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Home My WebLink AboutCST 26-11 Cif Report To Executive Committee 1 ICKERIly Report Number: CST 26-11 Date: June 13, 2011 01 From: Gillis A. Paterson Director, Corporate Services & Treasurer Subject: 2010 Year End Audit Recommendations: 1. That Report CST 26-11 of the Director, Corporate Services & Treasurer be received; 2. That the Year-end Communication Report as submitted by Deloitte & Touche LLP be received for information; and 3. That the 2010 draft Audited Consolidated Financial Statements for the City of. Pickering be approved; and, 4. That Deloitte & Touche LLP be reappointed to provide external auditing services to the City of Pickering for a 5 year term. Executive Summary: Attached to this report is the auditor's Year-end Communication Report and the draft Audited Consolidated Financial Statements for the year ended December 31, 2010. Again this year, the auditor has provided an unqualified opinion on the financial statements which means that the financial statements present fairly, in all material respects, the financial position of the City and its operations, assets and cash flows in accordance with Canadian public sector accounting standards. Staff are pleased to advise that the auditor did not identify any significant deficiencies in the audit to report to Council and therefore the auditor has not issued a management letter. Under the Municipal Act, 2001, Council must appoint an auditor licensed under the Public Accounting Act, 2004 for a period not to exceed five years. The current auditor, Deloitte & Touche was appointed on January 15, 2002 and reappointed in October 2006. As the five year appointment ends with the 2010 year end audit, it is recommended the firm be reappointed. Report CST 26-11 Date: June 13, 2011 2010 Year-End Audit Page 2 02 Financial Implications: The financial results for 2010 were once again favourable. However these results, as in prior years, are primarily a result of one-time occurrences and cannot be relied upon to continue on an annual basis into the future. In regards to the reappointment of the auditors, there will be no additional costs beyond the budgeted amount included in the 2011 Current Budget, as the auditor has indicated they would be willing to hold their fees at the 2010 level for the next three years with an inflationary increase in years 4 and 5. Sustainability Implications: This report does not contain any sustainability implications. Background: The audit of the consolidated financial statements for the year ended December 31, 2010 has been completed. The auditor's Year-end Communication Report is included as Attachment 1. This report, prepared by Deloitte & Touche LLP, summarizes the results of the December 31, 2010 audit and comments on significant matters regarding the audit or other matters they may believe to be of interest to Council. Nothing of significance has been noted. Appendix A of the attachment presents a draft of the independent auditor's report which is attached to the Financial Statements, once approved by Council, and provides the unqualified opinion. On an annual basis, the auditor is required to communicate all relationships between the City and the firm that may impact on their independence to the City. The independence letter included in Appendix B confirms that Deloitte & Touche LLP is independent with respect to the City. It is in draft form as it will be dated once the Consolidated Financial Statements are approved by Council. Appendix C illustrates the draft representation letter which is provided by the City to the auditors. This letter indicates that the Financial Statements are management's responsibility and that management has provided and disclosed all necessary information to ensure the Financial Statements are not materially misstated. This letter will be signed by the Chief Administrative Officer and the Treasurer upon approval of the financial statements by Council. The scope of the audit does not include an in-depth evaluation of all systems or internal controls; however, the auditors may report on matters that come to their attention during the course of their review. No matters came to their attention to report in a management letter and as such one has not been issued. The draft Audited Consolidated Financial Statements are included as Attachment 2. These statements 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 its audit. An unqualified opinion has been provided. The Consolidated Financial Statements includes the activities of the City of I Report CST 26-11 Date: June 13, 2011 2010 Year-End Audit Page 3 03 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. This is the second year of reporting on the full accrual basis of accounting as prescribed by the Public Sector Accounting Board (PSAB), which includes reporting tangible capital assets. Tangible capital assets, such as land, building, infrastructure and equipment