

12. STAYING CURRENT – Exposure Drafts Government Transfers: • PSAB initially approved the project in June 2001 • PSAB finally approved the 3rdRe-Exposure Draft in December 2010. • New standard will be issued in March, 2011 • Effective for fiscal years beginning on or after April 1, 2012 • Municipalities – Year Ended December 31, 2013 Manitoba Local Government Municipal Finance & Advisory Services

13. STAYING CURRENT – Exposure Drafts Government Transfers (cont’d): • Prospective or retroactive application will be permitted • Recipient recognizes revenue unless the recipient has a liability • Liability may exist because the transferor sets specific stipulations • Applies to operating & capital transfers • See PSAB Plain Language Doc – April, 2010 Manitoba Local Government Municipal Finance & Advisory Services

14. CONTROLLED ENTITIES AND GOVERNMENT PARTNERSHIPS • Delays in completing consolidated statements because controlled organizations and government partnerships not completed. • Discuss options to remedy for current year and future. (change year ends, consolidate record keeping, eliminate ownership and/or control.) • Professional judgement –consider not including for 2009, restate for 2010. Might create problem of scope limitation for 2009. Depends on materiality. Manitoba Local Government Municipal Finance & Advisory Services

15. Time to Hear From the Auditors Why are the 2009 F/S so late? • What are the issues you encountered at the municipalities? • How can the municipalities be better prepared? • Do you anticipate 2010 to be as difficult? • What can the Department do to improve 2010? Manitoba Local Government Municipal Finance & Advisory Services

16. FEDERAL GAS TAX TRANSFERS • The new deal for Cities and Communities extended to 2014 • Current year’s transfers from Federal Government to the Province are delayed • Late AER reports delayed the OAG audit and Federal review • Municipalities should accrue 2010 transfers o/s at Dec 31, 2010. Manitoba Local Government Municipal Finance & Advisory Services

17. FEDERAL GAS TAX TRANSFERS • Gas Tax reports required annually by June 30 or earlier. • Submission required even if Annual Financial Audit not completed. • Payment withheld until Audited Financial Statements filed with Department. • Five year spending requirement – Municipality must request extension from Oversight Committee. Manitoba Local Government Municipal Finance & Advisory Services

18. T2 FILING REQUIREMENTS • Compliance refund hold legislation, April 1, 2007 • CRA adopted administrative position in 2008 – tax-exempt organizations (municipalities) will not be subject to withholding provisions. • UPDATE: Extended up to and including 2010 tax years to allow for CRA’s internal review to be completed. Manitoba Local Government Municipal Finance & Advisory Services

19. SUPPLEMENT TO AUDIT REPORT • Risk Alert for issuing Derivative Reports • Reliance on Supplemental Report – Gap between what we expected and what was being provided. • Department relies on supplementary audit reports to provide assurance that municipalities are operating properly Manitoba Local Government Municipal Finance & Advisory Services

20. SUPPLEMENT TO AUDIT REPORT • Auditors not performing additional audit work over and above work required for financial statement audit. • Auditors reporting on matters that came to their attention during financial audit • Not sufficient to support level of reliance placed by the Department • OAG commented in the audit of La Broquerie & the Dec/2010 report on the Public Accounts – Please check! Manitoba Local Government Municipal Finance & Advisory Services

21. SUPPLEMENT TO AUDIT REPORT Department Reviewing Options: • What assurance levels required • Most cost effective way to obtain • Meet CICA Audit and Assurance Standards Manitoba Local Government Municipal Finance & Advisory Services

22. QUESTIONS? Manitoba Local Government Municipal Finance & Advisory Services