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HomeMy WebLinkAboutCS 27-08 REPORT TO EXECUTIVE COMMITTEE Report Number: CS 27-08 Date: June 9, 2008 I t I I () '1 I.) i From: Gillis A. Paterson Director, Corporate Services & Treasurer Subject: 2007 Year End Audit Recommendations: 1. That Report CS 27-08 of the Director, Corporate Services & Treasurer be received; 2. That the Audit Results Report as submitted by Deloitte & Touche LLP be received for information; and, 3. That the 2007 draft Audited Consolidated Financial Statements for the City of Pickering be forwarded to Council for approval. Executive Summary: This report provides the auditor's Audit Results report, independence letter and the draft Audited Consolidated Financial Statements for the year ended December 31, 2007. I am pleased to advise that the auditor did not find it necessary to issue a Management Letter for 2007. However, staff in a separate confidential report will be providing an update on those ongoing matters identified in 2006. Financial Implications: The 2007 year financial results were once again very favourable and contributed significantly to the City's much lower 2008 property tax increase. A combination of under expenditures due to expenditure control and staffing vacancies and increased revenues mainly in the areas of investment income and penalties and interest on taxes contributed significantly to the City's positive financial position. Additional contributing factors included increased building permits, lower than expected benefits renewal costs and higher supplementary taxes. Sustainability Implications: implications. This report does not contain any sustainability Report CS 27-08 Date: June 9, 2008 2007 Year-End Audit Page 2 u2 Background: The audit of the consolidated financial statements for the year ended December 31, 2007 has been completed. The auditor's Report to the Executive Committee - Audit Results is included as Attachment 1 and also includes the auditor's independencelette~ This report, prepared by De/oitte & Touche LLP, summarizes the results of the December 31, 2007 audit and comments on significant matters regarding the audit or other matters they may believe to be of interest to you. Nothing of significance was noted. On an annual basis the auditor is required to communicate all relationships between the City and the Firm that may impact on their independence in addition to confirming their independence with respect to the City. The Independence Letter in Appendix 1 of the attachment confirms that Deloitte & Touche LLP is independent with respect to the City. The draft Audited Consolidated Financial Statements are included as Attachment 2. They are the responsibility of management and have been prepared by City accounting staff under the direction of the Director, Corporate Services & Treasurer. Deloitte & Touche LLP are responsible to express an opinion on these Consolidated Financial Statements based on their audit. An unqualified opinion has been provided. I am pleased to advise the Committee there were no problems or questionable items I have to report to you at this time. However I would like to summarize some financial highlights. The Consolidated Financial Statements also includes the activities of the City of Pickering Public Library Board. The City's investment in Veridian Corporation is accounted for on a modified equity basis which means the City includes its share of Veridian's income or loss in the Consolidated Financial Statements. Overall net assets increased over prior year by approximately $4.7 million as a result of a decrease in liabilities of approximately $4.6 million. Financial Assets The change in financial assets from prior year was very minimal. Although the investment balance significantly declined by approximately $4.2 million, this decrease was offset by increases in taxes receivable, accounts receivable and the investment in Veridian Corporation. The investment portfolio balance under management declined over prior year primarily as a result of the refund to OPG for the settlement of the outstanding assessment appeals for the years 2003 to 2006. The City's share of this refund amounted to approximately $4.2 million. Report CS 27-08 Date: June 9, 2008 2007 Year-End Audit Page 3 "I" ,I ,_, The taxes receivable increase of approximately $800,000 over the prior year is reasonable since total taxes billed increased over the prior year. The outstanding receivable balance at DI3cember 31, 2007 represents 8,3% (2006 - 8.2%) of total tax revenue which is comparable to the prior year. The increase in the investment in Veridian Corporation arises due to the City's share of Veridian's net income offset by the dividends received from Veridian during the course of the year. Liabilities The decrease in liabilities of approximately $4.6 million is primarily due to the decrease in the accounts payable and accrued liabilities balance of approximately $6.5 million in addition to a decrease in long-term liabilities offset by an increase in deferred revenue. The prior year accounts payable and accrued liabilities balance included an accrual for the settlement of the OPG assessment appeal in the amount of approximately $6.6 million which included both the City and Region shares. This amount was paid to OPG in December 2007. The Region has paid the City its share which represents approximately $2.4 million. Deferred revenue increased by approximately $3.0 million which arises from the increase in the obligatory Reserve Funds and two Provincial grants received in 2007 but earmarked to be used in the 2008 Capital Budget. The Obligatory Reserve funds are made up of the following: Development Charges, Parkland, Third Party/Developer's Contribution and Federal Gas Tax. In compliance with generally accepted accounting principles, these restricted funds are to be reported as deferred revenue. The Development Charges Fieserve Fund and Federal Gas Tax fund balances increased because of the timing of receipt of funds and occurrence of related capital expenditures. The decrease in long-term liabilities of approximately $1.1 million represents the annual principal repayment of the outstanding debentures. The City's requirement for debt did not coincide with the Re!Jion's timing therefore there was no debt issued on the City's behalf during 2007. Revenues & Expenditures Consolidated revenues and expenditures are comparable with the budget with the exception of government grants and fees, investment Income, general government expenditures and planning and development which are discussed below. The budget for government grants and fees includes provincial and federal grant monies, such as COMRI F and federal gas tax, identified in the 2007 capital budget to fund various capital projects. Because of the timing of capital expenditures, revenue is recognized once the expenditures are incurred. Particularly COMRIF funding is not received by the municipality until an expenditure claim is submitted. Therefore Report CS 27-08 Date: June 9, 2008 2007 Year-End Audit Page 4 " ' ,\ I1f \, \ L approximately $1.0 million of the revenue reported in 2007 relates to expenditures for projects approved in previous budgets and thus the grant revenue is not included in the budget figure. The budget for investmE!nt income is usually a conservative estimate as it is difficult to predict interest rates and timing of cash on hand. The variance from budget of approximately $750,000 arose due to the unexpected interest rate increase over the course of the year and excess cash on hand from timing of receipts (i.e. Provincial Grants) and payments (i.e. OPG tax refund from appeal). For these reasons and a declining interest rate environment, the budget estimate for 2008 was only increased by $50,000 to $1,050,000. It is expected that the investment income will be more in line with the budget estimate for 2008 due to changes in the market conditions and that interest rates began to drop in December 2007. General government expenditures, which includes purchased services, insurance, tax write-ofts, contingency and Administration and Corporate Services departments was underbudget by approximately $950,000. There is not one specific factor driving this under expenditure but multiple underages in the cost centres within the Departments and the contingency account. Planning and developmemt expenditures are underbudget by approximately $970,000. This is primarily a result of an under expenditure in the Planning consulting account of $750,000 which arose from some studies not proceeding/commencing during 2007. For example Duffin Heights and Seaton Neighbourhood Servicing Plans, to be funded 100% from landowners, had no expenditures as funds were not received from the external parties. As you are aware capital expenditures for projects may be incurred over multiple years therefore comparisons of actual to budget are not meaningful. Capital expenditures incurred are slightly higher than the budget amount reported but only approximately $3.7 million of the total capital expenditures of $10.7 million were for 2007 approved projects. The balance of the expenditures was for projects budgeted and approved in earlier years. Attachments: 1. Auditor's Report to the Executive Committee - Audit Results 2. 2007 Draft Audited Consolidated Financial Statements Report CS 27-08 Date: June 9, 2008 2007 Year-End Audit Page 5 '. ( . I i) :) Prepared By: / Approved I Endorsed By: ~~....~ '--""" Gillis A. Paterson Director, Corporate Services & Treasurer '/ , ('. / . \ {!' . A/;lCt.J ~ ."