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County says no to audit letter request

The County of Barrhead is backing its auditors to not release portions of audit management letters to the public. The Alberta Association of Municipal Districts and Counties (AAMDC) is seeking input on whether or not to publicly release the letters.

The County of Barrhead is backing its auditors to not release portions of audit management letters to the public.

The Alberta Association of Municipal Districts and Counties (AAMDC) is seeking input on whether or not to publicly release the letters. Audit management letters are the main communication tool between a council and its auditors. Only the recommendations made in the letters would be made public. Auditors are not required to provide such a letter; in the event they do, the Canadian Institute of the Chartered Accountants’ handbook states they are not intended for a third party, according to AAMDC.

However, the province is looking at ways to make municipalities more financially transparent to Albertans. Making audit letters accessible to the public is one aspect in the four-point Municipal Accountability Action Plan that serves as an alternative to establishing a municipal auditor general. Barrhead County councillors were asked to consider in the interest of accountability and transparency, how should significant weakness or breakdowns in process be disclosed, and would publicizing the audit letters restrict the effectiveness of the communication between auditor and council.

“AAMDC is taking a poll to determine whether it would be alright for change, and what would be the pros and cons,” said County manager Mark Oberg.

County auditor Blaine Clarahan told councillors there is a reason audit letters aren’t released – there’s danger of misinterpretation by anyone who doesn’t fully understand the numbers.

“If these letters are presented to people who don’t properly understand them, that’s where misinformation can happen,” Clarahan said.

He said in his time with the County, there may have been one instance where a letter was published in the newspaper, but for the most part, releasing this information isn’t worth the effort.

Oberg said he is pleased with the level of transparency of the County of Barrhead. He told councillors not to think about the request as directly related to Barrhead, as the County has no problems with its financial transparency.

Rather, he said it should be viewed in a more general sense, so communities that are experiencing financial difficulties will come to the attention of the government.

In its response to AAMDC, the County stated: “The recommendations that are made in municipal audit management letters are not written for the lay person. Unless the reader has an understanding of municipal finance, as well as some knowledge of the financial systems of the individual municipality that was audited, there is a danger that the recommendations could be misinterpreted. Should this happen, the municipality could be unfairly blamed for a situation that may not be true. What could be meant to be a helpful suggestion by the auditor on how to improve a process could be interpreted as laying blame, or uncovering a misdeed. If the management letters were made public, auditors may be reluctant to include these suggestions for improvement. That would be a loss to the municipality.”

Coun. Gerald Nanninga said the province isn’t automatically sent a copy of the audit letters, and perhaps that is something that needs to change in order to prevent municipalities from falling into financial ruin.

“In my nine years on council, there is nothing in these letters that I would have been afraid to make public,” Nanninga said. “There have been recommendations, and we’ve acted on them. But, too many municipalities have poor financial officers, and their finances are a mess. The residents don’t know about it, nor does the province.”

Clarahan said the fact it’s only the recommendations that would be made public is a little more acceptable than releasing the entire letter.

“In general, I think most auditors would feel the same, and (an entire letter) isn’t something that should be published,” he said.

Coun. Lawrence Miller said all accountants work under a charter, which means they have to be trusted in their work. Only more bureaucracy would be created through releasing recommendations from audit letters.

Other aspects include rotating municipal corporate reviews, reviewing auditor independence, and establishing an informal portal to enhance public access to municipal financial information.