are now capitalized (recorded) at cost on the Statement of Financial Position (Balance Sheet) and amortized (depreciated) over their estimated useful lives in current operating expenses. Under this method, the Statement of Financial Position now includes tangible capital assets under the non-financial asset section and shows Accumulated Surplus. The Statement of Operations no longer shows capital expenditures but includes those capital budget expenditures, that are-not deemed tangible capital assets, as operating expenses. Statement of Financial Position' Financial assets are those assets which could provide resources to discharge existing liabilities or finance future operations. Net financial assets increased over the prior year which was due to an increase in financial assets of approximately $8.8 million offset by an increase in liabilities of approximately $6.7 million. The increase in financial assets is due to an increase in investments of approximately $8.3 million. Timing of receipt and use of funds, especially when funds are received in the last quarter of the year, will cause the investment balance to change year over year. The following factors contributed to the increased investment balance at the end of the year: debenture proceeds of just over $4 million received in mid October, Federal Gas Tax installment of $1.3 million received in mid November, supplementary tax billing of $1.6 million due in late October and November and an increase in development charges collected of approximately $1.8 million. The increase in liabilities primarily resulted from an increase in Accounts Payable ($1.4M), Deferred Revenue ($2.5M) and Long-term Liabilities ($2.3M). As noted above, debentures were issued in the year causing a net increase in long-term liabilities after principal repayments were made. The deferred revenue balance consists primarily of the Obligatory Reserve Fund amounts such as Development Charges, Parkland Contributions, Federal Gas Tax and Third Party/Developer's Contributions. As mentioned above, the Federal Gas Tax installment received in November and the overall increase in Development Charges collected has contributed to the.increase in deferred revenue. Lastly, the increase of approximately $1.3 million in Accounts Payable balance at year end results from timing of receipt of invoices and processing of payments in addition to an overall increase in accruals from the prior year including an accrual for the refund of Report CST 26-11 Date: June 13, 2011 2010 Year-End Audit Page 4 0 property taxes in the amount of $345,000 for the successful assessment appeals by golf courses. Non-financial assets includes tangible capital assets which is the net book value (cost less accumulated amortization) of the City owned assets including land, .buildings, roads, bridges & sidewalks infrastructure, storm sewer infrastructure, furniture and fixtures, vehicles and equipment. Non-financial assets are not available to discharge existing liabilities and are held for use in the provision of services. They have useful lives extending beyond the current year and are not intended for sale in the ordinary course of operations. Statement of Operations Revenue reported includes both operating and capital. Therefore, variances between budget to actual may arise due to timing of approval in the capital budget and actual receipt of funds/recognition of revenue. This is clearly illustrated with the Government grants and fees revenue item. This amount includes provincial and federal grant monies for both current and capital budget expenditures. The higher budget figure compared to actual is primarily due to the $8 million of federal and provincial grants assumed in the 2010 Capital Budget for the Frenchman's Bay Entrance construction. This project is only to proceed upon receipt of grant funding which has not occurred. Therefore, the actual revenue is much lower than the budget. The timing of project approval and recognition of revenue also applies to the Other contributions and Development charges earned line items. A number of these projects have not commenced or been completed and therefore the revenue is not recognized until the expenses are incurred. The capital budget expenditures do not show on the Statement of Operations as capital expenditures. For those expenditures that meet the definition of a tangible capital asset (TCA), the cost is reported on the Statement of Financial Position (Balance Sheet). Only a portion of the asset's cost is included as an amortization expense each year over the life of the asset in the operating expenses reported on the Statement of Operations. The amortization expense is included in operating expenses for the asset's respective functional category. For example, amortization on a fire truck is included under the Protection to Persons and Property category. Capital budget expenditures that do not meet the TCA definition are included as operating