\./{ {,H ristine Senior Manager, Accounting Services GAP/vw Copy: Chief Administrative Officer ,~ Recommended for the l::onsideration of Pickering City COU.r\ \' I // D6 ATTACHM[! __ L_ f; __~<) -)7':') 'S Deloitt_! The C~orporation of the City of Pickering Report to the Executive Committee - Audit Results Year ended December 31, 2007 Audit. Tax .Consulting. Financial Advisory. I] '1- ~ i Deloitte Deloitte & Touche LLP 5140 Y onge Street Suite 1700 Toronto, ON M2N 6L7 Canada Tel: (416) 601 6150 Fax: (416) 601 6151 www.deloitte.ca May 20, 2008 The Members of the Executive Committee The Corporation of the City of Pickering I The Esplanade Pickering ON L I V 6K7 Dear Executive Committee Members: We are pleased to submit this report on the results of our audit of the consolidated financial statements of The Corporation of the City of Pickering (the "City") for the year ended December 31, 2007. Our audit was completed in accordance with the audit plan presented to you on November 12,2007. Our professional standards require that we communicate with you certain matters that may be of interest to you in fulfilling your obligation to oversee the financial reporting and disclosure process for which management of the City is responsible. This report is designed to summarize certain aspects of the 2007 audit of the consolidated financial statements, comment on significant matters regarding the audit and other matters which we believe will be of interest to the Executive Committee (the "Committee"). This report has been provided to the Committee on a confidential basis. It is intended solely for the use of the Committee and we disclaim any responsibility or obligation to any third party who may rely on this report. The matters addressed in this report are a by-product of the financial statement audit and may not necessarily identify all matters that may be of interest to the Committee in fulfilling its responsibilities. We wish to express our appreciation for the co-operation we received from senior management, finance staff and the many employees of the City with whom we work in the discharge of our various responsibilities. Yours sincerely, ;j)J.cdiL ~ f~t, LLI' Chartered Accountants Licensed Public Accountants Member of Oeloitte Touche Tohmatsu [j B Table of contents Status of the audit, audit scope and related representations Matters to report to the Executive Committee Audit findings - Management judgments and accounting estimates - Adjusted differences - Unadjusted differences Areas of audit focus Internal controls Significant upcoming changes in accounting standards Appendices Appendix: Independence letter @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2007 Report to the Executive Committee 3 4 5 5 7 7 8 10 11 2 t~ ,~ U ~1 Status of the audit, audit scope and related representations · The audit of the December 31, 2007 consolidated financial statements is substantially complete. · Our auditors' report on the 2007 consolidated financial statements will: - be signed following approval by Council; - be dated April 4, 2008; and - state that the consolidated financial statements present fairly, in all material respects, the financial position of the City as at December 31, 2007 and the results of its operations and the changes in its financial position for the year then ended in accordance with Canadian generally accepted accounting principles. · The audit approach was consistent with the audit plan we provided to you on November 12, 2007. · Our audit was conducted in accordance with Canadian Generally Accepted Auditing Standards ("GAAS") and our firm standards. · We examined, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, therefore, we would not necessarily detect all weaknesses, errors or other irregularities that might have occurred. · We assessed the accounting principles used and significant estimates made by management. · We evaluated the overall financial statement presentation. · Tests and procedures that we considered necessary were used to form an opinion on the consolidated financial statements. · We relied on the work of the City's actuaries in the calculation of employee future benefits. · We did not rely on the work of the City's internal auditor in determining the nature, extent and timing of our work. · We are independent of the City as is required to provide an independent audit opinion. A copy of our independence letter to the Committee is included in Appendix 1 of this report. @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2007 Report to the Executive Committee 3 , ,\ I. 1 r"\ IU Matters to report to the Executive Committee Reportable matter 1. Significant weaknesses in internal No significant weaknesses in internal controls relating to the financial controls relating to the financial reporting reporti ng process. process were identified. 2. Illegal acts. None noted. 3. Significant transactions inconsistent None noted. with the ordinary course of business, including fraud or possible fraud. 4. Unusual related party transactions. None noted. 5. New significant accounting principles None in the current year. See page 11 or policies. for significant upcoming changes in accounting standards. 6. Disagreements with management. None. 7. Management consultation with other None noted. accountants about any significant auditing or accounting matters. 8. Unusual transactions that None noted. significantly increase risk of loss. 9. Actions that, if they became public, None noted. might cause embarrassment. 10. Non-compliance with regulatory None noted. requirements. 11. Major issues discussed with None noted. management that influence audit appointment. 12. Management's judgments and Reasonable (see Pages 5 and 6). accounting estimates. 13. Misstatements, including unadjusted See audit findings (Page 7). audit differences. 14. Difficulties encountered during the None. audit. 15. Limitations placed on the scope of None. our audit. @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2007 Report to the Executive Committee 4 '1 Audit findings Management judgments and accounting estimates The preparation of the consolidated financial statements requires management to exercise judgment and utilize assumptions to make estimates. The key areas where management estimates are required are as follows: · Post employment benefit liability and WSIB benefit liabilities; · Allowance for significant property tax appeals; · Allowance for doubtful accounts receivable; · Accrued liabilities; and · Contingent liabilities. Post employment benefit liability and WSIB benefit liabilities Management uses the assistance of an actuary in determining the post-employment benefits liability. The extrapolation to December 31, 2007 was based on the January 1, 2004 valuation. As reported by the actuary, this is not in accordance with accepted actuarial practice as extrapolations should not be performed for a period longer than three years. We understand that a new valuation will be performed next year once the results of collective bargaining is known. The results of any collective bargaining undertaken by the City during 2008 have not been reflected in the post-employment benefits liability at December 31, 2007. The WSIB benefit liabilities are calculated by WSIB using management's best estimates and assumptions. This approach is consistent with other municipalities and these estimates appear to be reasonable. Property tax appeals and doubtful accounts receivable Management makes estimates for significant property tax appeals and the provision for doubtful accounts receivable. Management makes these estimates based on the information available, at a point in time, when preparing the financial statements. The liability for the significant property tax appeal outstanding at December 31, 2006 was settled during fiscal 2007 and any amounts remaining in the Contingency Reserve relating to this matter were transferred to the Rate Stabilization Reserve in accordance with Council approval. Accrued liabilities Management is required to make estimates, mainly for capital work performed to December 31, where invoices for such work have not been received prior to when the books are closed. Also included in accruals at December 31, 2007 are amounts relating to salaries under negotiation and a compensation review. @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2007 Report to the Executive Committee 5 12 Audit findings (continued) Management judgments and accounting estimates (continued) Contingent liabilities - litigation When preparing the consolidated financial statements, management makes estimates relating to litigation based on the information available, at a point in time. As disclosed in Note 17 to the financial statements, the City recognizes liabilities in the financial statements related to litigation when management and legal counsel have assessed the outcome of the legal claim as likely and the amount can be reasonably estimated. Management has determined that the outcome of any legal actions outstanding as at the reporting date is not determinable and accordingly, no provision has been made in the consolidated financial statements. Overall, we believe the accounting policies selected and the application thereof to be appropriate for the City. Estimates and assumptions used have been assessed against standard practice and appear to be reasonable. @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2007 Report to the Executive Committee 6 