THE REGIONAL MUNICIPALITY OF PEEL AUDIT AND RISK …€¦ · (See also Reports – Item 4.1) 4. REPORTS 4.1. Deloitte 2015 Audit Service Plan (For information) (See also Delegations

THE REGIONAL MUNICIPALITY OF PEEL

AUDIT AND RISK COMMITTEE AGENDA ARC - 4/2015 DATE: September 3, 2015 TIME: 11:00 AM – 12:30 PM LOCATION: Regional Council Chamber, 5th Floor 10 Peel Centre Drive, Suite A

Brampton, Ontario MEMBERS: F. Dale; C. Fonseca; M. Medeiros; K. Ras; R. Starr; A. Thompson Chaired by Councillor C. Fonseca or Vice-Chair M. Medeiros 1.

DECLARATIONS OF CONFLICTS OF INTEREST

2.

APPROVAL OF AGENDA

3.

DELEGATIONS

3.1.

Trevor Ferguson, Partner, Deloitte, Presenting the 2015 External Audit Service Plan (See also Reports – Item 4.1)

4.

REPORTS

4.1.

Deloitte 2015 Audit Service Plan (For information) (See also Delegations – Item 3.1)

4.2.

Audit and Risk Committee Information and Reporting Needs (For information)

4.3.

Treasury Services Audit (For information)

Presentation by David Bingham, Treasurer and Director of Corporate Finance; and Jennifer Weinman, Manager, Internal Audit

4.4.

Environmental Control Laboratory Services Contract Audit (For information)

Presentation by Anthony Parente, Director, Wastewater; and Jennifer Weinman, Manager, Internal Audit

ARC – 4/2015 -2- September 3, 2015

4.5.

Summary of Global Risks 2015 (For information)

5.

COMMUNICATIONS

6.

IN CAMERA MATTERS

7.

OTHER BUSINESS

8.

NEXT MEETING Thursday, November 5, 2015, 11:00 a.m. – 12:30 p.m. Council Chamber, 5th Floor Regional Administrative Headquarters 10 Peel Centre Drive, Suite A Brampton, Ontario

9.

ADJOURNMENT

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REPORT Meeting Date: 2015-09-03

Audit and Risk Committee

For Information

DATE: July 7, 2015

REPORT TITLE: DELOITTE 2015 AUDIT SERVICE PLAN

FROM: Stephen VanOfwegen, Commissioner of Finance and Chief Financial

Officer David Bingham, Treasurer, Peel Housing Corporation

OBJECTIVE

To present the 2015 Audit Service Plan prepared by the Region’s external auditors, Deloitte, for the fiscal year ending December 31, 2015.

REPORT HIGHLIGHTS

The attached 2015 Audit Service Plan has been prepared by the Region of Peel’s external auditors, Deloitte, for the audit of the fiscal year ending December 31, 2015 for both the Region of Peel and the Peel Housing Corporation. The plan provides information regarding Deloitte’s audit key elements, audit scope, audit approach and communication requirements to the Audit and Risk Committee.

DISCUSSION

The Audit and Risk Committee approved the extension of the five-year audit contract by one year on April 2, 2015 while the Peel Housing Corporation approved Deloitte as the external auditors at the Annual General Meeting held on June 25, 2015. The audit for the 2015 fiscal year for both the Region of Peel and Peel Housing Corporation will commence in the fall. Deloitte has prepared the attached audit planning report to provide the Audit Committee with the external audit approach, audit scope, materiality, audit risks and communication requirements to the Audit and Risk Committee. It is expected that the 2015 consolidated financial statements for the Region of Peel and the 2015 financial statements for Peel Housing Corporation will be presented to the Audit and Risk Committee in early May 2016. There is a new accounting standard being implemented for 2015 dealing with the liability for contaminated sites. Work is on track regarding the estimated new liability.

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July 7, 2015 DELOITTE 2015 AUDIT SERVICE PLAN

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CONCLUSION

The 2015 external audit is expected to proceed as per the Audit Service Plan, as presented by Deloitte.

Stephen VanOfwegen, Commissioner of Finance and Chief Financial Officer

David Bingham, Treasurer, Peel Housing Corporation Approved for Submission:

D. Szwarc, Chief Administrative Officer APPENDICES

Appendix I – Regional Municipality of Peel and Peel Housing Corporation 2015 Audit Service Plan For further information regarding this report, please contact David Bingham at extension 4292 or via email at [email protected]. Authored By: Monique Hynes

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Regional Municipality of Peel and Peel Housing Corporation 2015 Audit service plan

For the year ending December 31, 2015 For presentation to the Audit and Risk Committee September 3, 2015

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© Deloitte LLP and affiliated entities. 2015 Audit service plan – Regional Municipality of Peel and Peel Housing Corporation i

Table of contents

Key elements of our audit service plan ......................................................................................................... 1

Audit scope ................................................................................................................................................... 4

Appendices

Appendix 1 – The Deloitte risk-based audit approach

Appendix 2 – Communication requirements

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© Deloitte LLP and affiliated entities. 2015 Audit service plan – Regional Municipality of Peel and Peel Housing Corporation 1

Key elements of our audit service plan

The Deloitte audit approach adheres to applicable professional auditing standards and, is risk-based and tailored to address the risks to financial reporting – the audit risks. Our audit approach involves consideration of the following:

Audit service plan – Key elements

Audit scope The audit planning and the preliminary risk assessment activities we conduct enable us to set the scope of our audit and to design procedures tailored to that scope.

Materiality We are responsible for providing reasonable assurance that your Financial Statements as a whole are free from material misstatement. Our materiality levels will be determined using professional judgment, on the basis of total revenues. We will report to the Audit and Risk Committee all uncorrected misstatements greater than a clearly trivial amount of 5% of materiality and any misstatements that are, in our judgment, qualitatively material. In accordance with Canadian GAAS, we will request that misstatements be corrected.

Audit risks Region of Peel

Areas of audit risk Our proposed audit response

Year-end cut-off Description: Determine if cut-off of revenues and expenses is appropriate

Substantive testing on accounts payable, accrued liabilities, deferred revenue and accounts receivable. Test disbursements subsequent to year-end.

Contaminated sites Description: Appropriate accounting and disclosure

Review of the completeness of management’s analysis of potentially contaminated sites under the new accounting standard. Test management’s estimates of potential remediation costs (if any).

Revenue and deferred revenue amounts*Description: Revenue recognition

Substantive testing to determine if restricted contributions (i.e., development charges, gas tax, conditional grants, etc.) have been recognized as revenue in the appropriate period.

Tangible capital assetsDescription: Appropriate accounting and disclosure

Substantive testing to determine if the validity, valuation, recording and cut-off of 2015 additions and disposals is appropriate. Testing calculations of amortization.

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Audit service plan – Key elements Region of Peel (Cont’d)


Year-end accruals and other estimates (including salaries, employee future benefits, landfill closure and post-closure liability and allowance for doubtful accounts) Description: Estimates require management judgments and assumptions

Obtain documentation on management’s control over accounting estimates and assess risk. Review and assess the consistency of major assumptions used to develop significant accounting estimates. Compare actual historical experience to models employed in such calculations. Obtain calculations from experts for accruals such as employee future benefit liability and assess assumptions and data used to prepare the report. Review actual outcome of prior year estimates.

