attachment #1 to report no. hc-19-10

Attachment #1 To Report No. HC-19-10

Audit Planning Report to the Audit Committee

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Topics for discussion

We propose to highlight the following topics with the Audit Committee.

Topic Audit Committee action

What has changed from last year (page 3) Read

Scope and timing of the audit (page 4) Read and comment

Audit Committee members’ potential concerns Raise and discuss

This report is for the use of the Audit Committee for the purposes of carrying out and discharging its responsibilities and should not be used for any other purpose.

KPMG shall have no responsibility or liability for loss or damages or claims, if any, to or by any third party as this document has not been prepared for, and is not intended for, and should not be used by, any third party or any other purpose.

© 2010 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity.


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Audit plan for Audit Committee consideration

What has changed from last year

Entity-specific changes

Construction of new building to be owned by the Corporation funded through the Canada-

Ontario Affordable Housing Program Extension 2009.

Potential transfer of ownership of the Oakville Senior Citizens Residence to Halton Region.

Impact of economic downturn on level of bad debt expense.

Auditing standards

Canadian Auditing Standards are effective for periods ending on or after December 14, 2010

consistent with the clarified International Auditing Standards

Significant audit performance differences relate to:

communications with those charged with governance. The engagement letter in Appendix 1 provides a list of the communication requirements under Canadian Auditing Standards.

accounting estimates (including fair value accounting estimates and disclosures), evaluation of the severity and communication of control deficiencies, related parties and transactions, service organizations, and association with other information.

Significant reporting differences relate to:

date of the audit report – when sufficient appropriate audit evidence has been obtained, financial statements including notes have been prepared and the recognized authority has taken responsibility for the financial statements

form of the audit report, content of the audit report (e.g. emphasis of matter paragraph for material uncertainty related to future outcome of exceptional litigation)

fair presentation or compliance frameworks related to special purpose financial statements – expresses opinion on fair presentation or expresses opinion that financial are in compliance with the framework

Incremental audit file documentation requirements.


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Scope and timing of the audit

Our responsibilities

Our responsibilities are described in the engagement letter in Appendix 1 to the Audit

Planning Report.

Scope – Materiality

We determine materiality to:

plan and perform the audit

evaluate the effect of identified misstatements on the audit and of uncorrected misstatements, if any, on the financial statements.

For the current year, materiality of $400,000 has been determined.

We will reassess materiality at year-end to confirm whether it remains appropriate prior to

evaluating the effect of uncorrected misstatements.

We will communicate to you corrected and uncorrected misstatements identified by us during

the audit, other than those that are clearly trivial.

Should uncorrected misstatements remain, we will:

in accordance with professional standards, request that all uncorrected misstatements be corrected

communicate the effect that uncorrected misstatements, individually or in aggregate, may have on the opinion in the audit report on the financial statements.


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Scope – significant risks of material misstatement, including risks of fraud

Significant

accounts and

disclosures

Summary of

planned audit approach

Government

subsidies Substantive approach verifying subsidies to documentation from the

Ministry.

Rents receivable

and rental

revenue

Substantive approach using substantive analytical techniques on rental

revenue and performing the test of details sampling on subsequent

receipts of uncollected rents.

Accounts payable

and expenses –

operating and

capital

Substantive approach performing test of details sampling.

Mortgages

payable and

related expense

Substantive approach verifying balances to documentation from

Mortgage holder.

Investments and

related income Substantive approach performing test of details on the balances and

using substantive analytical techniques on related income.

Income producing

properties Substantive approach performing test of details sampling.

Appropriate accounting for and disclosures of new construction.

Substantive approach refers to the application of substantive analytical procedures or test of

details procedures.

Substantive analytical procedures consist of the evaluation of financial information through a

study of plausible relationships among both financial and non-financial data. They also

encompass the investigation of identified fluctuations and relationships that are seemingly

inconsistent with other relevant information or deviate significantly from predicted amounts.

Test of details are the application of one or more of the following techniques to individual items

or transactions: inspection of records or documents; inspection of tangible assets; observations;

confirmations; recalculation; re-performance.