Audit findings (continued) 13 Adjusted differences The following differences were discussed with City management and were adjusted: · An adjustment of $249,725 to the general ledger clearing account for the Class System, which is grouped with cash, to correct the accounting of prior years' (pre 2003) recreation revenues as the systems moved from a manual accounting system to the automated Class system. · Recording of $31,150 of investment income earned on an interest bearing investment. · Reversal of operating fund revenues and recording of deferred revenue in the amount of $59,340 relating to 2008 bingo licenses. Unadjusted difference The following difference was discussed with City management but not adjusted: · The understatement of 2007 capital fund revenues and accounts receivable in the amount of $25,729 relating to a capital project to be funded by a third party for work completed to December 31, 2007 but not yet billed. @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2007 Report to the Executive Committee 7 14 Areas of audit focus On November 12, 2007 we reported to you our planned key areas of audit focus. The following summarizes our findings in respect of these areas: Area I Issue I Response I Conclusion Year end · Determine if cut-off · Focused substantive testing on · Satisfactory cut-off of revenues and accounts payable, accrued (see audit expenditures is liabilities, deferred revenue and findings). appropriate. accounts receivable. · Test disbursements and cash receipts subsequent to year end. · Test supporting assumptions for accrued liabilities, deferred revenue and accounts receivable. Actuarial . Accuracy and · Review actuarial report including . Satisfactory determined completeness of related assumptions. (see audit liabilities certain liabilities findings). such as Workplace · Determine that appropriate Safety and accounting treatment has been Insurance ("WSIB") applied. and Post . Review related financial employment statement note disclosure. benefits. · Communicate with actuary on our reliance on their report for audit purposes. Reserves, . Approval of · Focused testing on the continuity . Satisfactory. reserve transfers to and and material transactions to funds and from reserve and determine if transfers are in capital fund reserve funds. accordance with council approvals and/or legislative requirements. Investment . Compliance with PS . Review accounting for Investment . Satisfactory in Veridian 3070 "Government in Veridian Corporation and (see Note 4 in Corporation Business related disclosures. consolidated Enterprises". · Review financial statements of financial Veridian Corporation. statements). . Communication with Veridian Corporation's auditor on our reliance on their auditor's report for purposes of the City's audit. @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2007 Report to the Executive Committee 8 Areas of audit focus (continued) (- ,) Area I Issue I Response I Conclusion Management · Requires · Focused review of calculations · Satisfactory (see estimates management and support. audit findings). judgment (i.e. allowance for · Discussion with management. assessment appeals, · Analytic review of related contingent accounts. liabilities, etc.). Capital Fund . Revenue · Focused testing to determine · Satisfactory (see Recognition whether restricted contributions audit findings). (i .e. development charges, gas tax, conditional grants) have been recognized as revenue in the appropriate period. @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2007 Report to the Executive Committee 9 6 Internal controls Our audit was designed to provide a basis for formulating an opinion as to whether the consolidated financial statements present fairly in all material respects, in accordance with generally accepted accounting principles, the financial position, results of operations and changes in financial position of the City. As part of our examination we reviewed and evaluated the design and implementation of certain entity level controls and business cycle controls in order to assess audit risk in accordance with Canadian generally accepted auditing standards. The main purpose of our review of controls was to assist in determining the nature, extent and timing of our audit tests and to establish the degree of reliance, which we could place on selected controls; it was not to determine whether internal controls were adequate for the City's purposes. The scope of such a review of internal controls is not sufficient to express an opinion as to the effectiveness or efficiency of the City's internal controls. While the audit did not include an in-depth evaluation of all systems of internal controls or all aspects of any individual system and should not therefore be relied upon to identify all significant internal control weaknesses, or all errors, irregularities or inefficiencies that might occur, we undertake to report such matters to you when they come to our attention. We did not identify any significant internal control weaknesses during the audit. We understand that management will provide the committee with an update on the status of any outstanding comments from our prior year's management letter. @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2007 Report to the Executive Committee 10 Significant upcoming changes in accounting standards Most municipal governments in Canada prepare their financial statements in accordance with generally accepted accounting principles (GAAP) as established by the Canadian Institute of Chartered Accountants (CICA) Public Sector Accounting Board (PSAB). Effective with the fiscal year commencing January 1, 2009, there will no longer be a separate reporting model specific to local governments. All governments in Canada, including municipalities, will follow a single reporting model. This reporting model, which among other things will require municipalities to capitalize and amortize tangible capital assets, will have a significant impact on the financial reporting, budgeting, systems and processes that are currently in place at the City. Municipalities currently manage a variety of significant tangible capital assets and have various sub-systems and processes to manage different asset classes. We encourage Council and management to use this accounting change to engage the entire municipality into providing more integrated information about tangible capital assets for decision making purposes. This can include decisions related to resource allocations, affordability, sustainability, setting rates and fees, full cost accounting, life cycle costing etc. There will be a significant one-time effort required to gather and compile the necessary information needed to record tangible capital assets on the statement of financial position for the year ending December 31, 2009 (with comparative restated figures for 2008). There will also be a need to ensure that the CAD, finance staff, department managers, Council and others understand the changes and their impact on the financial statements and the budgets. We have noted that municipalities are at various stages in the process of preparing for this significant change, including a few throughout the country that have already implemented the new reporting model. Most municipalities have limited in-house resources to undertake the incremental preparation work required to ensure that the necessary changes have been implemented on time. As the conversion period is fast approaching, this process will require a focused effort in order to ensure that the impact on future budgets is assessed and that there is no delay in issuing financial statements for the 2009 fiscal year. It is important that this not be viewed simply as an accounting exercise for purposes of financial reporting. In order to be able to sustain the ongoing requirements of reporting under this new reporting model it is necessary for all departments to understand the requirements for maintaining information related to tangible capital assets such as additions, disposals, useful lives and residual values. We encourage the Executive Committee, as part of your responsibility for the oversight of the financial reporting process, to monitor the progress of the implementation plan relating to the new reporting requirements. @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2007 Report to the Executive Committee 7 11 IH ,-" Appendix Appendix - Independence letter 9 Deloitte Deloitte & Touche LLP 5140 Y onge Street Suite 1700 Toronto, ON M2N 6L7 Canada Tel: (416) 601 6150 Fax: (416) 601 6151 www.deloitte.ca May15,2008 The Members of the Executive Committee The Corporation of the City of Pickering I The Esplanade Pickering ON L I V 6K7 Dear Executive Committee Members: We have been engaged to audit the consolidated financial statements of the Corporation of the City of Pickering (the "City") for the year ended December 31,2007, which includes: · The Corporation of the City of Pickering; and · Pickering Public Library Board. In addition, we have been engaged to audit the City of Pickering Trust Funds. Canadian generally accepted auditing standards (GAAS) require that we communicate at least annually with you regarding all relationships between the City and our Firm that, in our professional judgment, may reasonably be thought to bear on our independence. In determining which relationships to report, these standards require us to consider relevant rules and related interpretations prescribed by the appropriate provincial institute / ordre and applicable legislation, covering such matters as: (a) holding a financial interest, either directly or indirectly, in a client; (b) holding a position, either directly or indirectly, that gives the right or responsibility to exert significant influence over the financial or accounting policies of a client; (c) personal or business relationships of immediate family, close relatives, partners or retired partners, either directly or indirectly, with a client; (d) economic dependence on a client; and (e) provision of services in addition to the audit engagement. Member of Oeloitte Touche Tohmatsu @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2007 Report to the Executive Committee 13 ) ('1 .:..