Management override of controls*Description: Management is in a unique position to perpetrate fraud because of management’s ability to directly or indirectly manipulate accounting records and prepare fraudulent financial statements by overriding controls that otherwise appear to be operating effectively

Our audit tests the appropriateness of journal entries recorded in the general ledger and other adjustments made in the preparation of financial statements. We will obtain an understanding of the business rationale for significant transactions that we become aware of that are outside of the normal course of business for the Region, or that otherwise appear to be unusual given our understanding of the Region and its environment. We will review accounting estimates for bias and evaluate whether the circumstances producing the bias, if any, represented a risk of material misstatement due to fraud.

Peel Housing Corporation


Tenant and other receivables/revenue*Description: Revenue recognition and valuation

Review aging reports and estimate allowance for doubtful tenant receivables for reasonableness. Confirm subsidies received from the Service Manager. Perform detail testing of tenant and other receivables and related revenue.

Tangible capital assetsDescription: Appropriate accounting and disclosure

Substantive testing of capital asset additions and disposals. Testing calculations of amortization.

Long-term debt Description: Appropriate accounting and disclosure

Confirm long-term debt balances. Recalculate interest.

*Identified as a significant risk.

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Audit service plan – Key elements

Fraud risk In determining our audit strategy to address the assessed risks of material misstatement due to fraud, we will: 1. Assign and supervise personnel, taking into account the knowledge, skill and ability of

individuals with significant engagement responsibilities and our assessment of the risks of material misstatement due to fraud for the engagement.

2. Evaluate whether the selection and application of accounting policies by your organization, particularly those related to subjective measurements and complex transactions, may be indicative of fraudulent financial reporting resulting from management’s effort to manage results.

3. Incorporate an element of unpredictability in the selection of the nature, timing and extent of our audit procedures.

We will inquire directly of the Audit and Risk Committee regarding its views about the risk of fraud, whether it has knowledge of any actual or suspected fraud affecting the Region and the role it exercises in the oversight of management’s antifraud programs. If we suspect fraud involving management, we will communicate these suspicions to the Audit and Risk Committee and discuss the nature, timing, and extent of audit procedures necessary to complete the audit.

Internal control matters

We will communicate in writing significant deficiencies in internal control identified during the audit to the Audit and Risk Committee on a timely basis.

Use of specialists

Our audit team is supported with online resources as well as practice and national office specialists who assist our team when dealing with more complex, technical accounting, auditing and reporting issues. We intend to use the work of the Region’s actuary in their determination of the Region’s post-employment benefits. We will review and test any data and assumptions used, ensure the disclosure in the financial statements is adequate, and that the actuary is in good standing with the Canadian Institute of Actuaries. We also intend to use the work of the Region’s specialist to determine the valuation of the Region’s closure and post closure landfill liability and remediation costs for contaminated sites (if any).

Engagement letter

The terms and conditions of our engagement are included in the engagement letter, which is to be signed on behalf of Council and management, and will be provided separately to you.

Complete engagement reporting

Upon the satisfactory completion of our audit, we will provide you with an audit report on your Financial Statements. We will also provide reports to the Audit and Risk Committee to assist you in fulfilling your responsibilities, as required by applicable auditing standards. Appendix 2 summarizes the required communications between Deloitte and the Audit and Risk Committee.

Other matters

Independence We have developed important safeguards and procedures to protect our independence and objectivity. We will report on our independence at the conclusion of our engagement.

Management representations

We will obtain written and oral representations from management to complement our audit procedures. We will provide the Audit and Risk Committee with a copy of the written representations to be provided by management in our final report.

New financial reporting standards

We have reviewed recent PSAS standard setting activities (both finalized and in development) that we believe are particularly relevant to the Region. As previously communicated to the Audit and Risk Committee, the new PSAS standard PS 3260 re: ‘Liability for Contaminated Sites’ is applicable to the Region for the year ending December 31, 2015.

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Audit scope

Designed to obtain reasonable assurance and address the risks of material misstatements An audit is designed to search for potential misstatements that, individually or collectively, are material. This is done by determining a specific threshold for each engagement and considering other qualitative factors. The threshold amount is also used to evaluate the significance of uncorrected misstatements.

Materiality Our overall materiality level is used in our assessment of significant accounts where audit effort is necessary. We will design our work so as to consider material items appropriately and to detect potential adjustments that, individually or in combination with others, would be material to the Financial Statements. In accordance with Canadian GAAS, we will request the correction of any misstatements.

If the amount of uncorrected misstatements detected when conducting our audit exceeds that which we anticipated when we planned the audit, we may need to revise the scope of our audit. Should such a situation arise, we will discuss the matter with management on a timely basis in order to agree upon the appropriate course of action.

Risk assessment We compile information from a variety of sources, including discussions with management and the Audit and Risk Committee, to identify risks to the Region’s financial reporting process that may require attention. Our preliminary risk assessment took into account:

Key business developments and transactions (internal and external) Current business, regulatory and accounting pronouncements and developments Key management strategies and business plans Review of internal audit reports Prior years’ audit results, and Areas of significant judgment and risk.

Our audit planning activities and our preliminary identification of audit risks enables us to set the scope of our audit and to design audit procedures tailored to the identified risks to financial reporting. The table on page 1 sets out the more significant risks to financial reporting that we have identified, with management’s support, during our preliminary planning activities. The table also includes our proposed response to each risk. Our planned audit response is based on our assessment of the likelihood of a risk’s occurrence, the significance should a misstatement occur, our determination of materiality and our prior knowledge of the Region.

The results of our audit planning and risk assessment drive the scope and timing of the auditing procedures.

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© Deloitte LLP and affiliated entities. 2015 Audit service plan – Regional Municipality of Peel and Peel Housing Corporation

Appendix 1 – The Deloitte risk-based audit approach

A consistent approach that supports a dynamic environment Deloitte’s audit approach is a systematic methodology that enables us to tailor our audit scope and plan to address the unique issues facing the Region.

These steps are not necessarily sequential nor are they mutually exclusive. For example, once we’ve developed our audit plan and the audit is being performed, we may become aware of a risk that was not identified during the planning phase. Based on that new information, we would reassess our planning activities and adjust the audit plan accordingly.

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1. Initial planning

Understanding your business and accounting processes Our audit will take into account any specific items of particular interest raised by the Audit and Risk Committee as well as any areas of concern identified by the Audit and Risk Committee or management.

2. Assessing and responding to engagement risk Our audit approach combines an ongoing identification of risks with the flexibility to adjust our approach when additional risks are identified. Since these risks may impact our audit objectives, we consider materiality in our planning to focus on those risks that could be significant to your financial reporting.

Risk assessment The risks that we have identified to date, and which will be addressed when conducting the audit, are summarized on pages 1-3. As we perform our audit, we will update our risk assessment and will inform the Audit and Risk Committee and management of any significant changes to our risk assessment and any additional risks that are identified.

Consideration of the risk of fraud Fraudulent acts include the deliberate failure to record transactions, forgery of records and documents, and intentional misrepresentations made to our audit engagement team. Fraud may include intentional acts by management or employees acting on behalf of the Region, as well as employee fraud if management or employees are involved in actions that defraud the Region. Deloitte does not assume that management is dishonest nor do we assume unquestioned honesty. Rather, in accordance with Canadian GAAS, we exercise professional skepticism and recognize that the conditions we observe and evidential matter we obtain, including that obtained from prior audit engagements, need to be objectively evaluated to determine whether the Financial Statements are presented fairly in all material respects.

