ADMINISTRATIVE REPORT

Date: December 29, 1998
Author/Local: J.Beresford/7789
RTS No. 437
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 1999 fiscal year, as required under Section 230 of the Vancouver Charter.

B. THAT KPMG be instructed to undertake the 1999 audit of the City’s finances and operations in accordance with its letter attached to this report, at a fee of $126,279 for 1999 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, as the City’s 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 1999.

DISCUSSION

We have received a letter from KPMG, dated December 23, 1998, requesting confirmation of their appointment as the City’s External Auditors for 1999. Their letter is attached as the Appendix to this report.

Council will note that the fee proposal for 1999 amounts to $126,279 exclusive of GST. The 1999 fee reflects a 0.6% increase over 1998, based on the Vancouver CPI increase from October 31, 1997 to October 31, 1998. As approved by Council in 1995, the fee includes an addition over the original tender amount due to an increase in the year-end audit work resulting from a refocused and reduced Internal Audit function. The total elimination of the Internal Audit Office in 1997 resulted in a further increase for 1998. This additional fee will remain in effect for the 1999 audit to reflect the continued absence of the Internal Audit function. 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 1999 operating budget.

The table below shows the individual 1999 fee increases by audit program compared with the 1998 fees.

	1998 Fees*		1999 Proposed Fees*
Audit Program
City general and related funds	$90,384		$90,926
City Public Housing Corporation	8,608		8,658
Basic Fee	$98,992		$99,584
Additional year-end work as a result of the elimination of the Internal Audit function.	26,536		26,695
Total Fees *Excluding GST	$125,528		$126,279

Note(1) - The 1998 fees are based on the lower of the Vancouver CPI increase -October 98 over October 97 (0.6%) and the percentage increase in the final 1998 operating budget (2.0%).

The total fees include the audit services rendered in reporting on compliance with the Provincial Home Owner Grant Act, the Local Government Grants 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 Director of Finance.

It is quite possible that as a result of the City moving to a new financial system, that additional quality assurance work will be required. Staff will negotiate the terms of this arrangement separately with the auditors.

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 1999 is recommended.

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(c) 1998 City of Vancouver