ADMINISTRATIVE REPORT

Date: December 16, 1997

CC File No. 1503

TO:Vancouver City Council

FROM:Director of Finance

SUBJECT:Confirmation of External Auditors

RECOMMENDATION

A.THAT the accounting firm of KPMG be confirmed as the City's External Auditors for the 1998 fiscal year, as required under Section 230 of the Vancouver Charter.

B.THAT KPMG be instructed to undertake the 1998 audit of the City's finances and operations in accordance with its letter attached to this report, at a fee of $125,528 for 1998, exclusive of GST.

GENERAL MANAGER'S COMMENTS

The General Manager of Corporate Services RECOMMENDS approval of A and B.

COUNCIL POLICY

On January 5, 1993, Council approved the appointment of KPMG Peat Marwick Thorne as the City's External Auditors for a five-year term commencing in 1993, after an extensive tender and evaluation process. This appointment is subject to confirmation on an annual basis in order to meet the requirements of the Vancouver Charter.

On January 7, 1997, Council extended the term of appointment for the years 1998-2000, on the same fees and conditions of the previous appointment.

PURPOSE

The purpose of this report is to recommend confirmation of KPMG as the City's External Auditors for 1998.

DISCUSSION

We have received a letter from KPMG, dated December 16, 1997, requesting confirmation of their appointment as the City's External Auditors for 1998. Their letter is attached as the Appendix to this report.

Council will note that the fee proposal for 1997 amounts to $125,528 exclusive of GST. The 1997 fee reflects a 0.5% increase over 1997, based on the Vancouver CPI increase from October 31, 1996 to October 31, 1997. As approved by Council in 1995, the fee includes an addition over the original tender amount due to an increase in year-end audit work resulting from a re-focused and reduced Internal Audit function. The total elimination of the Internal Audit Office this year has resulted in a further increase for 1998 of $4500. The basic increase accords with the tender language dealing with year-over-year inflationary increases in the audit fee. The fee inflation factor will be adjusted, if required, to reflect the lower of the CPI number and the percentage increase reflected in the City's final 1997 operating budget.

The table below shows the individual 1998 fee increases by audit program compared with the 1997 fees.

1997 1998

Fees * Proposed Fees*

Audit Program

City general and related funds$89,934$90,384

City Public Housing Corporation8,5658,608

Basic Fee $98,49998,992

Additional year-end work as a

result of the elimination of

the Internal Audit function 21,926 26,536

Total Fees$120,425$125,528

* Excluding GST

Note (1) -The 1997 fees are based on the lower of the Vancouver CPI increase -November/96 over November/95 (0.4%) and the percentage increase in the final 1996 operating budget (0.65%).

The total fees include the audit services rendered in reporting on compliance with the Provincial Home Owner Grant Act, the Revenue Sharing Act, the School Act and the Hotel Room Tax Act. I note, however, that the total fees do not include any special or advisory services that may be rendered at the request of Council, the City Manager or the Director of Finance.

CONCLUSION

KPMG have been the City's External Auditors for a considerable number of years. Their work is of the highest professional quality and they continue to provide the City with excellent advice and service. The confirmation of KPMG as the City's External Auditors for 1998 is recommended.

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(c) 1997 City of Vancouver