Part 1: Audit Committee Reviews Clean 2024 Audit and Flags Long-Term Financial Pressures - 08/27/2025
- PECConnect
- Aug 27, 2025
- 5 min read
The meeting was called to order by the Chair and live streamed from Shire Hall. Quorum was confirmed, and Rita Coburn was formally welcomed as a new member of the Audit Committee. The agenda was approved, no pecuniary interests were declared, and the minutes from the March 26 2025 meeting were adopted without amendment. With no announcements, the committee moved directly into its primary business for the day: review of the 2024 year-end audit results.
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KPMG Audit Findings for the Year Ended December 31 2024
Katie Mahone, Partner at KPMG, presented the audit findings report and walked the committee through the highlights. She confirmed that the audit was substantially complete and that the County received a clean, unmodified audit opinion. Draft consolidated and trust fund financial statements, along with the draft auditor’s report, had already been circulated and would be finalized once Council approval is obtained.
Mahone explained that there were no significant changes to the audit plan from what had been approved earlier in the year. Audit materiality was set at $2.1 million, representing 2.5 percent of prior year expenses, which fell well within accepted public sector audit standards. A lower reporting threshold of $105,000 was used during audit testing.
Fraud risk was discussed in detail, including mandatory testing for management override of controls. KPMG performed unpredictable procedures, including review of employee expense reports and corporate credit card reconciliations. No issues were identified, and no fraud-related findings were reported.
The audit identified five immaterial misstatements, all of which were corrected by management during the audit process. As a result, there were no uncorrected misstatements remaining at year end. Mahone noted that the adjustments largely reflected year-end timing and staff turnover rather than systemic issues.
KPMG also confirmed that no significant internal control deficiencies were identified, either individually or in aggregate.
Financial Sustainability Observations and Net Debt Growth
The most substantive discussion centered on KPMG’s observations regarding financial sustainability. Mahone highlighted that the County’s net debt increased from approximately $38 million to just under $55 million year over year.
She cautioned that public sector financial statements do not separate current and long-term liabilities under existing accounting standards, which can distort perceptions of short-term liquidity. Of the net debt total, approximately $32 million relates to long-term debt, while more than $40 million reflects temporary borrowing expected to convert to long-term debt once projects are completed.
Mahone also pointed to approximately $40 million in reserves, alongside roughly $15 million in unfinanced capital projects, emphasizing that audited financial statements reflect historical position only and do not capture future capital commitments.
Committee members pressed on how to interpret these numbers meaningfully. Councillor Kate MacNaughton raised concerns about the sharp year-over-year increase in net debt and the limits of single-year snapshots, calling for trend analysis, long-term projections, and clearer triggers for action.
Mahone agreed, explaining that while the County remains within provincial debt repayment limits and ministry financial indicators, long-term financial forecasting is essential to understand timing gaps between capital spending and funding sources. She noted that accounting standards will change in 2027, introducing current versus long-term classifications that should improve clarity.
Questions on Benchmarking, Comparisons, and Presentation
Committee members asked how Prince Edward County compares to peer municipalities. Mahone explained that meaningful comparisons are difficult due to differences in geography, service mix, water and wastewater systems, and long-term care facilities. While provincial financial indicators place the County in a lower risk category, she stressed the importance of planning for upcoming capital demands.
New committee member Rita Coburn asked whether management reporting could provide more useful short-term views than annual audited statements. Mahone confirmed that audited financial statements are constrained by accounting standards, but internal management reporting can and should be more flexible.
Management Response and Upcoming Financial Reporting
Director of Finance and IT Aaron McNichol outlined work already underway to address these concerns. He confirmed plans to introduce a financial health or State of the Union style report, supplementing quarterly and year-end financial updates with trend data on debt, reserves, sustainability ratios, and flexibility metrics.
McNichol linked this work to the County’s broader asset management planning, upcoming development charge background study, and a water and wastewater rate study scheduled for 2026. He emphasized that much of the current net debt is strategic, tied to growth-related infrastructure that will ultimately be funded through development charges, water and wastewater rates, and future tax base growth. The committee formally received the KPMG audit presentation.
Public Comment on Bill 23 and Long-Term Financial Planning
The committee then heard from Jennifer, representing the Wellington Community Association, who requested and was granted extended speaking time.
She warned that Bill 23 and other provincial growth mandates are placing unsustainable pressure on rural municipalities by accelerating housing approvals while reducing development charge revenues and infrastructure funding. She highlighted that the province contributed only $18 million toward a $300 million County waterworks expansion, leaving local taxpayers exposed.
Jennifer urged the County to commission a 10-year financial impact plan assessing the cumulative effects of Bill 23 on infrastructure, debt, reserves, and long-term affordability. She referenced work by former Toronto CFO Heather Taylor, suggesting that external expertise could help municipalities better quantify risks, improve creditworthiness, and advocate for fairer provincial funding.
Committee members acknowledged the concerns. McNichol responded that many of the proposed elements are already being developed internally through asset management, development charge studies, and long-range financial modeling, though he did not rule out future external reviews if Council directs them.
Public comments were formally received.
Financial Reports and Committee Decisions
The committee then reviewed and received:
the Audit Findings Report for 2024
the Draft Consolidated and Trust Fund Financial Statements, which were forwarded to Council for approval
the 2024 year-end financial report, including reserve transfers to address a $419,700 operating deficit
the June 30 2025 financial report, providing a mid-year snapshot of operating and capital activity
Discussion during these items touched on unbudgeted legal costs, COVID-related reconciliation clawbacks at H J McFarland Home, insurance savings tied to improved risk management, and the value of mid-year reporting to flag emerging trends.
Work Plan and Next Steps
The committee reviewed its work plan and agreed to postpone the October meeting, instead scheduling a December session to allow time for:
third-quarter financial reporting
a financial health overview
additional committee discussion without conflicting with budget preparation
The meeting adjourned at 4:53 pm.
Disclaimer: This article is based on a meeting with an approximate duration of 1:52:029. Due to the length of the meeting, our team was not able to independently review the full recording in its entirety. As a result, we relied on software-generated transcription, automated summarization, and automated recognition of speakers and participants, which may not be entirely accurate. All transcriptions, summaries, and related content are prepared by our team in good faith and on a reasonable best-efforts basis. The content is provided for general informational purposes only and is intended to support public understanding of the topics discussed. While reasonable efforts have been made to present the information accurately, automated processes may result in errors, omissions, or unintended misinterpretations. This article does not constitute an official, certified, or verbatim record of the meeting, and it should not be relied upon as such. Readers are encouraged to consult original source materials, official minutes, or recordings where available for confirmation or clarification. Questions, requests for clarification, or suggested corrections may be submitted to hello@pecconnect.ca for review and consideration.
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