- \..,) Appendix 1 - Independence letter ( continued) The Corporation of the City of Pickering May15,2008 Page 2 We have prepared the following comments to facilitate our discussion with you regarding independence matters arising since July 6,2007, the date of our last independence letter. We are not aware of any relationships between the City and our Firm that, in our professional judgment, may reasonably be thought to bear on independence that have occurred from July 6,2007 to May IS, 2008. The fees (exclusive of GST) billed from July 6,2007 (the date of our last independence letter) to May 15,2008 are as follows: City of Pickering · Balance of audit related fees for the year ended December 31, 2006 · Audit for the year ended December 31, 2007- interim billings $10,250 $55,000 · Auditors' report dated June 15, 2007 for the Transfer of Federal Gas Tax Revenues for the year ended December 31, 2006 $ 3,500 City of Pickering Public Library Board · Audit for the year ended December 31,2007- interim billing $ 3,500 GAAS requires that we confirm our independence to the Executive Committee in the context of the Rules of Professional Conduct of the Institute of Chartered Accountants of Ontario. Accordingly, we hereby confirm that we are independent with respect to the City within the meaning of the Rules of Professional Conduct of the Institute of Chartered Accountants of Ontario as of May 15, 2008. This report is intended solely for the use of the Executive Committee and others within the City and should not be used for any other purposes. Yours truly, 'dJ~ 0/- tiw.de.. ILfJ Chartered Accountants Licensed Public Accountants @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2007 Report to the Executive Committee 14 ') 1 Deloille @ Deloitte & Touche LLP and affiliated entities. Deloitte, one of Canada's leading professional services firms, provides audit, tax, consulting, and financial advisory services through more than 7,600 people in 56 offices. Deloitte operates in Quebec as Samson Belair/Deloitte & Touche s.e.n.c.r.1. The firm is dedicated to helping its clients and its people excel. Deloitte is the Canadian member firm of Deloitte Touche Tohmatsu. Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms, and their respective subsidiaries and affiliates. As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms have any liability for each other's acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names "Deloitte," "Deloitte & Touche," "Deloitte Touche Tohmatsu," or other related names. Services are provided by the member firms or their subsidiaries or affiliates and not by the Deloitte Touche Tohmatsu Verein. JOEST EMPlOYElUi IN CA:>IAOA .z007 !f'iiii 1II11JS1lE5S 22 ATTACHMENT #....1- TOREPORT#~ ~ 7-0'1 December 31, 2007 VM T Document in City of Pickering Notes (.' 5/21/08: 10:40 AM FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering December 31, 2007 {')"Z /_ "J Table of contents Auditors' Report ............................................................. ............................. ....................... ....1 Consolidated schedule of capital fund financial ac vities and fund Consolidated statement of financial position............................................. ....................... ...........2 Consolidated statement of ft nancial activities no................................ ... ~...... ................... 3 Consolidated statement of changes in financial position .............. ....................... ..........................4 ~~ V. Document in City of Pickering Notes (; 5/21/08; 10:40 AM FOR DISCUSSION PURPOSES ONLY 24 Deloltte & To he LLP 5140 Yonge treet Suite 170 Toronto N M2N 6L7 Canad Auditors' Report To the Members of Council, Inhabitants and Ratepayers of the Corporation of the City of Pickering We have audited the consolidated statement of fmancial position f the Corporatio of the City of Pickering as at December 31, 2007 and the consolidated state nts of financial tivities and of changes in financial position for the year then ended. These financial ta ents are th responsibility of the City's management. Our responsibility is to express an opinion 0 th cia! atements based on our audit. Chartered Accountant Licensed Public Acc untants April 4, 2008 Document in City of Pickering Notes (." 5/21/08: 10:40 AM FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Consolidated statement of financial position December 31, 2007 Financial assets Cash Investments (Note 4) Taxes receivable Accounts receivable Other current assets Investment in Veridian Corporation (Note 5(b)) Promisso notes receivable Note 6 Liabilities Accounts payable and accrued liabilities Other current liabilities Deferred revenue (Note 7) Long-term liabilities (Note 10) Post-employment benefit liability (Note 9(a)) WSIB benefit liabilities Note 9 b Net financial assets Non-financial assets Invento Net assets Municipal position Operating fund (Note 12(a)) Capital fund (Note 12(b)) Reserves and reserve fund (Not E ui in Veridian Cor or tion Note t in City of Pickering FS (#3921): 5/21/2008: 10:41 AM FOR DISCUSSION PURPOSES ONLY :2 ~:) 2007 $ 3,445/5 2,969, 1 46/714/ 60 50,867,,722 12,13 ,647 11,3 7,986 5,1 4,265 4, 92,024 ~ 530,363 6, 634 34,768,015 25 69 25 069 000 130 488 293 130 464 291 11/16 ,320 17,625,266 1,469 61,168 32 24,941 29,434,292 ' /796,011 9,929,000 2,343,250 2,316,950 643 045 690,331 55 457 036 60 057 007 75,031,257 70,407,284 246 361 209 760 75,277,618 70,617,044 (51,077) (50,232) 2,294,298 5,209,345 23/927,149 20,148,226 64 894 654 62 880 035 91/065,024 88,187,374 Page 2 26 The Corporation of the City of Pickering Consolidated statement of financial activities year ended December 31, 2007 Revenues Residential and farm taxation Commercial and Industrial taxation Taxation from other governments User charges Government grants and fees Other contributions and donations Development charges and developer contributions earned Investment income Penalties and Interests on taxes Fines Interest on promiSSOry notes Other Total revenues Expenditures (Note 15) Current General government Protection to persons and property Transportation services Environmental services Social and family services Recreational and cultural services Plannln and develo ment Capital General government Protection to persons and prope Transportation services Environmental services Social and Family Service Recreation and cultural ervices Pianning and develo ent Budget (Unaudited) $ (Note 19) 28,816,719 7,168,712 6,813,101 7,983,905 1,350,627 213,500 1,180,360 623,436 4,756,100 510,000 33,000 2,602,410 9 705,306 63,763,276 ( 4,534,307) (1,132,989) (1,101,847) 2,696,700 803,000 1,264,864 (3,269,443) FOR DISCUSSION PURPOSES ONLY 26 74,748 ,683,041 6,937,311 7,194,785 2,806,426 549,778 1,552,588 1,498,759 1,698,253 590,341 1,905,244 602,157 58,493,431 11,813,917 15,302,981 14,330,659 13,513,808 6,109,154 5,308,877 119,365 46,718 385,401 333,056 16,529,901 16,047,858 1,774,748 1,928,424 51063,145 52,481 722 1,014,811 1,280,176 1,342,124 1,739,315 5,978,241 3,570,541 132,408 91,493 25,029 14,945 2,186,944 1,993,404 782 10 679 557 8,690,656 61 742 702 61,172,378 3,654,619 3,669,588 4,623,973 990,641 (1,132,989) (847,000) (1,225,949) (1,095,381) 2,792,000 352,000 10,700 262,567 949,752 229,227) 1,711,166 Page 3 The Corporation of the City of Pickering Consolidated statement of changes in financial position year ended December 31, 2007 2007 $ Operating activities Net revenue E uit share of net income of Veridian Cor oration Uses Increase in taxes receivable Increase in accounts receivable Increase in other current assets Decrease in accounts payable and accrued liabilities Decrease in other current liabilities Decrease in WSIB benefit liabilities (1,042,887) (359,252) (108,288) Sources Increase in accounts payable and accrued Iiabili Increase in other current liabilities Increase in deferred revenue Increase in ost-em 10 ment benefit Iiab" t ~ 6,290,978 1,775,987 10 700 8 077 665 3 432 860 Investing activities Increase (decrease) in investme Dividends received from Veridi 4,152,862 1 640 000 5 792 862 476,418 2 969 181 3,445,599 258,025 2 711 156 2,969,181 t in City of Pickering FS (#3921): 5/21/2008: 10:41 AM Page 4 FOR DISCUSSION PURPOSES ONLY ')8 The Corporation of the City of Pickering Notes to the consolidated fmancial statements December 31, 2007 1. Significant accounting policies The consolidated financial statements of The Corporation of the City of Pickeri g (the "City") ar the representations of management prepared in accordance with generally cepted accounti g principles for local governments as established by the Public Sector Accou ing Board ("PSA ") of the Canadian Institute of Chartered Accountants. Significant accounti g policies adopt by the City are as follows: (a) Reporting