Maintaining an attitude of professional skepticism means that we carefully consider the reasonableness of the responses we receive to our inquiries from those charged with governance, and evaluate other information obtained from them in light of the evidence we obtain during the audit. When we identify a misstatement or control deficiency, we consider whether it may be indicative of fraud and what the implications of fraud and significant error are in relation to other aspects of the audit, particularly the reliability of management representations.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, it is possible that material misstatements due to error or fraud may not be prevented or detected on a timely basis. Accordingly, the assurance an auditor provides concerning the lack of misstatements arising from fraud is necessarily lower than the assurance provided concerning those arising from an error.

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3. Developing and executing the audit plan The performance of an audit includes evaluating the design and determining the implementation of internal controls relevant to the audit, and performing substantive audit procedures.

Audit procedures The timing of our audit procedures is dependent upon a number of factors including the need to coordinate with management for the provision of supporting analysis and other documentation. Generally, we perform our audit procedures to allow us sufficient time to identify significant issues early, thereby allowing more time for analysis and resolution.

For example, we anticipate performing audit procedures on account balances and disclosures involving significant and complex transactions.

Tests of controls As part of our audit, we will review and evaluate certain aspects of the systems of internal control over financial reporting to the extent we consider necessary in accordance with Canadian GAAS. The main objective of our review is to enable us to determine the nature, extent and timing of our audit tests and to establish the degree of reliance that we can place on selected controls. An audit of the financial statements is not designed to determine whether internal controls were adequate for management’s purposes or to provide assurance on the design of internal control over financial reporting.

The extent to which deficiencies in internal control may be identified through an audit of financial statements is influenced by a variety of factors including our assessment of materiality, our preliminary assessment of the risks of material misstatement, our audit approach, and the nature, timing and extent of the auditing procedures that we conduct. Accordingly, we gain only a limited understanding of controls as a result of the procedures that we conduct during an audit of financial statements.

We will inform the Audit and Risk Committee and management of any significant deficiencies that are identified in the course of conducting the audit.

Substantive audit procedures Our substantive audit procedures consist of a tailored combination of analytical procedures and detailed tests of transactions and balances. These procedures take into account the results of our controls tests and are designed to enable us to obtain reasonable assurance that the Financial Statements are free from material misstatements. To obtain this assurance, misstatements that we identify while performing substantive auditing procedures will be considered in relation to the Financial Statements as a whole. Any misstatements that we identify, other than those that are clearly trivial (the threshold has been set at 5% of materiality), will be reported to management and the Audit and Risk Committee. In accordance with Canadian GAAS, we will request that any such misstatements be corrected.

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4. Reporting and assessing performance

Perform post-engagement activities We will analyze the results of the audit procedures performed throughout the year and, prior to rendering our report, we will conclude whether:

The scope of the audit was sufficient to support our opinion, and The misstatements identified during the audit do not result in financial statements being materially misstated.

Complete engagement reporting After the satisfactory completion of appropriate audit procedures, we will provide an audit report on your Financial Statements.

We also provide reports to the Audit and Risk Committee to assist you in fulfilling your responsibilities as required by applicable auditing standards. Appendix 2 summarizes the required communications between Deloitte and the Audit and Risk Committee.

Deloitte’s client service principles include providing management and the Audit and Risk Committee with insights into the condition of the business and offering meaningful suggestions for improvement. We will report these insights and suggestions to the appropriate members of management and/or the Audit and Risk Committee for their consideration.

To enable us to determine how well we have achieved our client service objectives, including an assessment of the quality of our audit engagement, we actively solicit feedback from our clients. This feedback will be obtained either through meetings with members of the Audit and Risk Committee and management or their completion of questionnaires.

Your feedback enhances our understanding of your expectations of us through your evaluation of our performance. The information you provide helps us refine our client service objectives to ensure that we remain focused, responsive and proactive in meeting your needs while fulfilling our professional responsibilities.

Deloitte enjoys a solid reputation for our commitment to quality. Key factors supporting that reputation include:

A strong tone at the top A comprehensive ethics and compliance program An uncompromising approach to quality in client service Communication of and adherence to professional standards and client service principles A mature client feedback program A multifaceted approach to monitoring independence A robust technical consultation approach National Office consultation on areas of high risk or that require significant judgment Technical training for our professionals An annual internal inspection process for audit engagements, and Continuous improvement based on lessons learned and client feedback.

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Appendix 2 – Communication requirements

Required communication Timing of communication

1. Our responsibilities under Canadian GAAS Audit plan presentation

2. Our audit strategy and scope Audit plan presentation

3. Matters related to going concern Audit results presentation

4. Management judgments and accounting estimates Audit results presentation

5. Audit adjustments Audit results presentation

6. Uncorrected misstatements and disclosure items Audit results presentation

7. Significant accounting policies Audit results presentation

8. Alternative treatments for accounting policies and practices that have been discussed with management during the current audit period

Audit results presentation

9. Our responsibility for other information in documents containing audited Financial Statements, any procedures performed, and the results


10. Disagreements with management Ongoing Audit results presentation

11. Our views about significant matters that were the subject of consultation with other accountants


12. Significant difficulties, if any, encountered dealing with management related to the performance of the audit

Ongoing Audit results presentation

13. Material written communications between management and us


14. All relationships between the Region and us that, in our professional judgment, may reasonably be thought to bear on independence


15. A statement that, in our judgment, the engagement team and others in our firm and, when applicable, network firms have complied with relevant ethical requirements regarding independence


16. Illegal or possible illegal acts Ongoing Audit results presentation

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Required communication Timing of communication

17. Fraud or possible fraud identified through the audit process


18. Significant transactions inconsistent with ordinary business, including related party transactions


19. Limitations placed on our scope Ongoing Audit results presentation

20. Written representations we are requesting Audit results presentation

21. Modifications to our opinion Ongoing Audit results presentation

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For Information

DATE: August 6, 2015

REPORT TITLE: AUDIT AND RISK COMMITTEE INFORMATION AND REPORTING NEEDS

FROM: Michelle Morris, Director, Internal Audit

OBJECTIVE To inform the Audit and Risk Committee of the results of the Information and Reporting Needs assessment conducted by Internal Audit. REPORT HIGHLIGHTS • Internal Audit conducted an Information and Reporting Needs assessment of the Audit and

Risk Committee through consultation with committee members. • There is support to continue the current approach of providing a summarized audit report

accompanied with a presentation. • There are opportunities to incorporate leading edge reporting practices and other best

practices into future Audit and Risk Committee reporting. DISCUSSION 1. Background

In accordance with Standard 2410 of the International Standards for the Professional Practice of Internal Auditing, Internal Audit must communicate the results of audit engagements. Communications must include the audit’s objectives and scope, observations, applicable conclusions and management action plans. Internal Audit periodically reviews how results are reported to Regional management and the Audit and Risk Committee and have made changes accordingly. Recent changes to our Audit and Risk Committee membership provided an opportunity to review how results are currently reported and to gain an understanding of the Audit and Risk Committee members’ information and reporting needs. The review included an assessment of our current state of reporting; research on leading edge reporting practices and best practices; consultation with Audit and Risk Committee members; Executive Leadership Team input; and benchmarking with other municipal internal audit divisions. In addition, Internal Audit conducted an assessment of the content of audit reports to promote continuous improvement in the quality of reporting.

