Presentation on Request For Proposal For Audit Services Finance & Supply Presentation on Request For Proposal For Audit Services at GFOA BC Canadian Municipal Accounting and Auditing Best Practices Workshop November 4 - 5, 2004 Presented by Anne Tourigny The City of Calgary Budget and Financial Overview

Budget and Financial Overview Finance & Supply Developing a RFP Consider Legislative guidance Municipal guidance Organizational structure Audit Committee The advertisement Supporting the RFP Recap I think that I drew the good straw in kicking off this panel discussion presentation - so I hope that I can hold your interest for the 4 minutes that I think this is going to take me Here’s a very brief outline of what I will cover Budget and Financial Overview

Guidance for Engaging an Auditor Budget and Financial Overview Finance & Supply Guidance for Engaging an Auditor Key Municipal Government Act Legislation Frequency of appointment Required accounting standards Key Municipal policy or practice as set by Council I.e. Frequency of appointment Before putting your external auditors services out for RFP it is important to look at the requirements as defined by Provincial Legislation and also the bylaws or policy and procedures in effect within your municipality. By way of example Alberta Provincial legislation requires an annual audit by an independent auditor. The legislation requires that an auditor is appointed by Council for the municipality and each of its controlled corporations. This is important as it must be considered when you are determining what engagements will be included in your audit services up for proposal. By combining several audit engagements for both the City and each of its subsidiaries you may be able to negotiate a lower fee than if you were to contract for each audit individually – I think that it also helps to have one audit firm auditing all organizations included in your consolidated financial statements – both from an administrative and operational standpoint. Each Province may have different legislation - defining who needs to be appointed by whom and how often, as well as the standards that will be applied. In Alberta GAAP and any additional regulations required by the Province provide the accounting standards. Moving along to the guidance provided from within the municipality - In Calgary the policy has been to enter into 5 year contracts with our auditors. In compliance with relevant provincial legislation within the 5 year term – annually council reappoints the auditors subject to satisfactory performance, as determined through a formalized evaluation process. Budget and Financial Overview

Budget and Financial Overview Finance & Supply History of Auditors 1960-1963 Harvey Morrision /Clarkson Gordon 1964-1967 Alger, Bless, Nichol & Co. 1968-1970 Riddell Stead & Co. 1971-1975 Collins Hames 1976-1980 Coopers Lybrand 1981-1985 Deloitte Haskins & Sells 1986-1990 Peat Marwick Thorne 1991-2002 Deloitte & Touche LLP 2003 - Ernst & Young LLP As you can see on this slide prior to 1990 our auditors have changed quite regularly over the last 20 years. Our most recent RFP was issued in 2002 and the successful firm was Ernst & Young LLP. It is important to consider the appropriate time for each contract – if the time is too short then the external auditors may not get far enough up the learning curve. A contract term that is too long may leave you or your audit committee wishing that your auditors had a fresh set of eyes. For those mathematically inclined souls - You may notice on my table that the Deloitte & Touche timespan covers more than 5 years and does not evenly divide into 5 years. We did do a RFP in 1996 & D&T were reappointed. Also in 2001 Council decided that given the current auditors involvement with some on-going issues such as the proposed sale of its Subsidiary ENMAX - the RFP process would be postponed by one year. My point here would be to allow some flexibility to extend a contract for a short term if specific non recurring circumstances seem to warrant it. Budget and Financial Overview

Budget and Financial Overview City of Calgary - Org Structure Finance & Supply Standing Policy Committees COUNCIL Special Committees City Auditor Audit Committee External Auditor City Clerks Office City Manager Before I go further along on explaining our RFP process for obtaining audit services I want to explain a little about our Council & also the Audit Committee. A RFP process may need to be tailored to fit your city’s organizational structure. The City of Calgary Council delegates to its Audit Committee the responsibility for obtaining, retaining and evaluating our external auditors as well as working with the external auditors on an ongoing basis. On an unrelated note Council also delegates other responsibilities to other standing policy committees - these responsibilities include Finance & Corporate Services, Utilities and Environment, Community & Protective Services and Land and Asset Strategy. Audit Committee is one of the special committees of Council. After a significant policy change in mid 2004 the Audit Committee extended its responsibility to not only the external auditors but also the City Auditor. Law Other Administration Budget and Financial Overview