entity Consolidated statements I d The consolidated financial statements reflect the set0~s, r, venues and expenditures of the operating fund, capital fund, eserve funds a reserves. The reporting entity is comprised of the activit' s of all committ es of Council and the City of Pickering Public Library Board whi is controlled b the City. All material inter-fund transactions and b nces are elimin ed on consolidation. Investment in Veridian Corporation ~ The City's investment in Veridian Co ora" "acco ted for on a modified equity basis, consistent with generally ac pted acc in principles as recommended by PSAB for investments in govern nt business ent rprises. Under the modified equity basis, Veridian Corporat' n's accounting Iicies are not adjusted to conform to those of the City and inter- rganizational tr sactions and balances are not eliminated. The City recog "zes its equity in rest in the annual net income or loss of Veridian Corporation in " 5 lidated atement of financial activities with a corresponding increase r de s "nvestment asset account. Dividends that the City may receive f m Veri Cor ration and other capital transactions are reflected as adjustm nts in the i est ent asset account. Operations of Sch 01 Boards and t Region of Durham The taxation, 0 er revenues, e enditures, assets and liabilities with respect to the operation of school b rds and the Region of Durham are not reflected in these cons Id ~ ancial atements. Trust fu s V; (i) (ii) (iii) (iv) Docvment in City of Pickering Notes (.' 5/21/08: 10'40 AM FOR DISCUSSION PURPOSES ONLY Page 5 The Corporation of the City of Pickering Notes to the consolidated [mancial statements December 31, 2007 1. Significant accounting policies (continued) (b) Basis of accounting (i) Investments Investments are recorded at the lower of cost plus accrued' terest and mar t value. Any premium or discount at purchase of an invest ent is amortized over the life of the investment. (ii) Tangible capital assets The net impact in property taxes as a res t of the applicat" n of the capping provisions does not affect the Consolida ~atement of inancial Activities as the full amounts of the property taxes wer. Ie . d owe v , the capping adjustments are reported on the consolidated St eme Financ' I Position as a receivable from the Region. Deferred revenue Deferred revenues represent ser charges and ees which have been collected but for which the related servic s have yet to be erformed. These amounts will be recognized as revenues i h,~r t services are performed. In addition, any contributions receiv d Wit:\wmal r, strictions are deferred until the related expenditures are mad . Post employment b nefits The present valu of the cost of p viding employees with future benefits programs is recognized a employees ear hese entitlements through service. Actuarial gains and 105 es amortize over the average remaining service period ("ARSP"). e t ter. ined ARSP to be 16 years. (iii) (iv) (v) (vi) t e lower of cost and net realizable value. Cost is ted-average basis. (vii) ment tra sfers are recognized in the financial statements in the period in eve ts giving rise to the transfer occur, eligibility criteria are met, and Ie timates of the amount can be made. The pr paration of financial statements in conformity with Canadian generally acce ed accounting principles requires management to make estimates and ass mptions that affect the reported amounts in the financial statements and a companying notes. Actual results could differ from these estimates. Document in City of Pickering Notes (: 5/21/08: 10:40 AM FOR DISCUSSION PURPOSES ONLY Page 6 ~ i) ,'H The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2007 2. Ajax Pickering Transit Authority Effective September 4, 2001, a joint Board of Management was established b Pickering and the Town of Ajax by way of a Merger Agreement for operating transit system across Pickering and Ajax. Operations, under the control of the joint boar , commenced effective January 1, 2002. In January 2005, the Councils of the City of Pickering and the Town of jax passed a r olution agreeing to the transfer of the responsibilities for transit services to e Regional Mu . ipality of Durham (the "Region"). On January 1, 2006 the Ajax Pickering Tr nsyuthority (\\ TA") transferred its operations to the Region as part of the Durham R i9?'Z~sit Co ission in accordance with Regional By-law #85-2004. v "'0 Negotiations between the City of Pickering, Town of Ajax an the Region are ngoing as to the ultimate realization of assets and assumption of liabilities the Durham R ion Transit Commission and are expected to be finalized during 200 . Any remainin und balance will be settled once negotiations with the Region are complet . Operalions of school boards and lhe Region f D If /} Further to Note 1 (a) (Hi) requisitions are mad by the~~ 0 Durham and School Boards requiring the City to collect property taxes a payments in Ii of property taxes on their behalf. The amounts collected and remitte are summarize as follows: 3. 41,472,114 495 004 41,967,118 School board $ $ Taxation Pa ments in lieu of taxes 73,818,524 4 888 255 78,706,779 4. Investments ~ The investments ha e a mar alu of $47,043,975 (2006 - $51,091,578) at the end of the year. Investments re comprise 0 ankers acceptances, medium term notes, discount notes and bonds. Document in City of Pickering Notes t. 5/21/08: 10:40 AM Page 7 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2007 ;( "1 \..) ! 5. Investment in Veridian Corporation (a) Veridian Corporation is owned by the City of Pickering, Town of Ajax, M icipalityof Clarington and the City of Belleville. The City has a 41 per cent inter t in Veridian Corporation. Veridian Corporation, as a government business enter ise, is accounte for on the modified equity basis in these financial statements. Veridi Corporation set; es as the electrical distribution utility for a number of communities incl ding the four no ed above and conducts non-regulated utility service ventures thro gh its subsidiari . The following table provides condensed supplementary cons id formation for the corporation and its subsidiaries for the year ended ec Financial position: Assets Current Capital and intangibles other Total assets Liabilities Current Long-term debt other Tota/liabilities V. Document in City of Pickering Notes (: 5/21/08: 10:40 AM FOR DISCUSSION PURPOSES ONLY 53,948,442 60,794,000 18 293 223 133 035 665 67,285,173 24,910 22 403 660 89 713 743 222,749,408 235,271,455 6,878,200 233 235 950 8,913,705 2006 $ 69,512,995 138,225,079 946 571 208,684,645 42,961,459 60,794,000 20 129 148 123 884 607 67,285,173 24,910 17489 955 84 800 038 208,684,645 223,302,423 6,823,343 221 175 551 8,950,215 Page 8 i ') ,-J_." The Corporation of the City of Pickering Notes to the consolidated [mandaI statements December 31, 2007 5. Investment in Veridian Corporation (continued) (b) City of Pickering's equity represented by: Promisso Investments in Veridian Corporation Initial investment in shares of the Corporation Accumulated income Accumulated dividends received Increase in value of investments Total investment 30,496,196 8,256,018 (5,093,020) 1 108 821 34,768,015 (c) Equity in Veridian Corporation 2007 $ 2006 $ Balance, beginning of year Equity share of net income for t year Dividend received from Veridi Co Balance, end of year (d) (i) membe of the Municipal Electric Association Reciprocal " IE") which was created on January 1, 1987. A exch nge may be defined as a group of persons formed for the purpo of exchan . g eciprocal contracts of indemnity or inter-insurance with eac other. MEARIE ovides general liability insurance to member electric utilities. charged to each member utility consist of a levy per $1,000 of ervice revenue bject to a credit or surcharge based on each electric utility's e. Insurance limits of up to $30 million per occurrence are covered An ac io has been brought under the Class Proceedings Act: 1992. The plaintiff class eks $500 million in restitution for amounts paid to Toronto Hydro and to othe Ontario municipal electric utilities ("LDCs") who received late payment pe alties which constitute interest at an effective rate in excess of 60% per year, ntrary to Section 347 of the Criminal Code. Pleadings have closed in this action. he action has not yet been certified as a class action and no discoveries have been held, as the parties were awaiting the outcome of a similar proceeding brought against Enbridge Gas Distribution Inc. (formerly Consumers Gas). V, Document in City of Pickering Notes (.' 5/21/08; 10:40 AM Page 9 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2007 5. Investment in Veridian Corporation (continued) (d) (ii) (iii) of corporate taxes Mar 2, 2007, the Province of Ontario released the 2007 Ontario Budget. The b ,a ounced that new rules would be put in place to limit tax deductibility for inter st aid by municipal electric utilities ("MEUs") to municipalities. Interest eligibl for deductibility for the Corporation and other Ontario MEUs would be cons' tent with OEB cost-of-capital rules. Regulations for these new rules have not ye een released by the Minister of Finance. In the absence of the new regulation, t e amount of additional tax liability related to excess interest cannot be etermined. The Corporation and subsidiary, VCI, paid interest to municipalities of $4,620,344 during 2007 that may be subject to the new tax regulations. V. Document in City of Pickering Notes C' 5/21/08: 10:40 AM Page 10 FOR DISCUSSION PURPOSES ONLY 2008 2009 2010 2011 2012 Thereafter 31,212 697,325 688,836 616,914 149,580 76 000 2,959,867 7 ~ f, if ,,) . The Corporation of the City of Pickering Notes to the consolidated [mancial statements December 31, 2007 5. Investment in Veridian Corporation (continued) (e) Lease commitments Future minimum lease payment obligations under operating leases aJ; 6. Promissory notes receivable If /) Promissory notes are payable by Veridian Cor ration ~ri an Connections Inc. in the amount of $7,095,000 and $17,974,000 res ectively, with an nterest rate of 7.6% and maturity dates of November 1, 2009. The promissory no s are convertible into common shares at the option of the holder at the te of 1 comma share for every $1,000 of principal :::e:::t:::~:u~ or before the mat it~ 7. 