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August 6, 2015 ARC INFORMATION AND REPORTING NEEDS

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2. Observations

Currently, Audit and Risk Committee reports contain the audit objective and scope – which is issued to management prior to the commencement of field work; the overall audit opinion; the audit observations; and the management action plans to address observations. Accompanying each audit report is a high level presentation conducted by the internal audit manager and the audit client. The purpose of the presentation is to highlight the areas addressed in the audit and to provide management’s response. During the interviews with the Audit and Risk Committee members, there was support for the current structure of reporting – the summary report and the accompanying presentation. Most expressed that the presentations allow for engagement and discussion with the audit client. Key insights from the interviews included highlighting in the report, areas where controls are effective and working well and differentiating between observations in terms of their impact to program and service objectives. Internal Audit also conducted an environmental scan with other municipal internal audit divisions and performed leading edge reporting and best practice research. Key insights are noted below: Various approaches are used by municipal audit divisions. For example, some audit

organizations provide detailed reports including observations, recommendations and management action plans. There are a variety of practices with respect to the inclusion of presentations.

Leading edge reporting and best practice research supports a varied approach in how information is presented, depending on the complexity of the audit scope and observations. Examples included formal presentations, charts, graphs, metrics and storyboarding. Storyboarding is a visual illustration of how relationships fit together. From an audit perspective it would show how the management action plan addresses the audit observation.

For less complex audits and audits where no observations were noted they would proceed without a formal presentation but be subject to discussion and questions, as required.

As well, based on feedback received from the Audit and Risk Committee related to information provided in an audit report in the spring 2015, Internal Audit identified an opportunity to assess the content and quality of all audit reports. The assessment revealed areas where consistency and greater detail could be provided in audit reports. Internal Audit has implemented changes to address this and will continue to assess the quality of audit reports going forward.

3. Proposed Direction

Consistent with the feedback from Committee members, it is proposed that the current reporting approach be continued, which includes providing a summarized report accompanied with a presentation from the audit manager and client. Audit will begin to

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August 6, 2015 ARC INFORMATION AND REPORTING NEEDS

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incorporate best practices related to reporting techniques over the course of the next two years as part of our commitment to continuous improvement.

CONCLUSION

Internal Audit periodically reviews how results of audits are reported to management and the Audit and Risk Committee and has made changes accordingly. Recent changes to the Audit and Risk Committee membership provided an opportunity to review how results are currently communicated. Consultation with individual Audit and Risk Committee members support the current reporting approach which includes the summarized audit results accompanied by a presentation from the audit manager and client. Best practices for reporting will be incorporated into future Audit and Risk Committee reporting.

Michelle Morris, Director, Internal Audit Approved for Submission:

D. Szwarc, Chief Administrative Officer For further information regarding this report, please contact Michelle Morris, Director, Internal Audit, extension 4247 or [email protected] Authored By: Michelle Morris, CPA, CGA, FCCA, CIA, CRMA

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For Information

DATE: July 29, 2015

REPORT TITLE: TREASURY SERVICES AUDIT


OBJECTIVE To inform the Audit and Risk Committee of the results of the Treasury Services audit. REPORT HIGHLIGHTS • The Treasury Services section, within Corporate Finance, oversees an investment portfolio

of approximately $1.6 billion and debt securities of approximately $1.5 billion as of December 31, 2014.

• The objective of the audit was to evaluate whether controls in place are effective to enable the achievement of investment and debt management objectives.

• The audit observations are: o Investment and debt securities are managed effectively and in compliance with

legislation and the policies adopted by the Region of Peel (Region); o Effective controls are in place to safeguard assets and comply with legislative

constraints; o There are opportunities to:

� Strengthen documentation surrounding management oversight of the investment portfolio;

� Establish specific ethical conduct expectations and conduct background checks for staff in positions that manage the investment portfolio;

� Update the procedures manual to align with current practices and to clearly define roles and responsibilities

DISCUSSION 1. Background

The Internal Audit Risk Based Work Plan 2014 included an audit of Treasury Services. Internal Audit conducts an audit on the compliance of the investment portfolio with the applicable legislation on a recurring basis. The last audit of Treasury Services was conducted in 2007 and had no significant findings. The Treasury Services section, reporting directly to the Treasurer and Director of Corporate Finance, oversees the Region’s banking relationship, investment and debt management. The investment portfolio as of December 31, 2014 had a value of approximately $1.6 billion; total outstanding debt was approximately $1.5 billion for the same period. The total debt

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July 29, 2015 TREASURY SERVICES AUDIT

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outstanding included the Region’s own-purpose debt, Peel Housing Corporation mortgages, the debt retirement funds and the sinking funds, as well as debt issued on behalf of area municipalities. The Region issued debt in 2010 for both its own purpose and on behalf of the Town of Caledon. In 2013 it began to manage issuing debt for the City of Mississauga. The overall goal of the Region’s investment management approach is to provide adequate levels of liquidity and invest surplus funds to maximize returns while minimizing related risk and to comply with legislation. Investment limitations are established and approved by Council each year to ensure investments are managed within the tolerances stated in the Municipal Act, 2001, as amended and that investment related risks are minimized. Treasury Services’ role regarding the investment portfolio is to actively manage the investment of funds in authorized investment instruments and monitor and record earnings from the portfolio. The four major objectives of investment management are:

• Comply with legislative constraints; • Ensure safety of the principal; • Maintain adequate liquidity; and, • Maximize rate of return while complying with other objectives.

The overall goal of the Region’s debt management approach is to prudently finance the infrastructure needs of the Region, as well as the infrastructure needs of the area municipalities. The role of Treasury Services staff’s in the debt management process is to keep accurate records of outstanding debt balances and monitor interest payments and principal repayments. Debt issued in the Region’s name on behalf of area municipalities is monitored in the same manner as the Region’s own-purpose debt.

2. Audit Objectives The objective of the audit was to evaluate whether controls in place are effective to enable the achievement of investment and debt management objectives, specifically:

• Processes and procedures are in place to ensure that investment and debt management are in compliance with legislation and the Region’s policies; and,

• Investment and debt management are handled to achieve the objectives as outlined in the Region’s policies.

The scope of the audit included assessing Treasury transactions from January 1, 2014 to October 31, 2014. The scope of the audit specifically excluded:

• Debt issuance; • Banking service tendering process; and, • Effectiveness of cash forecasting.

This audit was conducted in accordance with the International Standards for the Professional Practice of Internal Auditing.