expenses under the appropriate functional category. The budget figures reported also need to reflect the change in reporting for capital budget expenditures. Note 18 of the City's consolidated financial statements reflects the changes made to the 2010 Council approved budget to put it on a basis consistent with the full accrual basis of accounting which incorporates tangible capital asset reporting. i Report CST 26-11 Date: June 13, 2011 2010 Year-End Audit Page 5 05 Overall, the actual expenses are comparable with the budget with the exception of the Recreation and Cultural Services function. As discussed above, the Frenchman's Bay Entrance construction project was an $8 million project included in the 2010 Capital Budget that has not proceeded. This project does not meet the definition of a City tangible capital asset as it does not appear it will be a City asset for financial reporting purposes, and therefore is included in operating expenses causing the significant variance between budget to actual. Accumulated Surplus The components that make up the Accumulated Surplus are disclosed in Note 12 of the City's consolidated financial statements and are summarized below. It must be emphasized that these amounts are not surplus funds in the traditional sense. The accumulated surplus balance essentially represents the difference between assets and liabilities of the City. What primarily contributes to this balance are the tangible capital assets of approximately $187.7 million and the City's equity in Veridian Corporation of approximately $69.2 million. The accumulated surplus is comprised of the following: Operating fund $ 125,092 Capital fund 10,355,677 Reserves and reserve funds 29,598,670 Equity in Veridian Corporation 69,231,568 Tangible capital assets 187,669,237 Post employment benefits liability (2,703,900) WSIB benefit liabilities (1,672,898) Internal loans (1,123,472) Net long-term liabilities (16,582,742) $274,897,232 Reappointment of Auditors Under section 296 of the Municipal Act, 2001, municipalities are required to appoint an auditor licensed under the Public Accounting Act, 2004 for a period not to exceed five years. At the end of the term the auditors may be reappointed. Deloitte & Touche LLP (D&T) was originally appointed in January 2002 for a five year term and reappointed for an additional five years in 2006. D&T is one of the largest public accounting firms in Canada and provides a wide variety of professional services. in addition to audit services and has vast experience within the municipal sector. These services include advice on management controls, tax matters and Public Sector Accounting Board Standards. The firm's municipal government practice provides a broad range of auditing, accounting and advisory services to a number of Canadian municipalities including 6 of the 8 local municipalities and the Regional Municipality of Durham. Report CST 26-11 Date: June 13, 2011 2010 Year-End Audit Page 6 Initiating a request for proposal (RFP) is not recommended as a significant amount of staff time is required to prepare and evaluate an RFP putting additional demands on already limited staff resources that are involved with a number of other Corporate priorities. Furthermore, a change in the audit firm would necessitate additional staff time and resources in introducing and explaining the City's policies, procedures, systems of controls, financial systems and operations as the firm moves through its learning curve which usually takes two or more audit cycles (years). The services provided by D&T have clearly demonstrated proficiency in the municipal environment and have demonstrated an excellent knowledge of City operations. Their comments and assistance is always relevant and practical. Based on the experience to date the firm has provided an excellent level of service at a reasonable cost. Attachments: 1. Auditor's Year-end Communication Report 2. 2010 Draft Audited Consolidated Financial Statements Prepared By: Approved / Endorsed By: Kristine Senior, CA Gillis A. Paterson, CMA Manager, Accounting Services Director, Corporate Services & Treasurer Copy: Chief Administrative Officer Recommended for the consideration of Pickering Ci Council .3v Zo Tony Prevedel, P.Eng. Chief Administrative Officer ATTACHMENT # TO REPORT # t2r A G -11 Deloitte, 07 Year-end communication The Corporation of the City ofPickering t a • yiE vt x k .eY. S d k.