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KPMG says it never signed off on City of Chestermere's 2021 financial statements, making audit void

The City of Chestermere is under fire from accounting firm KPMG LLP, which claims it never signed off on the municipality's 2021 financial statement.

In a letter sent to the city on Tuesday, KPMG says it was made aware of a financial package recently uploaded to the city's website stating the accounting firm had signed off on the audit.

"By letter dated December 1 2022, KPMG resigned from the engagement to audit the city's 2021 financial statements, effective immediately," reads the letter.

"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."

City council and administration, currently under several investigations around city finances, attached its financial package for 2021 to its website.

In the package is a letter dated Dec. 7, 2022, from then-acting city director of corporate services Kim Wallace:

"Our financials were audited by KPMG, presented to and signed off by the City of Chestermere’s audit committee on Thursday, November 18th, 2022," said Wallace.

"The KPMG auditors provided the 2021 financial report to the City of Chestermere council on November 29th, 2022. They were unanimously approved by council."

In January, Wallace was formally charged by the RCMP with one count of assault, after police were made aware of an incident at city hall.

On Wednesday, Mayor Jeff Colvin said that the city's administration is "under attack in the press."

In an article posted to Chestermere Today, Colvin addressed the discrepancies and the release of the 2021 financial statement, saying in no way was it intended to "mislead residents."

He blames KPMG for being "very slow" in reporting the city's finances, saying they were expected to be completed in May 2022, but took until November 2022 to provide a report.

"City Administration never intended to mislead residents, but were limited in what they could report, due to the ongoing potential legal issues between KMPG and the city, which are currently before the city's lawyers," said Colvin in the article.

Colvin says in the article that the city believed KPMG was satisfied and began to close the audit.

"KPMG sent their draft 360 Report, with details of their Audit findings, to the City Administration to review," he said.

"KPMG signed the 360 Report and presented it to the city's audit committee, which includes a summary of the 2021 City Financial Statement. The final step in the process, after council accepted the City Financial Statement was for KPMG to sign their Audit Report for the 2021 City Financial Statement."

Colvin claims that KPMG refused to sign, stating they need to review the draft version of the Municipal Inspection Report before signing off.

The city said that had nothing to do with these financials.

Colvin says KPMG resigned without signing the report.

The city is currently considering its legal options regarding this resignation.

Colvin says the report was "99.99 per cent" complete, but KPMG refused to sign.

He adds that it's been difficult to find another auditing firm to complete it and take over, as a new audit needs to be completed to access government grants.

The province extended Douglas Lagore as the official administrator of the city until March 31.

This is the latest issue in a series of missteps by the city as three separate investigations were launched last year.

Council voted to look into its own "irregular" finances last summer, hiring a third party to review $600,000 severance packages handed out to two former city employees.

The province also began looking into Chestermere's governance after three councillors — Sandy Johal-Watt, Shannon Dean and Ritesh Narayan — sent complaints to the province in 2022 about the actions of Colvin, Deputy Mayor Mel Foat and councillors Stephen Hanley and Blaine Funk.

Council had also ordered another third-party investigation into its own utilities company, formerly known as Chestermere Utilities Inc., last year after audits found millions of dollars unaccounted for or missing.

A provincial probe into code-of-conduct infractions against city council was also launched.

An inspection by the department of municipal affairs in December was criticized by city hall, according to the mayor, because the report possibly exposed what the investigation found.

Council sent it back to the province.

KPMG is demanding the city remove the financial statement from its website, explicitly communicate that the 2021 financial statement has not been audited by KPMG and provide written confirmation from council that no parties were directly advised by the city that KPMG has audited the city's financial statements for that year.

Mount Royal University political science scientist Lori Williams says the tensions and issues running through city hall are undermining the best interest of the community.

"The losers in all of this are very much the people of this municipality," said Williams.

"Because they voted for a more positive change, more functioning council in the last municipal election, and it doesn't appear that that's what has resulted."

Canada research chair in accounting Anup Srivastava says the fact KPMG dropped the city sparks red flags.

"If we do not have auditors sign off, and an auditor resigns, it smells of something bad," said Srivastava.

"Until they have signed off, you cannot say that the financial statements are audited."

Srivastava says KPMG is not worried about losing the City of Chestermere as a client or the financial implications it could bring.

"This will not even be a drop in the ocean, but they are most concerned about the reputation," he said.

Resident Matt Sywenky says he's frustrated and upset that his city's reputation is under fire again, and wants to see more honesty come from city hall.

"It's wasting our time," he said.

“We’re not getting the services we deserve. The residents are not being treated with respect. Chestermere is losing its dignity as we’re constantly seeing problem after problem just being flung in our face. Enough is enough.”

KPMG declined to comment on its letter.

In a letter sent to the city on Tuesday, KPMG says it was made aware of a financial package recently uploaded to the city's website stating the accounting firm had signed off on the audit. Top Stories


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