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3. Observations

The investment portfolio and debt securities are managed in compliance with the policies adopted by the Region and the Municipal Act, 2001, as amended. Additionally, controls are in place and working effectively to achieve the objectives of safeguarding assets and complying with legislative constraints. Three areas for control improvement were identified: a) Management Oversight

The Municipal Act, 2001, as amended, requires the Treasurer of a municipality to provide Council with an annual report on the performance of the investment portfolio and an opinion on whether all investments are consistent with the investment policies and goals adopted by the municipality. For the Treasurer to fulfill this responsibility, reviewing the investment performance reports on a regular basis provides the information needed to form the opinion. The Treasurer had sufficient awareness of the investment portfolio and its performance to issue an opinion in the annual report; however, there was no consistent, documented evidence showing the regular review of the investment portfolio reports by the Treasurer. Documented evidence of regular review would provide support that the Treasurer is aware of the portfolio and its performance. Not reviewing the portfolio reports on a regular basis may result in the Treasurer not having the most up-to-date information to issue an opinion. The Treasurer and Director, Corporate Finance will be reviewing treasury reports, currently under revision, on a monthly basis beginning in October 2015.

b) Ethical Conduct Expectations and Background Checks Ethical frameworks, a set of rules and guidelines designed to be followed by employees when making decisions, are an important component of strong organizational governance. Two core elements of an ethical framework are codes of conduct and criminal background checks. A code of conduct is the organization’s expressed expectation of ethical behaviors of its employees. Criminal background checks help reduce the likelihood that employees have a history of criminal misconduct. These requirements are often used for persons responsible for managing investment transactions and portfolios on behalf of an organization. The Region’s Code of Conduct expresses the ethical conduct expectations of employees and the Standard of Care in the Debt Management policy provides guidelines for staff involved in capital financing. There are no specific guidelines related to ethical conduct for staff involved in the management of investment portfolios. Criminal background checks are also not conducted for staff authorized to carry out investment transactions. Controls such as criminal background checks and ethical conduct expectations help reduce the risk of asset misappropriation by staff and subsequent reputational damage to the Region.

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The Chief Financial Officer will ensure criminal background checks are received once every three years for management involved in investment trading. Additionally, the Chief Financial Officer will include in the revised Investment Policy ethical conduct guidelines for employees involved in investment management. All work on this is expected to be complete by September 30, 2015.

c) Documented Procedures The Treasury Services section has a procedures manual in place to help guide staff in carrying out the responsibilities of managing the investment holdings and debt securities. The procedures manual also serves as training material for new staff or for coverage when needed. Presently not all documented processes in the manual are up to date and reflective of how staff carry out their duties. The procedures manual should be updated to align with current practices; there is a risk that controls may move out of alignment with current practices. In 2013, Treasury Services started a process review to capture current processes and identify opportunities for efficiency and improvement. Existing processes have been in place for many years and have not been re-examined to ensure they are still relevant and value adding. Phase I of the process review had documented all processes in the Treasury Services section at a high level, identified roles and responsibilities for each step in the process, as well as areas identified for improvement. The work performed in Phase I will serve as a foundation for future work. Currently, the planned Phase II and Phase III have been deferred due to resource constraints. The objective of Phase II was to ensure services are in alignment with client needs. Phase III was to identify gaps in service delivery and to establish performance measurement metrics. Work to update the procedures manual can be coordinated with any changes identified through the remaining phases of the process review. Specific areas to be addressed in the procedures manual include:

• Updating the new procedures for collecting cash flow information for cash

forecasting and minor tasks performed on a regular basis; • Updating for the changes of task assignment due to staffing addition, taking into

consideration the separating of incompatible duties; • Incorporating clearly defined roles and responsibilities from the next phases of

the process review; and, • Providing the portfolio performance reports to the Treasurer for his review and

sign off.

The Treasurer will move forward with starting the next phases of the process review and updating the procedures manual will be included in this work. Some interim updates to the manual are already underway; the final updates of the procedures manual are expected to be completed by December 31, 2016.

4.3-4


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CONCLUSION The investment and debt securities are managed effectively and in compliance with legislation and the policies adopted by the Region. Further, effective controls are in place to safeguard assets and ensure compliance with legislation. Opportunities for improvement were identified and management has developed action plans to address them. Internal Audit has reviewed the action plans and feels comfortable they will address the risks noted during the audit. Internal Audit will follow up on the status of management action plan implementation and report back to the Audit and Risk Committee


D. Szwarc, Chief Administrative Officer For further information regarding this report, please contact Michelle Morris, Director, Internal Audit at extension 4247 or via email at [email protected] Authored By: Jennifer Weinman, CPA, CA, CIA, CRMA and Lynn Guo, MBA, CIA

4.3-5

1

Treasury Services Audit

Presented by:

Dave Bingham, Director, Corporate Finance

Jennifer Weinman, Manager, Internal Audit

4.3-6

2

Background

• Investment portfolio as of December 31, 2014 - approximately $1.6 billion

• Overall investment goal is to maximize return while minimizing related risk and complying with legislation

• Debt outstanding as of December 31, 2014 - approximately $1.5 billion

• Overall debt management goal is to prudently finance the Region’s infrastructure

4.3-7

3

Audit Objective

Evaluate whether controls in place are effective to enable the achievement of the investment and debt management objectives. Specifically:

• processes and procedures are in place to ensure investment and debt management are in compliance with legislation and policies

• investment and debt management are handled to achieve the objectives in the Region’s policies

4.3-8

4

Audit Scope

• Transactions from January 1, 2014 to October 31, 2014

• The scope excluded:

– Debt issuance

– Banking service tendering process

– Effectiveness of cash forecasting

4.3-9

5

Audit Observations

• Investment and debt securities are managed effectively and in compliance with legislation and the policies adopted by the Region

• Effective controls are in place to safeguard assets and comply with legislative constraints

4.3-10

6

Audit Observations - continued

• Opportunity for improvement exist to:

– Strengthen documentation surrounding management oversight of investment portfolio

– Establish specific ethical conduct expectations and consider conducting criminal background checks for staff in positions that manage the investment portfolio

– Update procedures manual to align with current practices and clearly defined roles and responsibilities

4.3-11

7

Management Action Plans

• Ethical guidelines in place to support the decision making process in Treasury Services:

– A revised Investment Policy is scheduled to go to Council on September 10th includes guidelines related to Standards of Care for investment officers

– Criminal record checks for investment officers are expected to be received by August 31st. These shall be renewed every three years

4.3-12

8

Management Action Plans -continued

• Procedures manual and process improvement review:

– Interim updates to the manual are in progress, expected completion by October 31, 2015

– Treasury Review:

• Phase I: Current State Assessment completed by Corporate Project Management Office in November 2014

4.3-13

9


• Two other Phases are required to complete the Treasury Review:

• Phase II: Validation of Mandate & Services Phase III: Define Future State and Performance Measurement

• Funds are being requested within the 2016 operating budget to complete Phases II and III of the Treasury Review

4.3-14

10


• Management oversight of investment portfolio(s):

• Reports have been revised and now include cash as a short term investment

• Reports will be produced monthly and scheduled for review by the Treasurer on that basis

4.3-15

11

Conclusion

• Internal Audit has reviewed the action plans proposed by management and is satisfied they address the risk identified

• Internal Audit will follow up on the action plans with management and report back on the status annually to the Committee

4.3-16

12

Questions

4.3-17



For Information


REPORT TITLE: ENVIRONMENTAL CONTROL LABORATORY SERVICES CONTRACT AUDIT


OBJECTIVE To inform the Audit and Risk Committee of the results of the Environmental Control Laboratory Services Contract Audit. REPORT HIGHLIGHTS • The audit focused on determining that processes and controls are in place to ensure the

laboratory services contract is managed effectively. • The audit observations are:

• Effective controls are in place to manage the laboratory services contract. • There are opportunities for improvement, including:

o Establish a process to ensure compliance with the Records Retention By-law for laboratory test results;

o Provide on-going training for Regional staff on the functionality of the Maxxam laboratory information management system to efficiently and effectively access lab results; and,

o Document contract management procedures to provide guidance and education for staff.


The 2014 Internal Audit Risk Based Work Plan included an audit of the management of the laboratory services contract.