- 4 h For the year ended December 31, 2010 For presentation to the Executive Committee June 13, 2011 03 ■ D e l o tte ® Deloitte & Str a LLP 5140 Yonge Street Suite 1700 Toronto ON M2N 6L7 Canada Tel: 416-601-6150 Fax: 416-601-6151 www.deloitte.ca May 26, 2011 Private and confidential Members of the Executive Committee The Corporation of the City of Pickering 1 The Esplanade Pickering ON L1V 6K7 Dear Members of the Executive Committee: Report on audited annual financial statements We have performed an audit of the consolidated financial statements (the "financial statements") of the Corporation of the City of Pickering ("City") as of, and for the year ended, December 31, 2010, in accordance with Canadian generally accepted auditing standards ("GAAS") and expect to issue our audit report thereon dated June 20, 2011. The date of our independent auditor's report will be the date that the financial statements are approved by Council. This report summarizes our findings during the audit. Our audit has been conducted in accordance with the Audit Plan that was presented to the Executive Committee at the meeting on January 10, 2011. Use of our report This report is intended solely for the information and use of the Executive Committee, Council, management and others within the City and is not intended to be, and should not be, used by anyone other than these specified parties. Accordingly, we disclaim any responsibility to any other party who may rely on it. We would like to express our appreciation for the cooperation we received from the officers and employees of the City with whom we worked to discharge our responsibilities. We look forward to discussing this report with you and to answering any questions you may have. Yours truly, Chartered Accountants Licensed Public Accountants Member of Deloitte Tokhe Tohmatsu Limited 09 Table of contents Executive summary .......................................................................................................................................1 Audit scope and findings 3 Audit risks 5 Internal control matters.. 6 Significant accounting practices .....................................................................0-...........................................7 Group audit communications 8 Appendix A - Draft version of our independent auditor's report 9 Appendix B - Draft independence letter .....................................................................................................12 Appendix C - Draft representations letter ...................................................................................................14 © Deloitte & Touche LLP and affiliated entities. Year-end communication -The Corporation of the City of Pickering i Executive summary This report summarizes the main findings arising from our audit. Audit findings Audit results Our audit of the financial statements was designed to obtain reasonable, rather than absolute, assurance as to whether the financial statements are free of material misstatement. There were no significant departures from the audit planning and risk assessment described in the audit plan, which we presented on January 10, 2011. A detailed description of our audit results has been included on page 3 of this report. Status of our audit We expect to be in a position to render our audit opinion dated June 20, 2011 on the financial statements of the City, the Library Board and the Trust Funds, following approval of the financial statements by the Council and the completion of the following outstanding procedures : • Receipt of the signed management representation letter; • Receipt of legal letters; • Completion of our engagement quality control review; and • Completion of any required audit procedures between the completion of our field work and the expected date of our audit report (June 20, 2011). Audit risks, In accordance with our audit plan, our procedures focused on the following risk areas: • Year-end cut-off; • Revenue/Deferred amounts; • Accounting estimates (including actuarially determined liabilities); and • Tangible Capital Assets. There were no changes to the areas of risks identified in our audit plan. We have summarized the results of our audit procedures for each of these risk areas on page 5 of this report. Internal control over We did not identify any deficiencies in internal controls over financial reporting during financial reporting the year ended December 31, 2010 that we concluded to be material weaknesses. Group audit Based on the procedures we performed as set out in CAS 600, Special Considerations - Audits of Group Financial Statements (Including the Work of Component Auditors), we are not aware of any items that we believe are significant that should be brought to your attention. Fraud and illegal acts Based on the procedures we performed as recommended by CAS 240, The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements, we are not aware of any illegal acts or fraudulent events with respect to the City that occurred during the year. Significant events As a result of our audit procedures, we did not identify any items that we believe are significant that should be brought to your attention. 