2007 2006 $ $ 23,528,009 22,341,331 1,557,607 1,993,928 19,166 523,014 771,076 2,144,075 1,455,769 2 129 222 1 868 148 29,881,927 28,449,418 2 543 014 984 874 32,424,941 29,434,292 V. Document ill City of Pickerillg Notes C- 5/21/08; 10:40 AM Page 11 FOR DISCUSSION PURPOSES ONLY 7 C- ,) ,) The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2007 7. Deferred revenue (continued) Continuity of deferred revenue is as follows: Restricted funds received General funds received Interest earned 8. Interfund loans V. Document in City of Pickering Notes (; 5/21/08; 10:40 AM FOR DISCUSSION PURPOSES ONLY 1 108 004 4 196 153 2007 2006 $ $ 1,903,668 2,470,785 1,732,892 1,867,264 442,584 392,319 66,956 82,681 38 000 4,184,100 4 813,049 Page 12 1 / :) b 9. Post-employment benefit liability (a) Post-employment benefit liability The City makes available to qualifying employees who retire before t e age of 65, the opportunity to continue their coverage for such benefits as extende health and dru . Coverage ceases at the age of 65. Dependent on eligibility, healt coverage may a shared financial responsibility between the City and the retired mployees, The Ity also provides full time and permanent part-time employees a sick 'me entitlement nd any unused entitlement is accumulated year to year. This accu I (j entitleme t is not vested and therefore does not get paid out at the time of r: tir nt or ter /nation. The most recent actuarial valuation of the post-employment en erf rmed at January 1, 2004. Information about the City's benefits liability is as fo ows: The Corporation of the City of Pickering Notes to the consolidated [mandaI statements December 31, 2007 2006 $ 2,050,400 292 850 2 343,250 1,999,100 317850 2,316,950 yed in the actuarial valuations are as follows: (i) (Ii) were assumed to increase at 10% in 2005 and decrease by 1% per year to an ultimate rate of 5% per year in 2010 and thereafter. V, Document in City of Pickering Notes (: 5/21/08: 10:40 AM Page 13 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2007 7- 'j ,,/ ' 9. Post-employment benefit liability (continued) (b) Workplace Safety and Insurance Board (WSIB) benefit liabilities Effective January 1, 2001, the City became a Schedule II employer u der the Workpla e Safety & Insurance Act and follows a policy of self insurance for all . s employees. Information about the City's WSIB liability is as follows: 10. Long-term liabilities (a) The balance of I ng is made up of the following: 8,796,011 Document in City of Pickering Notes (.. 5/21/08; 10:40 AM FOR DISCUSSION PURPOSES ONLY 2006 $ 2007 $ 2006 $ 9,929,000 page 14 1 (~ ,J C The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2007 10. Long-term liabilities (continued) (b) The above long-term liabilities have maturity dates of July 15, 2009, D ember 23, 2009 July 12, 2011, 2016 and 2021, November 1, 2012, July 15, 2014 and ecember 23, 20 with various interest rates ranging from 3.6% to 5.6%. Principal re yments are summarized as follows: 2008 2009 2010 2011 2012 Thereafter 1,190,648 1,248,393 1,026,228 1,077,159 2,094,189 2 159 394 8796,011 (c) Long-term liabilities include a principal su which may be raised by the issuance of d 10 years. The above long-term liabilities have een approved b't; Council by-law. The annual principal and interest payments re ired to service ese liabilities are within the annual debt repayment limit prescribed the Ministry of unicipal Affairs and Housing. Interest expense recorded in t e ye~ t these long-term liabilities is $474,451 (2006 - $440,813). \S / (d) (e) 11. Amounts to be recovered 2007 2006 $ $ 2,164,250 2,137,950 4,184,100 4,813,049 8,796,011 9,929,000 643 045 690 331 15,787,406 17 570 330 12. The City's fund alances are comprised of the following: (a) Opera ng Fund balance 2007 $ 2006 $ For general reduction of taxation (51,077) (50,232) V, Document in City of Pickering Notes (: 5/21/08: 10:40 AM FOR DISCUSSION PURPOSES ONLY $ page 15 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2007 12. Municipal fund balances at the end of the year (continued) (b) Capital Fund balance Funds available for acquisition of tangible capital assets Acquisition of tangible capital assets expected to be Financed by long-term liabilities Financed by taxation or user charges Financed by grants Financed b donations and contributions (c) Reserves and Reserve Funds V, Document in City of Pickering Notes C' 5/21/08: 10:59 AM FOR DISCUSSION PURPOSES ONLY 5&,356 (~2~7. (50,8 0) 2007 $ 400,000 951,391 683,214 1,328,080 15,491,176 745,244 120,999 713,821 122,547 55,000 308 243 20 919 715 180,880 1,458,193 119,057 1,103,109 146 195 3007434 23,927,149 2006 $ 400,000 951,391 685,715 6,356,615 6,910,981 809,654 120,999 474,484 72,547 30,000 833 243 17645629 194,175 1,394,511 78,989 834,922 2 502 597 20,148,226 Page 16 ", 4 f I . ,.J The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2007 13. Pension agreements The municipality makes contributions to the Ontario Municipal Employees Reti ment Fund (OMERS), which is a multi-employer plan, on behalf of the members of its s ff. The plan is defined benefit plan which specifies the amount of the retirement benefit t be received by employees based on the length of service and rates of pay. Contributions on account of current service for 2007 were $1,828,005 2006 - $1,705, 14. Trust Funds I d Trust funds administered by the municipality amounting to $ 7,27f(~ $ 68,567) have not been included in the Consolidated Statement of Financi Position nor hall their operations been included in the Consolidated Statement of Financial ctivities. Classification of expenditures by object ~ The Consolidated Statement of Financial Activitie pre . he ex nditures by function; the following classifies those same expenditures by bject: 15. 16. 1: ansactions Revenues Interest 0 promissory notes Propert taxes levied Expens Ele rical energy and services Balan es A ounts payable romissory notes receivable Document in City of Pickering Notes (.' 5/21/08; 10:40 AM FOR DISCUSSION PURPOSES ONLY 2007 $ 35,963,876 11,881,810 2,054,598 961,143 201,718 10 679 557 61 742 702 2007 $ 1,905,244 42,093 1,919,134 393,505 25,069,000 2006 $ 32,114,799 17,386,515 1,721,394 1,097,144 161,870 8 690 656 61172 378 2006 $ 1,905,244 40,366 1,931,707 175,508 25,069,000 Page 17 17. Guarantees In the normal course of business, the City enters into agreements which cant The City's primary guarantees are as follows: (i) The City has provided indemnities under lease agreements for the e of various fac' Ities or land. Under the terms of these agreements the City agrees to 'ndemnify the counterparties for various items including, but not limited to, al iabilities, loss, s its, and damages arising during, on or after the term of the agreemen . The maximum mount of any potential future payment cannot be reasonably estimat ~ (Ii) The City indemnifies employees and elected officials for v rio s incl ing, but not limited to, all costs to settle suits or actions due to asso iation with . y, subject to certain restrictions, The City has purchased liability i urance to mitig e the cost of any potential future suits or actions. The term of the in mnification is n explicitly defined, but is limited to the period over which the indemn' led party served s an employee or elected official of the City. The maximum amou of any potentia future payment cannot be reasonably estimated. ~ (Iii) The City has entered into agreements that ay' I inde ities in favour of third parties, such as purchase and sale agree nts, c entia' y agreements, engagement letters with advisors and consultants, ou ourcing ag nts, leasing contracts, information technology agreements an service agreem nts. These indemnification agreements may require the City to mpensate coun rparties for losses incurred by the counterparties as a result of breac s in representa ' n and regulations or as a result of litigation claims or statutory sanc ons that may b suffered by the counterparty as a conseq. uence of the transaction Th!:2f th se indemnities are not explicitly defined and the maximum amount of ny po i ursement cannot be reasonably estimated. . The nature of these inde nification agr e ents prevents the City from making a reasonable estimate of e maximum ex osure due to the difficulties in assessing the amount of liability wh' h stems from t unpredictability of future events and the unlimited coverage er to counte arties. Historically, the City has not made any . significant payme s such or imilar indemnification agreements and therefore no amount has bee a lance sheet with respect to these agreements. 