Click here to witness first hand the delegation meeting and what was said before and after Mr. Santucci's presentation- which would also include Mr. Plessel's presentation.
Click here for a copy of Mr. Santucci and Mr. Bonham's presentation material used at the delegation.
FAILED AUDIT (ADVERSE OPINION): Point 1 of our GIC Presentation
On May 30, 2007 The Waterfront Trust received an Adverse Opinion issued by their external auditors, on their financial statements for the fiscal year end of December 2005. This audit came a full two years after they were required to submit audited financial statements to the both the Hamilton City Council and the Port Authority.
The Auditor’s Report gave the reasons why they could not sign off on the financials as presented to them by the management of the Waterfront Trust. The crucial paragraph states as follows:
“Due to an absence of adequate internal controls we were unable to satisfy ourselves that all revenues and expenditures of the organization had been recorded nor that the recorded transactions were proper. As a result we were unable to determine whether adjustments were required in respect of recorded or unrecorded assets, recorded or unrecorded liabilities and the components making up the statements of operations, changes in net assets and cash flow.” Published in the Bay Observer
The Board of Director’s responsibilities and the Auditor’s responsibilities in this process are outlined below. We were able to verify the contents in a conversation with the ICAO (Institute of Chartered Accountants of Ontario)
Directors’ Responsibility for the Financial Statements
The directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standards in Canada. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
The Auditor’s responsibility is to express an opinion on the financial statements based on their audit. The Auditors perform an audit in accordance with approved standards on auditing in Canada. Those standards require that they comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on their judgment, including the assessment of risks of material misstatement
of the financial statements, whether due to fraud or error. In making those risk assessments, they consider internal control relevant to the Company’s or Organization’s preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.
An Adverse Opinion is issued when the auditor determines that the financial statements of an auditee are materially misstated and, when considered as a whole, do not conform to GAAP (Generally Accepted
Accounting Principles – the accounting standards at the time when the Adverse Opinion was issued). It is considered the opposite of an unqualified or clean opinion, essentially stating that the information contained is materially incorrect, unreliable, and inaccurate in order to assess the auditee's financial position and results of operations. Investors, lending institutions, and governments very rarely accept an auditee's financial statements if the auditor issued an adverse opinion. In the adverse opinion the auditor clearly states that the financial statements are not in accordance with GAAP which means that they, as a whole, are unreliable,
inaccurate, and do not present a fair view of the auditee's position and operations.
An Adverse Opinion issued in the private sector can have a devastating effect on the enterprise, resulting in loss of confidence by the investors, action by regulatory bodies and drastic changes in management.
In the case of the Waterfront Trust this Adverse Opinion seems to have been regarded as a normal occurrence. During the opening questioning at the GIC of September 6 Councillor Clark, who as far as we know is not a Chartered Accountant, led the questioning and discussion on this point.
Councillor Clark began the discussion and during his remarks stated; " They (The Waterfront Trust) did not fail an audit......an Auditor issued an Adverse Opinion.........Adverse Opinion is common in the industry
Stoney Creek News Thursday, September, 06, 2012 “They should celebrate the success of what is happening (at the waterfront) and stop this nonsense,” said Stoney Creek Councillor Brad Clark. “It’s like
a snowball going down a hill. The inference is we have not done our jobs. I do take offense to that.” Councillor Brad Clark
Mountain Councillor Terry Whitehead called the public controversy over the waterfront trust a “tempest in a tea cup.” (Idem)
“This whole experience is much ado about nothing,” said Merulla. (Idem)
In conclusion, recent information concerning the insurance settlement and now the skating rink, zamboni etc.(October 2012 issue The Bay Observer), still call into question whether or not the issues identified in the Adverse Opinion may have be completely dealt with as was put forth by the Councillors present at the GIC of September 6, 2102.
We consider Issue 1 of our GIC Presentation back on the table.
Gary Santucci, Brian Bonham