0 Deloitte & Touche LLP and affiliated entities. Year-end communication -The Corporation of the City of Pickering 1 Executive summary Significant accounting The City's significant accounting policies are set forth in Note 1 to December 31, policies 2010 financial statements. We believe managements selection of accounting policies to be appropriate under Canadian public sector accounting standards. Our views on the significant quantitative and qualitative aspects of these accounting policies are presented on page 7 of this report. Management judgment Accounting estimates are an integral part of the financial statements prepared by and accounting estimates management and are based on management's current judgments. These judgments are normally based on knowledge and experience about past and current events, assumptions about future events and interpretations of the financial reporting standards. During the year ended December 31, 2010, management advised us that there were no significant changes in accounting estimates or in judgments relating to such estimates. Our views on the significant quantitative and qualitative aspects of the judgments and estimates made by the City's management are presented on page 7 of this report. Audit adjustments and There were no uncorrected misstatements identified or corrected misstatements uncorrected resulting from the current year audit. misstatements Adjusted and unadjusted There were no disclosure deficiencies noted by us during the current engagement disclosure deficiencies and pertaining to the latest period presented, as all disclosure. items noted during our audit have been corrected by management. Independence We have developed appropriate safeguards and procedures to eliminate threats to our independence or to reduce them to an acceptable level. As required under professional standards, we have reported all relationships and other relevant matters that, in our professional judgment, may reasonably be thought to bear on our independence and we will confirm our independence to the Executive Committee as at the date of our auditor's report for the year ended December 31,. 2010. Our draft independence letter is included as Appendix B. Representations letter A draft version of the representations letter to be signed by management is included in Appendix C. Conclusion We intend to issue an unmodified audit report on the financial statements of the City for the year ended December 31, 2010 once the outstanding items referred to above are satisfactorily completed and the financial statements are approved. A draft version of our Independent Auditor's Report is included in Appendix A. © Deloitte & Tour-he LLP and affiliated entities. Year-end communication - The Corporation of the City of Pickering 2 12 Audit scope and findings We have prepared the following comments to assist you in fulfilling your oversight responsibilities of the financial reporting and disclosure process for which management of the City is responsible. In accordance with Canadian GARS, our.audit is designed to enable us'to express an opinion on the fairness of the presentation of the City of Pickering's annual financial statements prepared in accordance with Canadian public sector accounting standards. Changes to the audit plan The December 31, 2010 audit was conducted in accordance with our audit plan, which was presented to the Executive Committee on January 10, 2011. We confirm that there have been no significant amendments to the audit scope and approach communicated in the audit plan. Use of the work of experts The City used the work of an actuary in the determination of the City's post employment benefits and WSIB benefits. We reviewed the actuary's work and tested the assumptions and data used, ensured the disclosure in the financial statements was adequate, and that the actuary is.in good standing with the Canadian Institute of Actuaries. We did not find any issues with the work of the actuary. Disagreements with management In the course of our audit, we did not have any disagreements with management about matters that individually or in the aggregate could be significant to the financial statements. Consultation with other accountants Management has informed us that the City has not consulted with other accountants about auditing or accounting matters. Throughout the year, we held routine discussions with management regarding the application of accounting principles or auditing standards in connection with transactions that occurred and/or are contemplated, or other reassessments of current circumstances. In our judgment, such discussions were not held in connection with our retention as auditors. Related party transactions Related party transactions are disclosed in Note 14 to the financial statements. We have not identified any related party transactions that are not in the normal course of operations and that involve significant judgments by management concerning measurement or disclosure. © Deloitte & Touche LLP and affiliated entities. Year-end communication -The Corporation of the City of Pickering 3 Audit scope and findings Legal and regulatory compliance Our procedures did not identify any areas of material non compliance with laws and regulations by