41 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2007 18. named as defendant in certain legal actions In which damages have been of th se actions is not determinable as at the date of reporting and o prov ion as been made in these financial statements for any liabilities which 19. udget figures The approved erating and capital budgets for 2007 are reflected on the Consolidated Schedule of erating Fund Financial Activities and Fund Balance, Consolidated Schedule of Capital Fun Financial Activities and Fund Balance, and the Consolidated Statement of Financial Activities. The budgets established for the capital fund operations are on a project-oriented basis, t costs of which may be carried out over one or more years and, therefore, may not be comp able with the current year actual amounts. As well, the municipality does not have a bud t for activity within Reserves and Reserve Funds, with the exception being those tr sactions which flow through either the operating or capital fund budgets. Budget figures ve been reclassified for the purposes of these statements to comply with PSAB reporting principles. Document in City of Pickering Notes (; 5/21/08; 10:40 AM Page 18 FOR DISCUSSION PURPOSES ONLY 20. Tangible capital assets For fiscal years commencing after January 1, 2009, the City will be required t report tangible capital assets in its consolidated financial statements in accordance with Th ublic Sector Accounting Handbook of the Canadian Institute of Chartered Accountants ction PS3150 - Tangible Capital Assets. The City is currently working toward obtaining e necessary information in order to comply with PS 3150. For 2007, Public Sector ideline 7 requir s the disclosure of tangible capital asset information in the notes to the fin cial statements 0 the extent that reliable information is available. The City is currently w rki on a plan implement PS3150 but as at December 31, 2007 the City does no h detailed t gible capital asset information to disclose. For the year ended December 31 0 ible c ital expenditures incurred during the year are recorded as capital xpenaitur . t e consolidated statement of financial activities. 42 The Corporation of the City of Pickering Notes to the consolidated fmancial statements December 31, 2007 21. Comparative figures Certain comparative figures have been reclassified statement presentation. current year financial Document in City of Pickering Notes (.' 5/21/08: 10:40 AM page 19 FOR DISCUSSION PURPOSES ONLY .",.~.~"",,,---~-~ ,1 7 '-& .") , ~, The Corporation of the City of Pickering Consolidated schedule of operating fund financial activities and fund b ance year ended December 31, 2007 Sc edule I Revenues Residential and farm taxation Commercial and industrial taxation Taxation from other governments User charges Government grants and fees Other contributions and donations Investment income Penalties and interest on taxes Fines Interest on promissory notes Other Total revenues Expenditures General government Protection to persons and property Transportation services Environmental services Social and family services Recreational and cultural services Plannin and develo ment Total ex enditures Net revenues Budget (UnaUdited) $ (Note 19) 11,813,917 14,330,659 6,109,154 119,365 385,401 16,529,901 1 774 748 51 063 145 7,401,024 ,474,748 6,683,041 6,937,311 7,194J85 352,672 98A43 lA04,505 1,698,253 590,341 1,905,244 591,612 53,930 955 15,302,981 13,513,808 5,308,877 46,718 333,056 16,047,858 1 928 424 52481,722 1 449,233 1,000,000 1,640,000 2A60,000 (2,343,239) (2,242,532) (2,668,858) 1,053,001 (4,456,014) 1,131,597 (1,132,989) (1,132,989) (1,101,847) (1,225,949) (47,286) 26,300 36,601 (2,525,074) (7,401,869 (110,000) (845) (51,503) 110,000 1,271 (51,077) (50,232) FOR DISCUSSION PURPOSES ONLY Page 20 '14 it The Corporation of the City of Pickering Consolidated schedule of capital fund financial activities and fund bal ce year ended December 31, 2007 Scl dule II Revenues Grants Other contributions and donations Development charges and developer contributions earned Other Total revenues Expenditures General government Protection to persons and property Transportation services Environmental services Social and family services Recreation and cultural services Plannin and develo ment Total ex enditures Net ex enditures Budget Unaudited $ (Note 19) 969,750 192,500 ,014,811 1,342,124 5,978,241 132,408 25,029 2,186,944 10 679 557 1,552,588 10 545 4441 727 1,280,176 1,739,315 3,570,541 91,493 14,945 1,993,404 782 8 690 656 2,283,556 2,242,532 2,668,858 1,166,125 978,374 (433,637) 2,696,700 2,792,000 803 000 597000 352000 6 949 381 3 817 906 5,379 221 (2,915,047) 1,130,292 5 209 345 4 079 053 2,294,298 5,209,345 FOR DISCUSSION PURPOSES ONLY Page 21 ~ The Corporation of the City of Pickering Consolidated schedule of reserves and reserve funds financial activities and fund balance year ended December 31, 2007 Revenues Other contributions and donations Investment income Net transfers from (to) other funds Operating Fund Ca ital Fund Total net transfers Change in reserves and reserve fund balance Reserves and reserve funds, be innin of ear Reserves and reserve funds, end of year (577,211) 20 148 226 20 725 437 23,927,149 20,148,226 Page 22 FOR DISCUSSION PURPOSES ONLY LJ Financial Statements of CITY OF PICKERI G ill PUBLIC LIBRAR BOA~ December 31,2007 DS Document in 2211 Pickering-City-Public-Library-Board-127 (; 5/27/08: 8:13 AM FOR DISCUSSION PURPOSES ONLY Auditors' Report /~1 '7 Deloitte & To he LLP 5140 Yonge treet Suite 170 Toronto N M2N 6L7 Canad We conducted our audit in accordance th Canadian nerally accepted auditing standards. Those standards require that we plan and p Ol~'t t obtain reasonable assurance whether the financial statements are free of material I Isstate . A audit includes examining, on a test basis, evidence supporting the amounts and d' closures the mancial statements. An audit also includes assessing the accounting principles u d and signi ca t estimates made by management, as well as evaluating the overall financial state nt presentation. In our opinion, these financial s tel the City of Pickering Public L' r the changes in its financial ositt accepted accounting princi es. s present airly, in all material respects, the financial position of B a ecember 31, 2007 and the results of its operations and r the y, ar then ended in accordance with the Canadian generally FOR DISCUSSION PURPOSES ONLY /1 e CITY OF PICKERING PUBLIC LIBRARY BOARD Table of Contents December 31, 2007 Statement of Financial Position Statement of Financial Activities and Change in Fund Balance 2 Notes to the Financial Statements 3-6 D Document in 2211 Picke,.ing-City-Public-Librory-Board-127 C 5/27/08: 8:13 AM FOR DISCUSSION PURPOSES ONLY Cash Accounts receivable Due from City of Pickerin o CITY OF PICKERING PUBLIC LIBRARY BOARD Statement of Financial Position December 31, 2007 2007 FINANCIAL ASSETS $ LIAB~ITIES CURRENT Accounts payable and accrued liabilities $ 155,502 Deferred Revenue Due to the Government of Canada 409 Post-employment benefits obli ation (Note 3) 123,000 278,911 NET FINANCIAL LIABILITIES (169,482) (196,364) NON-FINANCIAL ASSETS Prepaid ex ense $ 52,182 $ 73,364 NET LIABILITIES $ (117,300) $ (123,000) BOARD POSITION AMOUNTS TO BE RE $ (117,300) $ (123,000) tin 2210 Pickering-City-Public-Library-Boord-127(#7044)' 5/27/2008; 8:13 AM Page 1 of6 FOR DISCUSSION PURPOSES ONLY \) CITY OF PICKERING PUBLIC LIBRARY BOARD Statement of Financial Activities and Change in Fund Balanc Year ended December 31, 2007 2007 Budget (unaudited) (Note 7) Actual REVENUES City of Pickering grants - operating City of Pickering grants - capital Federal grants Province of Ontario grants Fines and other recei ts $ 4,052,450 186,750 $ $ 3,9 4,325 40,930 19,114 109,725 196,910 4,421,004 EXPENDITURES Operating Salaries Salaries and wages Fringe benefits Material, supplies and utilities Books Utilities Other supplies 2,582,430 531,921 3,114,351 502,541 526,327 192,249 205,422 53,315 49,125 748,105 780,874 223,235 227,773 189,704 43,898 42,013 40,131 13,600 10,397 11,817 12,600 17,880 10,103 12,750 10,562 11,885 8,295 7,457 4,183 4,706 6,248 5,509 38,759 52,501 58,509 8,000 6,873 14,806 1,763 15,763 16,679 15,228 381,606 400,146 361,875 4,374,057 4,324,986 4,257,100 186,750 197,880 140,930 4,560,807 4,522,866 4,398,030 26,882 22,974 (5,700) (5,800) (21,182) (17,174) $ $ $ in 2210 P;ckering-City-Public-Library-Board-127(#7044): 5/27/2008: 8:13 AM Page 2 of6 FOR DISCUSSION PURPOSES ONLY -'..f ,.-....i.~_~__;;.~.~__"-__.~....""',.."'"e<'''';-; The financial statements of the City of Pickering Public Library Board (the' ibrary Board") re the representations of management prepared in accordance with Can ian generally ccepted accounting principles for local government established by the Publ" Sector Accoun ng Board (PSAB) of the Canadian Institute ofChm1ered Accountants. . I d Significant accounting policies adopted by the Library Board are s fo1l6~ '1 I CITY OF PICKERING PUBLIC LIBRARY BOARD Notes to the Financial Statements December 31, 2007 1. SIGNIFICANT ACCOUNTING POLICIES Basis of accounting (b) Tangible capital assets n r tangible capital assets are not recorded , al as ets acquired during the year are rep0l1ed on ng in fund balance as capital expenditures in the (c) (d) of fi ancial statements in confonnity with Canadian generally accepted pIe requires management to make estimates and assumptions that affect the assets, liabilities and the disclosure of contingent assets and liabilities at the date of t le nancial statements and the rep0l1ed amounts of revenues and expenditures during the per' d. Actual results could differ from those estimates. Capital ex nditures were incurred to acquire furniture and equipment in the amount of $197,880 (2006 - $ ilO,930). D Document in 2211 Pickering-City-Public-Library-Boord-127 (.