Corporate Affairs and Audit Committee (CAAC) Meeting - April 19, 2013

Public Agenda

1. Approval of Agenda and Review of Agenda Order

Action: Approval

Pre-read: Agenda

Presenter: All

2. Confirmation of Public Meeting Minutes of March 8, 2013

Action: Approval

Pre-read: Minutes

Presenter: All

Reports from the Corporate Affairs and Audit Committee Chair

3. Chair's Report and Remarks

Action: Information

Pre-read: -

Presenter: Chair

Reports from Management

4. Auditor General’s Report

Action: Information

Pre-read: TCHC - Results of Follow-up of Previous Audit Recommendations

Presenter: Auditor General

5. 2012 TCHC’s Consolidated Draft Audited Financial Statements & PWC Year-End Report to the Audit Committee

Action: Approval

Pre-read: CAAC:2013-21

Presenter: External Auditor - PWC

IN CAMERA AGENDA ITEMS

Committee and External Auditor

Closed Meeting Agenda

A. Approval of Agenda and Review of Agenda Order

Action: Approval

Pre-read: Agenda

Presenter: All

B. Confirmation of Closed Meeting Minutes of March 8, 2013

Action: Approval

Pre-read: Minutes

Presenter: All

C. Confidential item respecting an identifiable person and litigation or potential litigation that affects TCHC

Action: Information

Pre-read: CONFIDENTIAL ATTACHMENT

Presenter: Auditor General

D. Confidential item respecting  recommendations of proposed policy or processes

Action: Approval

Pre-read: To be distributed April 17, 2013

Presenter: Director - Strategic Planning & Stakeholder Relations

E. Confidential item respecting  recommendations of proposed policy or processes

Action: Approval

Pre-read: CAAC:C2013-22

Presenter: Chief Financial Officer and Senior Director, Finance

In Camera Agenda Items

Committee Only

TERMINATION

Public Meeting Minutes

The Corporate Affairs and Audit Committee of Toronto Community Housing Corporation met on April 19, 2013, in the Main Floor Conference Room, 931 Yonge Street, commencing at 8:04 a.m.

Committee Directors present:

Christian Buhagiar, Chair

Brian Kwan

Regrets:

None

Other Directors present

Karen Newman

Also present:

Marta Asturi, Legal Counsel and Assistant Corporate Secretary 

Paul Chisholm, General Manager, Access Housing Connections Inc.

Jessica Claeys, Manager, Special Projects

Jason Gorel, Chief Financial Officer

Hugh Lawson, Director of Strategic Planning and Shareholder Relations

Janice Lewkoski, Board Secretary

Liz Reid, Senior Director, Information and Technology Services

Michael Vear, Chief Internal Auditor

Bora Zekavica, Senior Director Finance

Auditor General’s Officer

Jeffrey Griffiths, Auditor General

Jerry Shaubel, Director, Auditor General’s office

External Auditor-PricewaterhouseCoopers LLP

Daniel D’Archivio, Partner, Audit and Assurance Group, PWC

Rahim Lallani, Manager,Experienced, Audit and Assurance Group, PWC

Allen Topaloglu, Senior Manager, PWC

The Chair called the meeting to order and Ms. Mirela Bolentiru served as recording secretary.

At 8:04 a.m., the Committee only met in camera.  At 8:21 a.m., the public meeting resumed.

Item 1 - Confirmation of Agenda

Motion carried

Corporate Affairs and Audit Committee approved the agenda as presented.

Declaration of Conflict of Interest

The Chair requested members of the Corporate Affairs and Audit Committee to indicate any item on the public agenda in which they had a conflict of interest, together with the nature of the interest. None were declared.

Item 2 - Confirmation of Public Minutes of March 8, 2013

Motion carried

ON MOTION DULY MADE by Mr. Brian Kwan, seconded by Mr. Christian Buhagiar, the Corporate Affairs and Audit Committee confirmed the minutes of March 8, 2013.

Item 3 - Reports from the Committee Chair

The Committee Chair thanked the Committee members, the Auditor General and the external auditors for working together with TCHC management to complete and deliver the financial statements in due time and to implement the Auditor General’s recommendations. The Committee Chair also thanked the Chief Financial Officer and his finance team for a job well done.