the city. Post-balance sheet events Management is responsible for assessing subsequent events up to the date of the release of the financial statements. At the date of finalizing this report, we are not aware of any significant post balance sheet events. i Q Deloitte & Touche LLP and affiliated entities. Year-end communication - The Corporation of the City of Pickering 4 14 Audit risks Our audit plan identified certain audit risk areas that we discussed with the Committee when.reviewing the audit plan. The results of our audit work on these areas of risks are set out below: response Areas of risk Our audit Year-end cut-off Substantive testing of accounts payable, • Satisfactory • Cut-off of revenues and expenses accrued liabilities, deferred revenue and accounts receivable s Test disbursements and cash receipts subsequent to year-end • Test supporting assumptions for accrued liabilities and deferred revenue I Revenueldeferred amounts • Substantive testing to determine if restricted Satisfactory • Revenue recognition of grants and contributions (i.e. development charges, gas tax, contributions etc.) and government transfers have been recognized as revenue in the appropriate period Accounting estimates • Obtain documentation on management's control Satisfactory • Estimates require management over the development of accounting estimates judgements (i.e. allowance for for any significant management estimates and significant property tax appeals, assess risk contingent liabilities, etc.) and • Focused review of calculation and support there are new audit standards . Discussions with management relating to this area • Analytic review of related accounts • Review outcome of estimates from prior years. Tangible capital assets • Review of processes in determining • Satisfactory • Implementation of PS 3150 - completeness, valuation, recording and cut-off of Tangible Capital Assets was new 2010 additions and disposals in 2009 and for 2010 spreadsheets . Substantive testing of transactions and and journal entries still being used processes for assessing useful lives of TCA to appropriately record TCA and . Review of calculations of amortization related amortization Actuarially determined liabilities • Communicate with actuary on our use of their Satisfactory • Accuracy and completeness of report for audit purposes certain liabilities such as workplace • Review actuarial report and test related safety and Insurance ("WSIB")and assumptions and data post-employment benefits • Ensure appropriate accounting treatment has been applied • Review related financial statement note disclosure for accuracy and completeness 0 Deloitte & Touche LLP and affiliated entities. Year-end communication -The Corporation of the City of Pickering 5 i 15 Internal control matters We obtained an understanding of internal control relevant to the audit, however not all controls are relevant to every audit. We evaluated the design of controls relevant to the audit and determined whether they have been implemented. We are not, however, required in a non-integrated audit to determine whether all relevant controls are operating effectively. Although not required by Canadian GAAS, we may decide that, for a particular engagement, it makes sense to rely on the effective operation of some controls to determine our planned substantive procedures we will perform. In such cases, we would go beyond evaluating the design of relevant controls and determining whether they have been implemented to also test whether the controls on which we intend to rely are operating effectively. Canadian GAAS require us to report to the Committee any significant deficiencies that have come to our attention. We did not identify any significant deficiencies in the audit and we will not be issuing a management letter. Our audit was not designed to provide a high degree of assurance that significant deficiencies, if any, would be detected. Accordingly, we are unable to, and do not, provide any assurance on the design or effective operation of internal control over financial reporting. 0 Deloitte & Touche LLP and affiliated entities. Year-end communication -The Corporation of the City of Pickering 6 Significant accounting practices Significant accounting policies are those that are most important to the portrayal of the City's financial condition and its results of operations. During the course. of our audit of the financial statements, we considered the qualitative aspects of the financial reporting. process, including items that have a significant impact on the relevance, reliability, comparability and understandability of the information included in the financial statements. Changes in accounting policies During the year ended December 31, 2010, there were no significant changes in previously adopted accounting policies or their application. Management judgment and accounting estimates In ourjudgment, the significant accounting estimates made by management