Timing

The following are key deliverables and dates of the audit:

Topic Date(s)

Present the Audit Planning Report to the Audit Committee September, 2010

Conduct audit field work March 2011


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Topic Date(s)

Present the Audit Findings Report to the Audit Committee May 2011

Provide audit opinion on financial statements May 2011


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Appendices

Appendix 1: Engagement letter

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Mr. David Trevisani

Treasurer

Halton Community Housing Corporation

1151 Bronte Road

Oakville, ON L6M 3L1

July 27, 2010

Dear Mr. Trevisani:

The purpose of this letter is to outline the terms of our audit engagement commencing for the year

ending December 31, 2010.

This letter supersedes our previous letter to The Corporation of the Regional Municipality of Halton

dated September 28th, 2009 which included Halton Community Housing Corporation (“the Entity”).

The terms of the engagement outlined in this letter will continue in effect from year to year, unless

amended or terminated in writing. The attached Terms and Conditions form an integral part of the

terms of this engagement and are incorporated herein by reference (collectively the "Engagement

Letter").

FINANCIAL REPORTING FRAMEWORK

The financial statements will be prepared in accordance with a basis of accounting described in the

notes to the financial statements (hereinafter referred to as the "financial reporting framework"):

These financial statements will be prepared for the purpose of government funding and for the use

of the Entity, the Regional Municipality of Halton and Province of Ontario. The financial

statements will include an adequate description of the financial reporting framework.

MANAGEMENT'S RESPONSIBILITIES

Management acknowledges and understands that they are responsible for:

(a) the preparation and fair presentation of the financial statements in accordance with the

financial reporting framework referred to above.

(b) ensuring that all transactions have been recorded and are reflected in the financial

statements.

(c) such internal control as management determines is necessary to enable the preparation of

financial statements that are free from material misstatement, whether due to fraud or error.

Management also acknowledges and understands that they are responsible for the design,

implementation and maintenance of internal control to prevent and detect fraud.

(d) providing us with access to all information of which management is aware that is relevant

to the preparation of the financial statements such as records, documentation and other

matters.

(e) providing us with additional information that we may request from management for the

purpose of the audit.

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(f) providing us with unrestricted access to persons within the Entity from whom we determine

it necessary to obtain audit evidence.

(g) providing us with written representations required to be obtained under professional

standards and written representations that we determine are necessary. Management also

acknowledges and understands that professional standards require that we disclaim an audit

opinion when management does not provide certain written representations required.

An audit does not relieve management or those charged with governance of their responsibilities.

AUDITORS' RESPONSIBILITIES REGARDING THE AUDIT

Our function as auditors of the Entity is:

to express an opinion on whether the Entity's annual financial statements, prepared by

management with the oversight of those charged with governance, are, in all material respects,

in accordance with the financial reporting framework referred to above and

to report on the annual financial statements

We will conduct the audit of the Entity's annual financial statements in accordance with Canadian

generally accepted auditing standards (hereinafter referred to as applicable "professional

standards"). We will plan and perform the audit to obtain reasonable assurance about whether the

financial statements as a whole are free from material misstatement, whether due to fraud or error.

Accordingly, we will, among other things:

identify and assess risks of material misstatement, whether due to fraud or error, based on an

understanding of the Entity and its environment, including the Entity's internal control. In

making those risk assessments, we consider internal control relevant to the Entity's preparation

of the financial statements in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

Entity's internal control.

obtain sufficient appropriate audit evidence about whether material misstatements exist, through

designing and implementing appropriate responses to the assessed risks.

form an opinion on the Entity's annual financial statements based on conclusions drawn from

the audit evidence obtained.

communicate matters required by professional standards, to the extent that such matters come to

our attention, to the appropriate level of management, those charged with governance and/or the

board of directors. Refer to Appendix C for a listing of such matters and the form and timing of

such communication.

AUDITORS' DELIVERABLES

The expected form and content of our audit report is provided in Appendix B. However, there may

be circumstances in which a report may differ from its expected form and content.

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OTHER MATTERS

INCOME TAX COMPLIANCE AND ADVISORY SERVICES

This letter details the tax compliance and general tax advisory services to be provided to the Entity

for the 2010 taxation year. If there are tax services to be delivered outside the scope of those

described in this letter, we will require a separate engagement letter for those services.

Tax compliance services

We will prepare federal and provincial income and other tax returns and supporting schedules for

the Entity as requested. We will not audit or independently verify the data you provide for the

preparation of the returns. However, we may ask for clarification of some of the information.

Our engagement, with respect to tax compliance and general tax advisory services, cannot be relied

on to uncover errors or irregularities in the underlying information incorporated in the tax returns,

should any exist. However, we will inform you of any such matters that come to our attention.