- 5/27/08: 8:13 AM Page30f6 FOR DISCUSSION PURPOSES ONLY r~, .</ The Library Board makes available to qualifying employees who retire b ore the age of opportunity to continue their coverage for such benefits as extended he th and drugs. overage ceases at the age of 65. Dependent on eligibility, health coverage ay be a share financial responsibility between the Library Board and the retired employ s. >rhe LibratJ5 Board also provides full time and permanent patt-time employees a sick th e 'tlement aJ any unused entitlement is accumulated year to year. This accumulated entit m i ves d and therefore does not get paid out at the time of retirement or termination. T e most recen c arial valuation of the post-employment benefits was performed at Januaty 1,20 21-. CITY OF PICKERING PUBLIC LIBRARY BOARD Notes to the Financial Statements December 31, 2007 3. POST EMPLOYMENT BENEFITS OBLIGATION Information about the Library Board's post employment b nefits liabilities' as follows: Post-employment benefits liability, beginning of~ ar Current service costs AmOltization of actuarial losses Interest expense Benefits aid during the year Post-employment benefits liability, en 2006 123,000 $ 128,800 15,800 14,900 800 800 8,000 8,400 (30,300) (29,900) $ 117,300 $ 123,000 2007 2006 $ 126,200 (8,900) $ 117,300 $ 132,700 (9,700) $ 123,000 loyed in the actuarial valuations are as follows: (a) The current ental cost trend cost at January 1, 2004, the date of the most recent actuarial valuation, as 4.5% per annum. H Ith costs were assumed to increase at 10% in 2005 and decrease by 1 % increments per year an ultimate rate of 5% per year in 2010 and thereafter. D Document in 2211 Pickering-City-Public-Library-Boord-127 (: 5/27/08: 8:13 AM Page 4 of6 FOR DISCUSSION PURPOSES ONLY The Library Board makes contributions to the Ontario Municipal Emp yees Retiremen Fund (OMERS), which is a multi-employer plan, on behalf of eligible member of its staff. The Ian is a defined benefit plan that specifies the amount of the retirement be efit to be recei ed by the employees based on the length of service and rates of pay. I ;( Contributions in the amount of $149,696 (2006 - $143,143) wer paM/t~R on behalf of its members during the year. /~J CITY OF PICKERING PUBLIC LIBRARY BOARD Notes to the Financial Statements December 31, 2007 4. PENSION AGREEMENTS 5. STATEMENT OF CHANGES IN FINANCIAL POSI the related information is A statement of changes in financial position has not ~h>sented, readily determinable from the financial statements P' sel~ GUARANTEES 6. In the normal course of business, the brary Board el ers into agreements, which contain guarantees. The Library Board's primary, ouarantees are as ollows: (i) The Library Board indemnifies mplo~o I'd members for various items including, but not limited to, all costs to s Ie sui~~~~ti~s due to association with the Library Board, subject to certain restrictiOl . The Library Bard has purchased liability insurance to mitigate the cost of any potentia future suits or ctions. The term of the indemnification is not explicitly defined, but' limited to the riod over which the indemnified party served as an employee or board 1 e of the Li rary Board. The maximum amount of any potential future payment ca ot IX stimated. (ii) i 0 agreements that may include indemnities in favour of third pm1ies, such s purchase and Ie agreements, confidentiality agreements, engagement letters rs and consul nts, outsourcing agreements, leasing contracts, information agreements a a service agreements. These indemnification agreements may ibrm}' Bard to compensate counterparties for losses incurred by the a r ult of breaches in representation and regulations or as a result of o statutory sanctions that may be suffered by the counterpmiy as a t transaction. The tenns of these indemnities are not explicitly defined and aunt of any potential reimbursement cannot be reasonably estimated. he nature of t se indemnification agreements prevents the Librm}' Board from making a reasonable esti ate of the maximum exposure due to the difficulties in assessing the amount of liability, whi stems from the unpredictability of future events and the unlimited coverage offered to counterp ties. Historically, the Library Board has not made any significant payments under such or simila mdemnification agreements and therefore no amount has been accrued in the Statement of Financ' 1 Position with respect to these agreements. D Document in 2211 Pickering-City-Public-Library-Boord-127 {.. 5/27/08; 8:13 AM Page50f6 FOR DISCUSSION PURPOSES ONLY /t CITY OF PICKERING PUBLIC LIBRARY BOARD Notes to the Financial Statements December 31, 2007 7. BUDGET FIGURES Budgets established for capital expenditures are set on a project-oriented sis, the costs of hich may be carried out over one or more fiscal years and may not be compa ble with the cur ent year actual amounts. 8. TANGIBLE CAPITAL ASSETS For fiscal years commencing after January 1, 2009, the Libr ry Board will b required to repOlt tangible capital assets in its financial statements in accorda ce with The Pub c Sector Accounting Handbook of the Canadian Institute of Chartered AccoUl nts section PS 50 - Tangible Capital Assets. The Library Board is currently working toward t' ing the nec sary information in order to comply with PS 3150. For 2007, Public Sector id 'ne requir the disclosure of tangible capital asset infonnation in the notes to the fi nc' tement to the extent that reliable infonnation is available. The Library Board is c rrently 'ng n a plan to implement PS3150 but as at December 3 1, 2007 the Library B rd does not e detailed tangible capital asset infonnation to disclose. For the year end December 3 I, 007 tangible capital expenditures incurred during the year are recorded as cag' al expenditures 1 the statement of financial activities. COMPARATIVE FIGURES ~ Certain of the prior year's comp ative figu~ha~ been reclassified to confonn to the current year's financial statement presen tion. 9. ~ D Document in 2211 Pickering-City-Public-Librory-Boord-127 (.' 5/27/08: 8:13 AM FOR DISCUSSION PURPOSES ONLY Page 6 of6 Financial Statements of THE CORPORATIO THE CITY OF PIC TRUST FUNDS DS Doa.unent in 2210 2007 Trust Notes (: 5/27/08: 8:00 AM FOR DISCUSSION PURPOSES ONLY '-) b Deloitte & T che LLP 5140 Yong Street Suite 17 Torant Cana Auditors' Report To the Members of Council, Inhabitants and Ratepayers of The Corporation of the City of Pickering We have audited the statement of financial position of the T st unds of the orporation of the City of Pickering as at December 31, 2007 and the statement of fin ci ac' vities a fund balances of the Trust Funds for the year then ended. These financial st em re th responsibility of the City's management. Our responsibility is to express an opinio on these statements based on our audit. We conducted our audit in accordance with Those standards require that we plan and perfo financial statements are free of material mis ate ent. An a it includes examining, on a test basis, evidence suppOlting the amounts and disci sure i 111 cial statements. An audit also includes assessing the accounting principles used and sig cant stimates made by management, as well as evaluating the overall financial statemen presentatio' FOR DISCUSSION PURPOSES ONLY THE CORPORATION OF THE CITY OF PICKERING TRUST FUNDS Statement of Financial Position December 31, 2007 FINANCIAL ASSETS Investments Interest receivable Loans receivable TRUST FUND POSITION OHRP 2007 Dorothy Card Estate 2006 $ $ 256,674 256,674 18,360 8,222 2,240 3,671 $ 2,240 $ 268,567 $ 2,240 $ 268,567 tin 22112007 Trust FS (#7043); 5/27/2008: 7:59 AM Page 1 of3 FOR DISCUSSION PURPOSES ONLY ) >{ " \.' THE CORPORATION OF THE CITY OF PICKERING TRUST FUNDS Statement of Financial Activities and Fund Balances Year ended December 31, 2007 REVENUES Interest 2007 Dorothy Card OHRP Estate $ 314 $ 1,658 87 1,745 (1,431) EXPENDITURES Provincial payments Administration charges NET REVENUES (EXPENDITURES) FUND BALANCE, BEGINNING OF YEAR FUND BALANCE, END OF YEAR FOR DISCUSSION PURPOSES ONLY 9,641 1,766 93 1,859 7,782 268,567 $ 277,274 260,785 $ 268,567 Page 2 of3 THE CORPORATION OF THE CITY OF PICKERING TRUST FUNDS Notes to the Financial Statements December 31, 2007 1. ACCOUNTING POLICY The financial statements of the Trust Funds of the Corporation of the ty of Pickering re the representations of management prepared in accordance with Ca aian generally accounting principles. Significant accounting policies adopted include: Basis of accounting Investments Investments are recorded at cost. roximates their fair value. 2. ONTARIO HOME RENEWAL P 'vable at ecember 31, 2007 are comprised entirely of repayable loans of ). the event of the sale or lease of the home or in the event of the o upy the home, the balances of the repayable loan immediately become e omeowner. 3. The City of p' ering has established a trust fund for the Dorothy Card Estate for the care and upkeep of t destitute elderly. The fund balance is comprised of investments and accumulated interest am unting to $275,034 (2006 - $264,896). A atement of cash flows has not been presented as the information is readily determinable from e financial statements presented. D Document in 22102007 Trust Notes t. 5127/08; 8;00 AM Page 3 of3 FOR DISCUSSION PURPOSES ONLY