are, in all material respects, free of possible management bias and of material misstatement. The disclosure in the financial statements around estimation uncertainty is in accordance with GAAP and is appropriate to the particular circumstances of the City. Significant estimates include: Payroll-related accruals - $1,307,532 (2009 - $833,619) Allowance for uncollectible taxes - $367,000 (2009 - $367,000) .Allowance for doubtful accounts - $305,000 (2009 - $305,000) Post employment benefit liability - $2,882,900 (2009 - $2,715,100) WSIB benefit liability - $1,672,898 (2009 - $1,368,198) Assessment appeals - $344,705 (2009 - nil) © Deloitte & Touche LLP and affiliated entities. Year-end communication -The Corporation of the City of Pickering 7 Group audit communications In accordance with CAS 600, Special Considerations-Audits of group financial statements (including the work of component auditors), Veridian Corporation is considered to be a significant component in relation to the December 31, 2010 City of Pickering's consolidated financial statements, given that it is 41 % owned by the City. As required by. CAS 600, we must communicate the following to the Executive Committee: An overview of the type of work to be An audit of the financial statements of Satisfactory. performed on the financial Veridian Corporation was performed by the information of the components component auditor. An overview of the nature of the We have communicated with the component Satisfactory. group engagement team's planned auditor to confirm their understanding of our involvement in the work to be audit requirements. In particular, we have performed by the component communicated with respect to the maximum auditors on the financial information materiality level, ethical requirements, skills of significant components and industry specific knowledge of the component auditor, and their understanding of Canadian GAAP and GAAS. A written confirmation has been obtained from the component auditor of the above. In addition we requested that specific information such as audit risks, unadjusted misstatements and subsequent events be communicated to us. Instances where the group No instances noted. Satisfactory. engagement team's evaluation of the work of a component auditor gave rise to a concern about the quality of that auditor's work Any limitations on the group audit No instances noted. Satisfactory. (e.g., where the group engagement team's access to information may have been restricted) Fraud or suspected fraud involving No instances noted. Satisfactory. group management, component management, employees who have significant roles in group-wide controls or others where the fraud resulted in a material misstatement of the group financial statements. 0 Deloitte & Touche LLP and affiliated entities. Year-end communication -The Corporation of the City of Pickering 8 Appendix A Draft version of our independent auditor's report Our independent auditor's report on the consolidated financia ia_ tem;e.nts is expected to be in the form noted on the following pages. However, the final form may'raeed to betiadjusted to reflect the final results of our audit. " %g ,n{Sr'r;{~•~`r'G~.(;r r'}., S:l'~'i., :•:ti}}S~:i+~Cti;•v,~y ,,r .,vr,{•,sh,'r+~{;,}}`r;i ti{::;}A i.•}rf~:j~ ?F'tilr v: ..tifi'r'iit`,•: nn•. •..%~fs r...{v::_?;1,T:{ :•{::titer. C%r 41 y;,} f ' '%t: yr y' '''":r.,: V$ft Y 0 Deloitte & Touche LLP and affiliated 'entities. Year-end communication - The Corporation of the City of Pickering 9 19 DDeloitte a' ®i tte & Touche LLP C 5140 Yonge Street Suite 1700 Toronto ON M2N 61_7 Canada Tel: 416-601-6150 Fax: 416-601-6151 www.deloitte.ca Independent Auditor's Report To the Members of Council, Inhabitants and Ratepayers ofthe Corporation ofthe City of Pickering We have audited the accompanying consolidated financial statemeaZNM Corporation of the City of Pickering, which comprise the consolidated statement of financi. ion as at December 31, 2010, and the consolidated statements of operations, change in net financAi: ets and cash flows for the year then ended, and a summary of significant accounting policies and ePI.-O' Ianatory information. . nn, Management's Responsibility for the Consolidated &heial Statem"'i n N Management is responsible for the preparation anel'presentation of these cao}dated financial statements in accordance with Canadian public sectarscounting standards and fr$uch internal control + L as management determines is necessary to enable the pre aration;6. Onsolidated ui -W statements that Z ry.{ are free from material misstatement, wk>;efhe due to fraud~fa K". It". ~ Auditor's Responsibility 4} ~r?