The Environmental Control section, within the Wastewater division, is responsible for providing laboratory services to the Region of Peel’s client groups, including water treatment, wastewater treatment and sewer discharge. These services were provided in-house until March 2013. In 2012, management conducted an assessment of external and internal lab services to determine the optimal mix of in-house and outsourced laboratory services, taking into consideration cost versus benefit. In determining the ongoing viability of the Region’s in-house laboratory services, Internal Audit was brought into the assessment process to facilitate a risk assessment. Management used the results of the risk assessment

4.4-1

August 21, 2015 ENVIRONMENTAL CONTROL LABORATORY SERVICES CONTRACT AUDIT

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along with information gathered during the broader assessment period to support the recommendation to outsource laboratory services for the Region of Peel.

On March 21, 2013 Regional Council approved contracting the provision of laboratory service to Maxxam Analytics International Corporation (Maxxam) for the period of five years. At that time, it was reported to Regional Council that net savings from outsourcing the laboratory services were projected to be $1.8 million annually over the term of the contract with Maxxam. The contracted laboratory services started June 2013 with Environmental Control managing the contract and acting as the point of contact between Maxxam and the Regional client groups requiring laboratory services.

2. Audit Objective

The objective of the contract audit was to determine that processes and controls are in place to ensure the laboratory services contract is managed effectively, specifically that:

• Laboratory analysis, test holding times and turnaround times meet contracted

requirements; • Laboratory handling of the test result information meets the Region’s information

management requirements, such as the Municipal Freedom of Information and Protection of Privacy Act, security and records retention;

• Reporting is complete, accurate and timely; and, • Administration components of the contract are satisfied.

Specifically, the scope of the audit focused on assessing the management of services provided by Maxxam from the inception of the contract in June 2013 to December 2014. The audit was conducted in accordance with the International Standards for the Professional Practice of Internal Auditing.

3. Audit Observations

The Environmental Control section has effective processes in place to manage the laboratory services contract. The processes they have implemented to ensure effective contract management include:

• Daily review of lab test turnaround times to ensure the time frame is in

compliance with the contract; • Quarterly meetings with the laboratory services provider to review laboratory

services performance measures; • Biannual onsite audit of laboratory procedures at Maxxam by Environmental

Control staff; and, • Initial documentation of contract management processes.

During the audit three specific areas for improvement were identified that may enhance the effectiveness and efficiency of controls for managing the contract.

4.4-2


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Record Retention Section 255 of the Municipal Act 2001 allows the Region of Peel to establish retention periods during which the Region’s records must be retained and preserved. Regional Council passed the Records Retention By-law 1-2007, for this purpose. The Records Retention & Classification Schedule of the By-law lists the various retention periods required for Regional records and indicates that laboratory test records be retained for the current year plus an additional 20 years. Lab test results are retained by Maxxam on behalf of the Region of Peel as part of their contract responsibility. The Region is the owner of all test results data retained by Maxxam and is responsible to ensure records are retained in accordance with the By-law. The laboratory services contract states Maxxam will store data for a minimum of five years and guarantee electronic record retrieval for five years. The current contract does not address records retention beyond the end of the five year contract with Maxxam which may result in a loss of access to laboratory results which are required to be kept in accordance with the Records Retention By-law. Environmental Control is working with Maxxam to develop a process to transfer records from Maxxam to the Region of Peel on a regular basis. The Director Wastewater will facilitate the development of the transfer process by December 31, 2015.

Information Management Efficiency

Laboratory test results are retained by Maxxam in the company’s Laboratory Information

Management System (LIMS). LIMS is used for logging, tracking and reporting laboratory test results and provides flexibility to quickly access sample test results on-line. The LIMS can also create summary reports of lab test results for reporting purposes. Maxxam provides the Region with access to LIMS as part of the contract.

Regional staff, in the client groups, were trained on how to use the LIMS at the beginning of the contract in June 2013. Staff has identified issues with accessing historical test results and creating summary reports. As a result, staff has developed work-a-rounds, to create reports, which are not efficient or effective when the LIMS has the functionality to support various reporting needs.

The Director, Wastewater has worked with Maxxam to educate staff on generating custom reports using LIMS. Additionally, a training presentation has been developed and is available on the Region’s intranet site for client groups to access as needed. Lastly, in-person monthly training sessions are being offered by Environmental Control. This management action plan has been fully implemented.

Processes and Procedures Processes and procedures contribute to good governance by providing consistency for how work is carried out; they are building blocks of efficient and effective delivery of services. When processes and procedures are documented and communicated they provide guidance and education for new staff.

4.4-3


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Managing a contract for outsourced laboratory services is a new role for the section; as such not all procedures for contract management have been documented. Documenting procedures, such as:

• Ensuring Maxxam’s accreditation and license are current, • Confirming test turnaround times meet contracted requirements; and, • Verifying Maxxam insurance requirements;

provide staff direction on processes executed infrequently and helps ensure contract services are delivered. Without documentation, there is the risk that services may not be delivered as required by the contract. The Director, Wastewater, plans to review the contract and current operational procedures and update existing procedures or develop new procedures as warranted. Work on this is underway and the target date for completion is September 30, 2015.

CONCLUSION

Internal Audit found that there are effective processes in place to manage the laboratory services contract. There are opportunities to develop a process to ensure compliance with the Records Retention By-law, to facilitate staff use of Maxxam’s Laboratory Information Management System and to document contract management procedures. Internal Audit has reviewed management’s action plans and is satisfied that the actions proposed will address the risks identified. Internal Audit will follow-up on the status of the management action plans related to this audit and report the status to the Audit and Risk Committee annually.


D. Szwarc, Chief Administrative Officer For further information regarding this report, please contact Michelle Morris, Director, Internal Audit at extension 4247 or [email protected] Authored By: Jennifer Weinman, CPA, CA, CIA, CRMA and Barb Morris, CPA, CMA, CIA, CFE

4.4-4

Environmental Control

Laboratory Services Contract

Audit

Presentation to Audit and Risk Committee

Jennifer Weinman, Manager, Internal Audit

Anthony Parente, Director, Wastewater

4.4-5

Background

Environmental Control is responsible for providing laboratory services to the Region’s client groups, including water treatment, wastewater treatment and sewer discharge.

In 2012, management conducted an assessment of cost and benefits of the in-house laboratory which resulted in outsourced laboratory services.

4.4-6

Background

In 2013 Regional Council approved contracting the provision of laboratory service to Maxxam Analytics International Corporation (Maxxam) for five years.

Environmental Control manages the contract and acts as the point of contact between Maxxam and the Regional client groups requiring laboratory services.

4.4-7

Audit Objective & Scope

Objective – to determine that processes and controls are in place to ensure the laboratory services contract is managed effectively.

The scope of the audit focused on determining:

Laboratory testing met contracted requirements.

Laboratory handling of the test result information met Regional information security requirements.

Reporting is complete, accurate and timely.

Administration components of the contract are satisfied.

4.4-8

Audit Observations

Effective controls are in place to manage the laboratory services contract.

There are opportunities for improvement to:

Establish a process to ensure compliance with the Records Retention By-law for laboratory test results.

4.4-9

Audit Observations

Provide on-going training for Regional staff on the functionality of the Maxxam laboratory information management system to efficiently and effectively access lab results.

Document contract management procedures to provide guidance and education for staff.