Because management has ultimate responsibility for the tax returns, please have the appropriate

corporate officer review the returns before signing and filing them.

All returns are subject to examination by the taxing authorities. In preparing the returns, we rely on

your representations and that you understand and have complied with the documentation

requirements for all expenses and deductions. You should retain originals of all documents and

records as, in the event of an examination, you may be asked to produce documents, records or

other evidence to substantiate the items of income and deduction shown on the tax returns. KPMG

does not retain copies of any documentation. If an examination occurs, we will be available, on

request, to assist you. Such additional services are not included in the fees specified in this letter.

General tax advisory services

Our advice generally falls under one of the following situations:

1) On an ongoing basis, we will provide advisory services of a general nature relating to various

income, capital, payroll and indirect tax matters as they arise. This type of service generally

arises on a periodic basis as a result of preliminary inquiries made by you. In rendering these

services, it is important to recognize that the advice provided is dependent on the detail of the

information provided and the environment in which it is rendered. When professional

judgment suggests written confirmation of the facts and advice is necessary, we will draft the

appropriate correspondence to ensure the appropriate standard of care is met by all parties.

2) Periodically, you will seek detailed advice from us in connection with a specific transaction or

undertaking you are contemplating. In such a situation, our advice will be based on the

information provided to us. It is the responsibility of the Entity to ensure we are provided with

all the information necessary in order for us to render the advice sought. Our tax advice will

most likely be communicated to you, or your designate, in writing.

Our tax advisory services, both written and oral, will be based on the facts and assumptions

submitted to us. We will not independently verify this information. Inaccuracy or incompleteness of

the information could have a material effect on our conclusions.

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To be of greatest assistance to the Entity, we should be advised in advance of any proposed

transactions. If such matters exceed the scope of this engagement letter, we will issue additional

engagement letters to confirm the particular scope and terms.

FEES

Our fees for professional services to be performed under this Engagement Letter are $13,930 for the

financial statement audit and $1,070 for the report on the financial information contained in the

annual information return. This fee includes preparation of the tax returns as described above. In

subsequent periods, we will agree our estimated fees with the Entity before we commence the

delivery of any service. General tax advisory services described above will be billed at our

customary hourly rates based upon the time spent. We will discuss the estimated time required

prior to commencing any work.

We are available to assist the Entity, upon request, with a wide range of services beyond those

outlined above. Additional services are subject to separate terms and arrangements.

We are proud to serve the Entity and we appreciate your confidence in our work. We shall be

pleased to discuss this letter with you at any time. If the arrangements outlined are in accordance

with the Entity's requirements and if the above terms are acceptable to the Entity, please sign the

duplicate of this letter in the space provided and return it to us.

Yours very truly,

Barry F. Frieday

Partner

(905) 523-2212

Enclosure

cc: Audit Committee

The terms of the engagement set out are as agreed:

Name and Title Mr. David Trevisani

Treasurer

Date (dd/mm/yy)

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Appendix B – Expected Form of Report

INDEPENDENT AUDITORS' REPORT

To the Members of Board of Directors

Halton Community Housing Corporation

We have audited the accompanying financial statements of Halton Community Housing

Corporation ("the Entity"), which comprise of the statement of financial position as at December

31, 2010 and the consolidated statement of operations, statements of operating fund and changes

in fund balance, capital fund and changes in fund balance and cash flow for the year then ended,

and a summary of significant accounting policies and other explanatory information. The

financial statements have been prepared by management of the Entity based on the financial

reporting provisions of the Operating Agreement with the Province of Ontario (“the agreement”).

Management's Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements in accordance with

the financial reporting provisions of the agreement, and for such internal control as management

determines is necessary to enable the preparation of financial statements that are free from

material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We

conducted our audit in accordance with Canadian generally accepted auditing standards. Those

standards require that we comply with ethical requirements and plan and perform an audit to

obtain reasonable assurance about whether the financial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on the auditor's judgment,

including the assessment of the risks of material misstatement of the financial statements, whether

due to fraud or error. In making those risk assessments, the auditor considers internal control

relevant to the Entity's preparation of the financial statements in order to design audit procedures

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness

of accounting policies used and the reasonableness of accounting estimates made by

management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a

basis for our audit opinion.

Opinion

In our opinion, the financial statements of Halton Community Housing Corporation for the year

ended December 31, 2010, are prepared, in all material respects, in accordance with the financial

reporting provisions of the agreement.

