September 14, 1998
To:Strategic Policies and Priorities Committee
From:Audit Committee
Subject:Management Letter -Audit of the Accounts of the former City of York
Recommendation:
The Audit Committee on September 11, 1998, recommended to the Strategic Policies and Priorities Committee that
the 1997 management letter for the former City of York be received for information and Council so advised.
The Audit Committee advises that the 1997 management letter was forwarded to all Members of Council with the agenda
for the Audit Committee meeting held on September 11, 1998.
Background:
At its meeting held on September 11, 1998, the Audit Committee had before it a communication (June 24, 1998) Mr. R.T.
Correll of KPMG, Chartered Accountants, forwarding the management letter relating to the audit of the financial
statements of the former City of York for the year ended December 31, 1997.
City Clerk
Ina Robinson 392-7031
Attachment
Item 9
August 5, 1998
To:Audit Committee
From:City Auditor
Subject:Metropolitan Toronto Pension Plan and Metropolitan
Toronto Police Benefit Fund - Management Letter
Recommendation:
It is recommended that the 1997 management letter and the corresponding response relating to the audits of the accounts of
the Metropolitan Toronto Pension Plan and Metropolitan Toronto Police Benefit Fund of the Department of Finance, be
received for information.
Comments:
I have completed the 1997 audits of the accounts of the Metropolitan Toronto Pension Plan and Metropolitan Toronto
Police Benefit Fund, for the year ended December 31, 1997. As a bi-product of my audit, the attached management letter
was issued to the Chief Financial Officer and Treasurer of the Finance Department. A response from the CFO and
Treasurer has been received.
Conclusion:
I have reviewed the response to the management letter prepared by the Finance Department. The responses are appropriate
and will be followed up as part of our future audit work.
Contact Name and Telephone No.:
Rafiq Dosani, 392-8438.
Jeff Griffiths
City Auditor
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June 3, 1998
Ms. Wanda Liczyk
Chief Financial Officer and Treasurer
Finance Department
Station 1133
13th Floor, Metro Hall
Dear Ms. Liczyk:
We have completed our audit of the Metropolitan Toronto Pension Plan (MTPP) and the Metropolitan Toronto Police
Benefit Fund (MTPBF) for the year ended December 31, 1997. During our review, we noted areas in which internal
controls could be strengthened and where accounting systems and procedures could be improved.
Considering the test character of our audit, you will appreciate that reliance must be placed on adequate methods of internal
control as your principal safeguard against irregularities which a test examination may not disclose. In this letter we are
presenting, for your consideration, our comments and recommendations on matters related to the system of internal control
which came to our attention during the course of our audit. Although a number of issues raised in prior years have been
addressed some are still outstanding and are also included in this letter.
Observation:
The Boards of Trustees of the MTPP and the MTPBF have not signed a securities lending agreement with the new
custodian CIBC Mellon Global Securities Services Company. We have been advised that the Boards of Trustees and
CIBC/Mellon have commenced negotiations on a new securities lending agreement.
Recommendation:
1. The securities lending agreement between the Boards of Trustees of the MTPP and the MTPBF and CIBC Mellon Global
Securities Services Company should be signed and executed as soon as possible.
Observation:
Confirmation responses from participating employers for contributions made to the MTPP during the year revealed several
differences with the records maintained by the Pensions Administration. These differences were all reconciled and resulted
from December's contributions not being recorded in the current year.
Recommendation:
2. Contributions by participating employers to the MTPP should be reviewed to ensure that they are complete and that any
adjustment for amounts receivable be made on a timely basis.
Observation:
Presently, there is no policy in place regarding the collection of overpayments to pensioners. The Pensions Administration
Section discovered in 1993 that two pensioners had received CPP disability benefits and determined that they were
overpaid by $21,923. To date, no repayment schedule has been negotiated with the pensioners.
Recommendation:
3. Management should develop a policy regarding the collection of overpayments to pensioners. This policy should be
submitted to both Boards of Trustees for approval.
Observation:
The Pension Benefits Act requires that Board of Trustees approve a statement of investment policies and goals annually.
Included in this statement is an asset mix policy which stipulates optimum asset mix percentages on a book value basis
with minimum and maximum limits for each asset class. In addition, under the Income Tax Act, there is a maximum limit
of 20 percent for non-Canadian equities which if exceeded will result in a tax penalty.
At the present time, neither the Custodian, the Investment Coordinator or Manager of Pensions Division is ensuring that
pension fund investments comply with the asset mix policy established by the Trustees. In fact, at the year end,
non-Canadian equities held in the Metropolitan Toronto Pension Plan at 18.5% exceeded the 18% maximum in the asset
mix policy. We are informed that the Custodian is ensuring that the non-Canadian investments, are in compliance with
requirements of the Income Tax Act. However, no one is monitoring from the Division to ensure that the custodian is
performing these functions.
Recommendation:
4. Management should establish guidelines that specify who should monitor compliance with the asset mix policy and the
requirements of the Income Tax Act. The guidelines should also require quarterly reporting of the results of monitoring the
asset mix policy.
We have reviewed these comments with staff from the Pensions Administration and would be pleased to discuss them
further, if you so wish.
Yours very truly,
Jeffrey Griffiths
City Auditor
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August 31, 1998
To:Audit Committee
From:Chief Financial Officer & Treasurer
Subject:1997 Management Letter Response
Purpose:
To respond to issues raised in the City Auditor=s 1997 Management letter as it specifically relates to the Metropolitan
Toronto Pension Plan and the Metropolitan Toronto Police Benefit Fund.
Financial Implications:
N/A
Recommendation:
Receive as information.
Discussion:
Comments on the 1997 Management Letter were sent to the City Auditor on June 23, 1998 and are contained in this report.
Auditor'
The security lending agreement between the Boards of Trustees of the MTPP and the MTPBF and CIBC Mellon Global
Securities Services Company should be signed and executed as soon as possible.
We will expedite the execution of the agreement once the legal department is satisfied with the wording of the agreement.
Currently our solicitor is in final discussions with CIBC Mellon in regards to one section of the agreement that concerns the
pooling of cash collateral.
Contributions by participating employers to the MTPP should be reviewed to ensure that they are complete and that any
adjustment for amounts receivable be made on a timely basis.
The verification procedure will be changed from an annual basis to a quarterly basis to ensure that discrepancies are
identified earlier.
Management should develop a policy regarding the collection of overpayments to pensioners. This policy should be
submitted to both Boards of Trustees for approval.
A draft policy will be submitted to the Board, within the next three months, for their discussion and approval.
Management should establish guidelines that specify who should monitor compliance with the asset mix policy and the
requirements of the Income Tax Act. The guidelines should also require quarterly reporting of the results of monitoring the
asset mix policy.
This matter will be brought to the attention of the Board of Trustees, at their next meeting, so that guidelines can be
established in regards to the monitoring of asset mix and foreign content limits.