4.4-10

Management Response – Record

Retention

Record Retention Bylaw

Requires analytical data to be kept for a minimum of 20 years

Environmental Control Actions

All contract data since 2013 received

Stored electronically with Environmental Control

Maxxam

will be starting electronic record transfer and the information will be stored in the historical area in SCADA

4.4-11

Electronic

records

4.4-12

Management Response - Training

o Training material completed

o All Staff users invited to training sessions

o All training materials made available on Water/Wastewater Operators training page

o Open training sessions on the Maxxam web portal are held every month

4.4-13

Online training 4.4-14

Management Response – Contract

Management Procedures

Contract reviewed

Conditions identified that require a formal procedure

Responsible person and the frequency of the task clarified

Formal procedures in development

Staff training on procedures to follow

4.4-15

Contract Procedures list

4.4-16

Next Steps

Internal Audit is satisfied that the provided action plans will address the observations in this report

Internal Audit will follow-up and report on the status of management action plans

4.4-17

Thank You

Questions?

4.4-18



For Information


REPORT TITLE: SUMMARY OF GLOBAL RISKS 2015


OBJECTIVE To provide the Audit and Risk Committee with a summary from the information adapted from the “Global Risks 2015, Tenth Edition”, World Economic Forum, Switzerland, 2015 report. REPORT HIGHLIGHTS

• The Global Risks 2015 report is produced by the World Economic Forum on an annual basis with the 2015 version being the 10th edition.

• The report captures 28 global risks with leaders from business, government, academia and non-governmental and international organizations ranking risks in order of likelihood and impact.

• The report now includes 13 trends which are occurring with certainty and can have both positive and negative consequences.

• The report provides management at the Region of Peel and the Audit and Risk Committee with information to proactively assess the likelihood and impact that global risks may have on the Region’s strategic objectives.


The World Economic Forum is an independent international organization committed to improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas. The World Economic Forum is a not-for-profit foundation incorporated in 1971 and is located in Geneva, Switzerland.

Since 2006, the World Economic Forum has been producing the Global Risk report with the 2015 report representing the tenth edition. This latest edition has identified 28 global risks. The report defines global risk as an uncertain event or condition that, if it occurs, can cause significant negative impact for several countries or industries within the next 10 years. This year’s report identifies 13 trends. A trend is defined as a long-term pattern that is currently taking place and that could contribute to amplifying global risks and/ or altering the relationship between them. Detailed information of each risk is attached as Appendix I -

4.5-1

August 7, 2015 SUMMARY OF GLOBAL RISKS 2015

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Risks of Highest Concern in Terms of both Likelihood and Impact and detailed information on trends is attached as Appendix II.

The objective of the Global Risk 2015 report is stated as follows: “To shed light on global risks and help create a shared understanding of the most pressing issues, the ways they interconnect and their potential negative impacts – are more relevant than ever. The shared understanding of challenges is needed as a base for multi-stakeholder collaboration, which has seen increasing recognition as the most effective way to address global risks and build resilience against them”.

The Global Risks 2015 report aims to support this process by:

Exploring the nature of systemic risks and trends; Mapping the 28 global risks according to the level of concern, their likelihood and potential impact, as well as the strength of the interconnections between them; and, Looking in-depth at the three following risks: the interplay between geopolitics and economics, rapid and unplanned urbanization in developing countries, and emerging technologies.

2. Overview and Purpose

The objective of this summarized version of the Global Risks 2015 report is to provide management at the Region of Peel and the Audit and Risk Committee with information to proactively assess the likelihood and impact that global risks may have on the Region’s strategic objectives, Term of Council Outcomes and the implications to the programs and services the Region offers and to help determine if the mitigation strategies in place address those risks that can significantly impact the Region’s success. The intent is not to manage all risks but to gain an understanding of the external environment from a global risk perspective that can influence our strategic direction.

3. Approach

The World Economic Forum conducted the Global Risk Perception Survey of approximately 900 members of the Forum who are leaders in business, government, academia and non-governmental and international organizations between July and September 2014. In order to capture the voice of the youth, the survey also included the World Economic Forum’s community of Global shapers with the under 30’s accounting for approximately one-fifth of the respondents. This report summarizes the top 10 global risks in terms of both impact and likelihood and also focuses on three risks as determined by the respondents that were not captured as part of the 28 global risks. It is important to note that although the risks are ranked sequentially most risks are interconnected, for example, fiscal crises in key economies would be tightly connected to structurally high unemployment or underemployment, and should be considered holistically.

A change to the approach in the 2015 report includes the identification of 13 trends and the identification of risk exposure by geographical Region. For North America, failure of critical infrastructure, cyber-attacks and failure of climate change adaption has been identified as the top three risks that North America is least prepared for.

4.5-2


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4. Analysis

The report breaks down risks into five broad global categories. The five broad categories are in-line with the Regional risk categories; categories that are part of the Integrated Risk Management Framework. In the chart below, Internal Audit has contrasted the risk categories from the World Economic Forum against the Regional risk categories for ease of reading. The information in the chart does not represent identified risks for the Region of Peel. Internal Audit will be bringing forward a report to the Audit and Risk Committee in the future discussing the approach for embedding Integrated Risk Management into the organization. The approach will include how risk will be systematically assessed and reported on.

Risk Categories

World Economic Forum Region of Peel

Economic Risk

Fiscal and liquidity crisis, failure of a major financial mechanism or institution, oil-price shocks, chronic unemployment and failure of physical infrastructure on which economic activity depends.

Economic Risk

Risk and opportunities affecting the Region’s ability to meet its financial commitments, including changing government funding strategies, internal budget pressures and the performance of multi-level government economies.

Environmental Risk

Include both natural disasters, such as earthquakes and geomagnetic storms, and man-made risks such as collapsing ecosystems, freshwater shortages, nuclear accidents and failure to mitigate or adapt to climate change.

Environmental Risk

Risk and opportunities relating to the Region’s environmental policies and plans including energy efficiency, pollution, recycling, landfill requirements, climate change and emissions.

Geopolitical Risk

Covers the areas of politics, diplomacy, conflict, crime and global governance. These risks range from terrorism, disputes over resources and war to governance being undermined by corruption, organized crime and illicit trade.

Political Risk

Risks and opportunities associated with the political environment including changing federal and/or provincial governments. In addition, the risks of not delivering on federal or provincial government policy or not meet local administration’s political commitments.

Societal Risk

Captures risks related to social stability, such as severe income disparities, food crisis and dysfunctional cities, and public health, such as pandemics, antibiotic-resistant bacteria and the rising burden of chronic disease.

Social Risk

Risk and opportunities associated with the effects of changing demographics including population growth rates, changes in immigration policies, aging population rates and local cultural issues.

4.5-3


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Risk Categories

World Economic Forum Region of Peel

Technological Risk

Covers major risks related to the growing centrality of information and communication technologies to individuals, businesses and governments. These include cyber-attacks, infrastructure disruptions and data loss.

Technology/ Information Management Risk

Risk and opportunities associated with the capacity of the Region to deal with technological change. The ability to use technology to address changing demands. Includes the consequences of not using technology to help achieve objectives, the risks associated with security and privacy and inability to effectively collect and use information.

The following ten Global Risks were ranked as highest concern by respondents for 2015 in terms of both impact and likelihood.

