KPMG auditor criticizes Chestermere city finances

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One of the largest accounting firms in the country accuses the City of Chestermere of misrepresenting its finances and demands immediate corrective action.

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In financial statements quietly uploaded to Chestermere’s website, city officials say KPMG, one of the so-called Big Four accounting organizations, conducted the annual audit of the city’s finances and the council approved the statements in November 2022. However, KPMG says it never ended. the audit, having been forced to resign before she could do so.

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The move has caught the attention of Municipal Affairs Minister Rebecca Schulz, whose spokeswoman confirmed that the minister is looking into the matter.

“The minister is very concerned about the city’s decision to release the 2021 financial statements without a signed report expressing the auditor’s opinion on the financial statements,” Schulz’s chief of staff Alexander Puddifant said in a statement on Tuesday. written statement.

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Incomplete audit, says KPMG

According to a Tuesday letter to the city from KPMG, obtained by Postmedia, KPMG claims the city is incorrectly presenting the documents as a full audit report, saying that “the package incorrectly states on two occasions that KPMG audited the 2021 financial statements.” from the city. ”

“As a result of our resignation, we did not complete an audit of the City’s 2021 financial statements and, accordingly, have not issued an audit report expressing an opinion on these 2021 financial statements,” the letter says.

The financial package is dated December 7, 2022, six days after KPMG’s resignation. In its Dec. 1, 2022, resignation letter, also obtained by Postmedia, KPMG said it was forced to resign due to a break in its relationship with the city and deterioration of its audit independence “by virtue of a repeated threat of litigation”. against KPMG by the city.”

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The documents on the city’s website do not include KPMG’s letterhead or the auditor’s signature, as the city’s financial statements have in previous years.

KPMG calls for public correction

In its letter on Tuesday, KPMG demands that the council take immediate action to remove the package from the city’s website, issue a public communication expressly stating that KPMG did not audit the city’s finances for 2021, and confirm that no one was informed of it. that KPMG had completed the audit.

“If any parties have been informed, then (requires) written confirmation from the City that those parties have been contacted, in writing, and directed to return any copies of the City’s financial statements that contain our unsigned Independent Auditors Report,” it read. the letter.

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The province obliges municipalities to submit audited financial statements each year in May. Although the financial statements were approved by the council, the province requires that the financial statements include an audit report signed by the auditor. As such, the province has not accepted the city’s financial statements.

“Financial stewardship and the fiduciary duty to manage municipal public resources in an accountable and transparent manner is at the core of how we expect city councils to provide good governance,” Puddifant said. “Municipal financial management and reporting are governed by the accounting standards for public bodies established by the Public Sector Accounting Board. As this information is relatively new, the minister is still reviewing it.”

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Four Alberta municipalities have not filed 2021 audits

Municipal Affairs officials previously told Postmedia that grant funds, such as the Municipal Sustainability Initiative, from which Chestermere was scheduled to receive $2.4 million in 2022, are not affected or lost due to late submissions, but they can be delayed. The department does not release the funds until it receives audited financial statements from the municipality for the previous year.

With KPMG’s resignation, it’s unclear if the city has hired another firm to handle the backlogged 2021 audit or the upcoming one for 2022.

Chestermere is one of four municipalities in Alberta that has yet to submit its 2021 audited finances, according to the province’s municipal dashboard of indicators. The other three are small rural communities: the City of Fox Creek, the Village of Arrowwood, and the Village of Delia, which have a combined population of approximately 2,500.

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Neither the city administration nor Mayor Jeff Colvin responded to Postmedia’s requests for comment Tuesday. As of Tuesday afternoon, the financial statements remained available on the city’s website.

Former CAO received more than $265,000 in severance pay before charge was split

Financial statements released by the city, though not signed off by the auditor, show former Chestermere Managing Director Bernie Morton was awarded a total of $265,302 in compensation when he was hastily fired days after the current council took office in October 2021.

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The move paved the way for a structural change in the role, splitting the typically lone senior manager role, the CAO, into three positions, all of whom report to the board. Since that change went into effect last February, seven people have served in all three roles, though the council recently ratified three people in the positions.

The package also provides a limited update on internal financial investigations the city launched last year into what it called “missing millions” from its former utility company and hundreds of thousands of dollars in irregular payments to two former employees. Since those investigations began, the city has not provided any public updates on their progress.

The November letters to the city’s KPMG contained in the package indicate that those investigations, while not yet complete, are not expected to result in any findings that affect the city’s 2021 finances. , a rare investigation into city government released by the province in May 2022, contains no findings affecting the city’s finances for 2021, the city says.

Municipal Affairs officials are expected to reveal the results of the municipal inspection at a public meeting in the coming weeks. At that time, Minister Schulz will provide direction to the city council and administration to address any issues found.

If those directives are not followed, the mayor, councilmembers or top city administrators could face further sanctions, including possible dismissal.

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Twitter: @miguelrdrguez