KPMG LLP’s 2025 External Audit Plan be received for information.

34:13from our KPMG presenter Brendan Hall and I'll turn it over to you. Perfect, thank you very much.

34:26Again my name is Brendan Hall. I'm an audit partner with KPMG based out of Kitchener

34:30and today really our purpose is to walk through with the committee our plan for the Fiscal 2025

34:36audit. Happy to stop along the way if there are any questions or if there are questions at the end,

34:41happy to take those as well. So our first section really of the report that that we'll speak to in

34:59detail is materiality. So every audit under Canadian audit standards is required to to set a level of

35:06materiality which will guide the performance of the audit procedures that we execute to ensure

35:10that the financial statements that are issued, the consolidated City of Guelph financial statements

35:15are free for material misstatement. So for a public sector entity we're typically looking at

35:21revenue as a benchmark. Again not a profit focused or oriented entity so that would typically default

35:28to a profit based metric but for a city and other municipalities we're typically looking at that

35:33revenue figure as a benchmark and so we've set materiality based off of the previous years

35:39consolidated revenues which results in a materiality level of 10 million dollars. That approximates 1.5%

35:46of revenue. The typical thresholds for a gross benchmark would be around the 1 to 3% realm so

35:54you can see that we're kind of well within the materiality thresholds and guidance. We are required

36:02to communicate with this group where there are areas of the audit where we rely on experts or other

36:09individuals that help support numbers within the financial statements. So in terms of the employee

36:15benefits that the City of Guelph has the City uses an actuarial firm to help model what those

36:22liabilities are modeled and estimated to be. We confirm with that party directly to ensure

36:28the information is consistent with what's been presented in the financial statements. We also

36:32perform substantive testing on our end to validate the inputs that are going into that actuarial's

36:38model which headcount age of employees and things like that. The other area where we do

36:46rely on individuals with specialized skills would be with respect to asset retirement obligations

36:53or the contaminated sites and again performing substantive audit procedures on changes that

36:58have occurred during the year. When we refer to the consolidated City of Guelph statements it's

37:05important to take that step back and just understand the various components that do come into the

37:10consolidated statements. So within the consolidated financial statements that we report on we have

37:15the Elliott, we have the Downtown Guelph Business Association, we have the City's proportionate

37:21share of the health unit and we also have Guelph municipal holdings and Guelph Junction Railway

37:26Limited. All of these entities have their own standalone audits that are performed and the

37:33results of those financial statements get consolidated in to the City of Guelph's consolidated

37:38financial statements that this engagement team ultimately provides an opinion on. We're going

37:46to walk through some of our core areas in terms of risk assessment where we spend significant

37:53portions of our time and discuss some of the procedures that we perform to get the evidence

37:58that we need to put an opinion on those financial statements. One area of significant risk which

38:06is common across all audits that are performed in Canada is we're required to presume that there

38:12is a risk of management override within the financial statements. This is relevant if you're

38:16working on a large publicly traded company, it's relevant if you're working on a municipality,

38:20it's relevant if you're working on a small owner managed business. There are certain procedures

38:25we're required to perform to address that risk which typically is around journal entry review. So in

38:31addition to the substantive testing that we do over the financial statement captions, we also do

38:36some work on journal entries to identify if there's any indication that there has been

38:41inappropriate journal entries reported throughout the fiscal year. We will report to this group if

38:46there's any results from those procedures in our findings report. The next section that we're going

38:53to go through is touching on some of our core areas and the procedures that we perform to get

38:58comfortable that the figures are free from material misstatement. So with post-employment

39:04benefits, you know, I indicated we do work with with the city's consultants that helped to model

39:11those actuarial figures and we perform testing on the inputs that that group uses to model the

39:16actuarial assumptions. Pertangible capital assets, a very material figure for the city of Guelph.