Budget and Financial Overview Finance & Supply Audit Committee WHO : 5 Council members appointed annually 2 Citizen members appointed for 2 years WHAT : Ensure Administration’s accountability to Council HOW: Meet Monthly to discuss specified items on the agenda – Supported by administration Audit Committee comprises 5 members from Council who are appointed annually and also 2 citizen members appointed for 2 year terms. The citizen members are selected from the applicants who apply to the advertised positions. I have observed that our citizen members provide strong financial skill sets and are a valuable resource on the Audit Committee. Audit Committee’s broad mandate is to ensure Administrations accountability to Council. To carry out their responsibilities the Audit Committee meets monthly to discuss items that are set out in the formal agenda. Each year the audit committee determines its monthly agendas, at one of the first meetings of the year. Their agenda items include such things are quarterly updates from the City Auditor and IT. Audit Committee also approves the City Auditors’ and the external auditors annual work plan. The Audit Committee has several resource groups that provide assistance and these include the legislative resource group, whose main function is to assist Audit Committee in fulfilling its mandate. The CFO or her designate is in attendance at each meeting to provide information and take direction on specific issues that are raised. The City Auditor or his designate and a representative from the external auditor are also always in attendance at the monthly meetings. Budget and Financial Overview

Budget and Financial Overview CALL FOR PROPOSAL External Auditors The City of Calgary’s Audit Committee is seeking proposals from interested audit firms to act as the City of Calgary’s external auditor for the years 2003- 2007. Interested parties are invited to submit a brief proposal describing their qualifications and experience relevant to this project. A description of likely approach and staffing should be included. Proposals will be received until 3:00 p.m., September 27 and can be sent to Mr. W. Ardiel, Aldermanic Office (#8001A), P.O. Box 2100, Station M, Calgary, AB T2P 2M5, or delivered to the Aldermanic Office, 3rd Floor, City Hall (Macleod Trail and 7 Avenue SE). Selected firms will be invited to make extended proposals, including a presentation to Audit Committee. Further information may be obtained from Mr. W. (Bill) Ardiel Legislative Resource Group Telephone (403) 268-1534 Fax (403) 268-8091 Given the audit committees responsibility for the external auditors they are responsible for driving the RFP for audit services. Each time a RFP has been issued the Legislative office under the direction of the Audit Committee has posted the advertisement. The 2002 advertisement is shown on the slide and you will probably notice that it is general. You can see that the audit committee was also responsible for accepting submissions. As I mentioned earlier the group of audits included in the RFP does need to be determined as well as the time period to cover. As I stated earlier the provincial government legislation or your own municipality’s bylaws policy or procedure may provide guidance in this area. The City’s RFP included the City’s consolidated financial statements as well as subsidiaries - ENMAX, Calgary Parking Authority, Calgary Housing Company, and The Calgary Public Library. Budget and Financial Overview

Budget and Financial Overview Finance & Supply Supporting the RFP Before the close date Administration provided information to any firm interested in responding Finance ITS City Auditors’ Office ENMAX and other subsidiaries Even though the advertisement was general - those considering applying were able to obtain detailed information from the specific members of administration to ensure that the applicants had all the information that they needed to develop a well researched submission and oral presentation to the audit committee - It is necessary to provide detailed information about the scope of the engagement, timing, risks, expectations & fees. Budget and Financial Overview

Budget and Financial Overview Supporting the RFP Finance & Supply Procedures to be followed throughout the process Description of accounting systems & financial reporting State of controls & issues Any contentious audit or accounting issues Auditing standards to be applied Audit time table Reporting requirements above audit report ( ie mgmnt letter) Fee basis Level of assistance available Desired level of detail in the submission Evaluation criteria The areas that you need to cover off include some of these items. We did not have all this information documented in one place - & you may want to consider doing this particularly for your first RFP as our applicants were able to get information from looking at previous RFP’s that were public documents. The individual people who provided this information included the CEO( or city Manager) ,The City Treasurer and other management in Finance, the City Auditor, the IT management, Legislative and financial and operational management from the City’s subsidiaries including the CFO of ENMAX. Of course when an RFP is placed the evaluation process and criteria will need to be closely tied in - but this leads me into the next speaker’s topic so at this point in time I will close with a couple of general thoughts on what to consider when putting together your RFP. Budget and Financial Overview

Recap - Setting up an RFP ? Budget and Financial Overview Finance & Supply Recap - Setting up an RFP ? Know your - Governing legislation Applicable city bylaws/policies & procedures Organizational structure Determine Audit Scope - which audits are included Term covered by the RFP (how many years) Provide administrative experts to provide information to applicants Read off slide Budget and Financial Overview