Item 4 - Auditor General’s Report: TCHC – Results of Follow-Up of Previous Audit Recommendations

The Auditor General presented a summary of his report to the Committee, including the following:

• The Auditor General was extremely pleased with the amount of effort from senior management and appreciated specifically the work of the Chief Financial Officer and his staff under the leadership of the Committee.
• In 2011, there were issued two audit reports containing a total of 41 recommendations. The 2012 review indicated that 10 recommendations had been implemented and 31 recommendations remained outstanding.
• In 2012, there were issued three audit reports with respect to procurement and payment functions at Housing Services Inc. (hsi), subsidiary governance and TCHC fleet management, containing 39 additional recommendations.
• The result of the 2013 review indicated that TCHC fully implemented 30 out of the 70 total outstanding recommendations made in the five audit reports issued by the Auditor General’s Office in 2011 and 2012.
• The Auditor General noted that:
  • The 40 outstanding recommendations take more time to be assessed as fully implemented.
  • The issue of the TCHC fleet moving over to the City fleet was addressed and completed very quickly. This move will bring good savings to TCHC. The Auditor General commended the Chief Financial Officer for his contribution to accomplishing this task.
• A discussion ensued on whether there were any discrepancies with management with respect to assessing a recommendation as complete and fully implemented. 
• The Auditor General informed the Committee that a timeline of six months for the implementation process is considered as industry best practice.  The Auditor General’s Office will issue annual reviews until all the recommendations are fully implemented.
• The Chief Financial Officer recognized the good work of his staff and thanked Jessica Claeys, Siew Wong, Valesa Faria and Megan Filey for their outstanding contribution.

Motion carried

ON MOTION DULY MADE by Mr. Brian Kwan, seconded by Mr. Christian Buhagiar, the Corporate Affairs and Audit Committee received the report for information.

Item 5 - 2012 TCHC’s Consolidated Draft Audited Financial Statements & PWC Year-End Report to the Audit Committee, CAAC:2013-21

The Corporate Affairs and Audit Committee had before it the above-captioned report (CAAC:2013-21) from the President and Chief Executive Officer.

Representatives of the external auditor introduced the report, including the following highlights:

• The external auditor explained the changes due to the adoption of the new accounting framework (PSAS + 4200 standards) and the impact on the Corporation.
  • Some changes were just retroactive adjustments.
  • The most significant change was with respect to pension obligations and discount rate (the rate at which TCHC can borrow money). TCHC’s borrowing rate in 2012 was between 2% and 2.4%, which was reflected in the discount rates for pension calculation purposes.
  • Going forward, the intention of the Corporation is to mortgage the real estate assets of the Corporation to lower the borrowing rates.
  • City has a different discount rate than TCHC, but it has not changed from previous reporting.
• The external auditor presented the following main topics addressed in the report:
  • Adoption of new accounting framework;
  • Management override of controls;
  • Revenue recognition;
  • Accounting for subsidiaries, joint ventures and other investments;
  • Purchase of remaining 40% interest in RPEI;
  • Acquisition and disposal of housing projects and improvements to housing projects;
  • Valuation of investments;
  • Related party transactions;
  • Land transfer to Library District;
  • Financing arrangements;
  • Payroll and employee benefits;
  • Impairment of housing projects and improvements to housing projects;
  • Litigation;
  • Long-term receivables from the City of Toronto – the external auditor informed the Committee that the City reconfirmed the receivable balance of $21.3 million (outstanding since 2001) for the 2012 fiscal year; and
  • Wind-up of Housing Services Inc. (HSI).
• The audit and investigation of potential improprieties being investigated by an external firm was considered by the Committee.
• The external auditor made two recommendations with respect to internal controls related to:
  • Passwords and external users, and
  • Contract property management.

A discussion ensued including the following highlights:

• The CFO will report back to the Committee with respect to gain recognition for development projects as they arise in future, as discussion ensued as to the complexity of such accounting matters, and the need to evaluate each of them on a case by case basis.
• The CFO will gather more information with respect to contract management model and will report back to the Committee on contract management financial statements.
• The Committee requested that a note be added to the financial statements with respect to external sales in the Statements of Operation. HSI is in the process of dissolution, but some of its external sales will be recognized in 2012, being reduced to nil by 2014. The CFO will discuss with PWC to consider the addition of such a note in the final version of the financial statements.
• For transparency reasons, the Committee requested more disclosure in the notes with respect to salaries as they are not disclosed and visible anywhere, which represent a significant portion of the administration expenses.
• The CFO recognized the efforts of Bora Zekavica, Anna Tramontozzi and Jessica Wong in producing the financial statements to meet reporting deadlines.

Motion carried

ON MOTION DULY MADE by Mr. Brian Kwan, seconded by Mr. Christian Buhagiar, the Corporate Affairs and Audit Committee adopted the report and recommended that the report be forwarded to the Board of Directors for approval, including the modifications discussed at the meeting.

PUBLIC MEETING PROCEEDINGS

Motion carried

The Corporate Affairs and Audit Committee adjourned the public meeting at 9:32 a.m.

The Corporate Affairs and Audit Committee met in camera session at 9:34 a.m. with the external auditors and Auditor General and his staff.

CLOSED MEETING PROCEEDINGS    

Motion carried

The Corporate Affairs and Audit Committee resolved to meet in closed meeting at 9:48 a.m. to consider items A to F. 

TERMINATION

The meeting of the Corporate Affairs and Audit Committee terminated at 10:35 a.m.