Top 10 Risks in Terms of Likelihood Top 10 Risk in Terms of Impact

1. Interstate conflict 2. Extreme weather events 3. Failure of national governance 4. State collapse or crisis 5. Unemployment or underemployment 6. Natural catastrophes 7. Failure of climate-change adaptation 8. Water crises 9. Data fraud or theft 10. Cyber attacks

1. Water crises 2. Spread of infectious diseases 3. Weapons of mass destruction 4. Interstate conflict 5. Failure of climate-change

adaptation 6. Energy price shock 7. Critical information infrastructure

breakdown 8. Fiscal crises 9. Unemployment or

underemployment 10. Biodiversity loss and ecosystem

collapse

Of the risks identified above, four were identified as a high concern from both an impact and likelihood perspective:

Interstate conflict Unemployment or underemployment Failure of climate change-change adaptation Water crises

4.5-4


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CONCLUSION

The World Economic Forum produces the Global Risks 2015 report based on the perceptions of world leaders and youth respondents. The information contained in the report can help to inform management and the Audit and Risk Committee on the potential likelihood and impact that global risks may have on the Region’s strategic objectives, Term of Council Outcomes and implications to the programs and services the Region offers. The information contained in this report should be treated as advisory. It is not intended to conclude on the effectiveness of mitigation strategies in place at the Region of Peel.


D. Szwarc, Chief Administrative Officer APPENDICES

Appendix I - Summary of Global Risks - Risks of Highest Concern in Terms of Likelihood and Impact

Appendix II - Summary of Global Trends For further information regarding this report, please contact Michelle Morris, Director of Internal Audit, at extension 4247 or via email at [email protected]. Authored By: Michelle Morris, CPA, CGA, FCCA, CIA, CRMA, Adapted from “Global Risks 2015, 10th Edition”, World Economic Forum, Switzerland, 2015 report.

4.5-5

APPENDIX I Summary of Global Risks – Risks of Highest Concern in Terms of Likelihood and Impact

1

Top Ten Risks in Terms of Likelihood

Risk Risk Type Description

1. Interstate conflict Geopolitical A bilateral or multilateral dispute between states escalates into economic (e.g.

trade/ currency wars, resource nationalization), military, cyber, societal or

other conflicts. Note: This risk was identified as one of the top ten risks in

terms of impact.

2. Extreme weather

events (e.g. floods,

storms)

Environmental Major property, infrastructure and environmental damage as well as human

loss caused by extreme weather events.

3. Failure of national

governance

Geopolitical Inability to efficiently govern a nation of geopolitical importance due to weak

rule of law, corruption, illicit trade, organized crime, impunity or political

deadlock.

4. State collapse or

crisis

Geopolitical State collapse of geopolitical importance due to internal violence, regional or

global instability and military coup, civil conflict, failed states.

5. Unemployment/

underemployment

Economic A sustained high level of unemployment or underutilization of the productive

capacity of the employed population. Note: This risk also ranked in the top

ten in terms of impact.

6. Natural

catastrophes

Environmental Major property, infrastructure and environmental damage as well as human

loss caused by geophysical disasters such as earthquakes, volcanic activity,

landslides, tsunamis or geomagnetic storms.

7. Failure of climate

change adaptation

Environmental Governments and businesses fail to enforce or enact effective measures to

protect populations and to help businesses impacted by climate change to

adapt. Note: This risk was ranked in the top ten in terms of impact.

4.5-6


2

Top Ten Risks in Terms of Likelihood


8. Water crises Societal A significant decline in the available quality and quantity of fresh water,

resulting in harmful effects on human health and/or economic activity. Note:

This risk was identified as the number one risk in terms of impact.

9. Data fraud or theft Technological Criminal or state-sponsor wrongful exploitation of private or official data takes

place on an unprecedented scale.

10. Cyber attacks Technological State-sponsored, state-affiliated, criminal or terrorist large-scale cyber-attacks

cause an infrastructure breakdown and/ or loss of trust in the internet.

4.5-7


3

Top Ten Risks in Terms of Impact


1. Water crises Societal A significant decline in the available quality and quantity of fresh water,

resulting in harmful effects on human health and/or economic activity.

2. Spread of

Infectious Disease

Societal Bacteria, viruses, parasites or fungi cause uncontrolled spread of infectious

disease (for instance due to resistance to antibiotics, antivirals and other

treatments) leading to widespread fatalities and economic disruption.

3. Weapons of mass

destruction

Geopolitical Nuclear, chemical, biological and radiological technologies and materials are

deployed creating international crises and potential for significant destruction.

4. Interstate conflict Geopolitical A bilateral or multilateral dispute between states escalates into economic (e.g.

trade/ currency wars, resource nationalization), military, cyber, societal or

other conflicts. Note: This risk was identified as one of the top ten risks in

terms of likelihood.

5. Failure of climate-

change adaption

Environmental Governments and businesses fail to enforce or enact effective measures to

protect populations and to help businesses impacted by climate change to

adapt.

6. Energy price shock Economic Sharp and/or sustained energy price increases that place further economic

pressures on highly energy-dependent industries and consumers.

7. Critical information

infrastructure

breakdown

Technological Systemic failures of critical information infrastructure (e.g. internet, satellites,

etc.) and networks negatively impact industrial production, public services and

communications

8. Fiscal crises Economic Excessive debt burdens generate sovereign debt crises and/or liquidity crises.

4.5-8


4

Top Ten Risks in Terms of Impact


9. Unemployment/

underemployment

Economic A sustained high level of unemployment or underutilization of the productive

capacity of the employed population. Note: This risk also ranked in the top

ten in terms of likelihood.

10. Biodiversity loss

and ecosystem

collapse

Environmental Irreversible consequences for the environment resulting in severely depleted

resources for humankind as well as industries such as fishing, forestry, and

pharmaceuticals.

4.5-9

APPENDIX II Summary of Global Risks - Summary of Global Trends

Trend Description

Ageing population Ageing of populations in developed and developing countries driven by declining fertility and decrease of middle and old-age mortality

Climate Change Change of climate attributed directly or indirectly to human activity that alters the composition of the global atmosphere and which is in additional to natural climate variability

Environmental degradation Deterioration in quality of air, soil and water from ambient concentrations of pollutants and other activities and processes

Growing middle class in emerging economies

Growing share of population reach middle-class income levels in emerging economies

Increasing national sentiment Increasing national sentiment among populations and political leaders affecting countries’ national and international positions

Rise of chronic diseases Increasing rates on non-communicable diseases, also known as chronic diseases, leading to long-term costs of treatment threatening recent societal gains in life expectancy and quality, placing a burden on economies

Rise of hyper connectivity Increasing digital interconnections of people and things

Rising geographic mobility Increasing mobility of people and things due to quicker and better performing means of transport and lowered barriers

Rising income disparity Increasing socio-economic gap between rich and poor ain major countries or regions

Shifts in power Shifting power from state to non-state actors and individuals, from global to regional levels, and from developed to emerging market and developing economies

Urbanization Rising number of people living in urban areas, resulting in the physical growth of cities

Weakening of international governance

Weakening or inadequate global or regional institutions’ (e.g. the UN, IMF, NATO, etc.) agreements or networks, and loss of trust in them, increasing the global power vacuum and preventing effective solutions to global challenges

4.5-10

Documents

THE REGIONAL MUNICIPALITY OF PEEL AUDIT AND RISK …€¦ · (See also Reports – Item 4.1) 4. REPORTS 4.1. Deloitte 2015 Audit Service Plan (For information) (See also Delegations