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Basis of Accounting and Restriction on Distribution and Use

Without modifying our opinion, we draw attention to Note 1 to the financial statements, which

describes the basis of accounting. The financial statements are prepared to assist the Entity to

comply with the financial reporting provisions of the agreement referred to above. As a result,

the financial statements may not be suitable for another purpose. Our report is intended solely for

the Entity and the Province of Ontario and should not be distributed to or used by parties other

than the Entity, the Regional Municipality of Halton or the Province of Ontario.

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Appendix C – Matters to communicate

Matters required to be communicated under professional standards to the appropriate level of

management include:

Engagement partner

identity and role of the engagement partner

Fraud and non-compliance with laws and regulations

any identified fraud or any information obtained that indicates that a fraud may exist.

any identified non-compliance with laws or regulations or suspected non-compliance.

Control deficiencies

any significant deficiencies in the Entity's internal control that we intend to communicate to

those charged with governance unless it would be inappropriate to communicate directly to

management in the circumstances.

other deficiencies in internal control that have not been communicated to management by

other parties and that, in our professional judgment, are of sufficient importance to merit

management's attention.

Misstatements

any accumulated misstatements, other than those that are clearly trivial. Furthermore, we

request that management correct all misstatements communicated.

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Appendix C – Matters to communicate (continued)

Matters required to be communicated, on a timely basis, under professional standards to those

charged with governance include:

Engagement partner

identity and role of the engagement partner

Audit approach

an overview of the planned scope and timing of the audit.


any identified fraud or suspected fraud that may exist involving management, employees who

have significant roles in internal control, or others where the fraud results in a material

misstatement in the annual financial statements.

any matters related to fraud that are, in our judgment, relevant to your responsibilities.

any identified non-compliance with laws or regulations or suspected non-compliance, other

than when the identified or suspected non-compliance is clearly inconsequential.

Control deficiencies

any significant deficiencies, in writing, in the Entity's internal control.

Misstatements

any accumulated uncorrected misstatements (amounts or disclosures) other than those that are

clearly trivial. Furthermore, we request all uncorrected misstatements be corrected

Accounting practices

our views about significant qualitative aspects of the accounting practices including

accounting policies, accounting estimates and financial statement disclosures.

Significant difficulties

any significant difficulties that we encountered during the audit. For example, if we conclude

that management's refusal to allow us to send a confirmation request is unreasonable or when

we are unable to obtain relevant and reliable audit evidence from alternative audit procedures.

Significant matters

significant matters, if any, arising from the audit that were discussed, or subject to

correspondence with management (e.g., management's consultation with other accountants,

major issues discussed with management prior to retention or any disagreements with

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management, whether or not satisfactorily resolved, about matters that individually or in the

aggregate could be significant to the financial statements or report thereon)

other significant matters arising from the audit, if any, that, in our professional judgment, are

significant to the oversight of the financial reporting process, including those significant

matters arising from the audit in connection with the Entity's related parties.

Management representations

copies of written representations requested from management.

Going concern

events or conditions identified that may cast significant doubt on the Entity's ability to

continue as a going concern.

Reporting

any expected modifications to the audit report.

any expected emphasis of matter or other paragraphs in the audit report.

management refuses to remove a scope limitation in the audit.

Other information

any revision necessary to, or material misstatement of fact included in, financial and non-

financial information which is included, either by law, regulation or custom, in a document

containing the audited financial statements and our audit report thereon ("other information")

that we identified when reading such information, which management refuses to correct.

our responsibilities with respect to other information in documents containing audited

financial statements.

any significant matters resulting from the procedures performed in accordance with

professional standards on the other information.

Note: Significant findings from the audit will be communicated in writing if, in our professional

judgment, oral communication would not be adequate.

Matters required to be communicated under professional standards to council include:


any identified non-compliance with laws or regulations or suspected non-compliance where

we suspect that management or those charged with governance are involved.


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Appendix 2: KPMG's Audit Committee resources

General

Accountability e-Lert – Periodic electronic newsletter

www.kpmg.ca/accountability

Canadian Audit Committee Update – Semi-annual publications

http://www.kpmg.ca/auditcommittee/update.html

Audit Committee Roundtables – Spring and Fall

http://www.kpmg.ca/auditcommittee/roundtables.html

Audit Committee Institute Web site

www.kpmg.ca/auditcommittee

kpmg.ca

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