39:22The city has, you know, in excess of 1.4 billion in capital assets, significant additions occur

39:30each year so the city constructs assets, acquires assets. Our team performs sampling on those capital

39:37asset additions to ensure that things that are being capitalized do have indicators of a multi-year

39:43benefit for the city and should not have been expensed through the statement of operations.

39:47We also perform work on an inverse direction looking at things that the city has expensed

39:53to ensure that those are appropriate and not indicative of something that should have been

39:56capitalized. For obligatory reserve fund revenue and other deferred revenue balances,

40:03our focus is really in two different two different elements. So in terms of being comfortable with

40:08the completeness of that deferred revenue or obligatory reserve balance, our team is doing

40:13work on the DC collections which would increase the obligatory reserve balance. We also perform

40:19substantive testing on the revenue that's realized that would draw that that obligatory reserve

40:25fund down. So again two very different tests that we're doing but for the purpose to get

40:30to get comfortable on the ending obligatory reserve balance. Asset retirement obligations was

40:38a very large, you know, discussion point in the past couple years was a new accounting standard.

40:44No longer a new accounting standard but there is requirements to update those estimates,

40:50accrete those liabilities and to the extent any of those asset retirement obligations have been

40:54settled during the year, there may be adjustments that that our team has to test and substantiate.

41:00So again not not expected to be a significant portion but this was a much larger topic in previous

41:06years. Cash and investments, very sizable balances for the city of Guelph. Cash and investments both

41:15both very material numbers. We confirm and interact directly with the city's banks and financial

41:21institutions that hold balances to ensure that what the city of Guelph has recorded in their general

41:26ledger is consistent with what we're what we're seeing with those third parties. We're also

41:32testing any reconciling items. So in cash there are typically reconciling items in terms of timing

41:36differences to ensure that those are accurately reflected. To the extent there are derivatives

41:42we would also be doing work on the fair value of those those derivative assets.

41:48Government contributions, another area where substantive testing is performed to ensure that

41:53the revenues that the city is recording are accurate and supported. So I won't plan to go

42:04through the appendices that are in this report but if there are questions or comments I would be

42:10happy to take those at this point in time. Well thank you very much for that presentation.

42:17We have our recommendations so perhaps I'll look to one of my colleagues to move the recommendation

42:22and we'll see if we have any questions. Moved by Councillor Cussin that KPMG LOP 2025's external

42:29audit plan be received for information and seconded by Mayor Guthrie. Do we have any questions for

42:37other KPMG? Yes. Go ahead Councillor Allt. Thank you very much Chair Gulliver. One quick question

42:47primarily for the public. Asset retirement balance. I was wondering if you could give

42:54some examples of that. I'm going to give one that I don't think is part of the retirement

42:59balance but some might ask and that's the current library which will be you know essentially is

43:08surplus as of next year but is surplus to the Guelph Public Library Board. Are there other

43:13examples and how small do those assets get? I assume that operating equipment is not capital asset.

43:25So in terms of other examples of asset retirement obligations you know quite common one of the

43:32one of the largest ones for municipality tends to relate to older buildings that may have materials

43:38that were used. Again I'm not a building expert. I'm not going to pretend to know all my years

43:43exactly but pre kind of the mid 1980s asbestos was very commonly used. You have grout materials. I've

43:51learned too much about asbestos to be honest in the past two years with Aero but many buildings have

43:57elements that are going to need specific remediation when those assets reach the end of their useful

44:03life. That would be one where you see probably many municipalities having an element of that.

44:13Thank you very much that's perfect. Thank you Councillor Oldt. Any other questions from

44:21St. Nonne? Well thank you very much for the presentation. I'll call the vote all in favour

44:26of approving the recommendation. Oh sorry do you want to we'll keep it that way?

44:33Okay okay we'll take that back. Anyone against the motion on the floor? St. Nonne that passes

44:42unanimously. Thank you very much for your presentation and that is it for this agenda item. I will

44:49turn things back to Mira Guthrie. Great thanks Chair Goller and now I'll turn it over to Chair