~'+- Our responsibility is to expres aa,~n opinion on ,ese cons t d fmanoa statements based on our audit. We conducted our audit,' `adce with Caal'an standards require geeaaceptedditing standards. Those that w ply v ethical re?and 1 d perform the audit to obtain Y reasonable assurance a s~#.whe there onsolidateancial statements are free from material s; misstatement t An audit iroxming p o~cedes to oaaudifdence about the amounts and disclosures in the conso I;a 'afed finan= itatements he proceuesrselected depend on the auditor's judgment, includritg_e assessment`of e.xisks a naterial misstatement of the consolidated financial statements, whether dte`. o fraud or error: r ea aking o Bose risk assessments, the auditor considers internal control relevant to 6e se tity's preparat nd fair p 'sentation of the consolidated financial statements in order to design audit pedures that ark a.propnate'm the circumstances, but not for the purpose of expressing r.•;. an opinion on the etfetiveriess ofle entity's internal control. An audit also includes evaluating the appropriateness of accn.U. g poltc er used and the reasonableness of accounting estimates made by management, as well as"'eca_luatiyage overall presentation of the consolidated financial statements. We believe that the audit eviciexice we have obtained is sufficient and appropriate to provide a basis for our audit opinion. i © Deloitte & Touche LLP and affiliated entities. Year-end communication -The Corporation of the City of Pickering 10 2 0 -2- Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Corporation of the City of Pickering as at December 31, 2010, and the results of its operations, assets and its cash flows for the year then ended in accordance with Canadian public sector accounting standards. (To be signed Deloitte & Touche LLP) Chartered Accountants} Licensed Public Accountants Toronto, Ontario S. Y June 20, 2011 ,4 } l: . f . r r'•fr'rvr. r'~ r 1Y., { { r ;;r fir. 1'?rX.Y ?jrr © Deloitte & Touche LLP and affiliated entities. Year-end communication -The Corporation of the City of Pickering 11 21 Appendix B - Draft independence letter Deloitte & Touche LLP Deloitte. 5140 Yonge Street Suite 1700 Toronto ON M2N 61_7 Canada Tel: 416-601-6150 Fax: 416-601-6151 www.deloitte.ca 't 1 4 . All June 20, 2011 Private and confidential` r The Members of Council's The Corporation of the City of Pickering, '.'~rrvr 1 The Esplanade rt~Y` Pickering ON L IV 6K7.~ w • Y' •J'•~~:1, titir~`'~v ?J, 'Vy Dear Members of Council: We have been engaged to audit the consolidate l c' d e rents o tiie -orPoration of the City of Pickering (the City) for theme e`nd d December31, 2014."jar zY;{ ,s v " . Canadian generally acce ~ audrtmg s ,;e• dards (G . -°require thate communicate in writing with you regarding our complian' th relev ethical reql"`ements regarding independence as well as all relationships and other matter e ee G ty our Fu a , d network firms that, in our professional judgment, ma, be thar~ andepedence. We are also required to communicate the relateds s _ e beena . ied to el~nate ldetrtified threats to independence or reduce them to eptable level. 4 ti In determining,". ` ch relationships ">report; se standards require us to consider relevant rules and related interpretat4~~ rescribed be apprope provincial institute / ordre and applicable legislation, covering such mattes, (a) holding a financial it -exert, either}directly or indirectly, in a client; (b) holding a position, eithe~ :y ;c • or indirectly, that gives the right or responsibility to exert significant influence over 'nancial 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. We confirm to you that the engagement team and others in the firm, as appropriate, have complied with relevant ethical requirements regarding independence. © Deloitte & Touche LLP and affiliated entities. Year-end communication -The Corporation of the City of Pickering 12 22 The Corporation of the City of Pickering ' June 20, 2011 Page 2 We have prepared the following comments to facilitate our discussion with you regarding independence matters arising since September 2, 2010, the date of our last 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 September 2, 2010 to June 20, 2011. We have not billed the City for any non-audit related services since the date of our last independence letter. GAAS requires that we confirm our independence to those chargx`l governance in the context of the Rules of Professional Conduct of the Institute of Chartered Aec,'"t}a• is of Ontario. Accordingly, we hereby confirm that we are independent with respect to the: ORi ;;~tiK the meaning of the Rules of Professional Conduct of the Institute of Chartered Acco}}t;aiit of Onfaxas of June 20, 2011. This report is intended solely for the use of the EXeffb Committee, Couif6 l hanagement, and others within the City and should not be used for any otliex ipurposes.`r. Yours truly, ''xf~'~ Chartered Accountants ' : fir; J '•~.y:. r:., Licensed Public Accou ifarits S: {r yr ,Siy n.: n ' i!M1'f.'[.•5i•_~{:` ti•~f,:,.~Ir',,~{j~ y.,•Y~•{dJff. •`•i .'lNJ'7 '•'y'ti••, 01J r'. % •i{~rr~,J f y~ :Y• 0 Deloitte & Tbuche LLP and affiliated entities. Year-end communication -The Corporation of the City of Pickering 13 23 Appendix C - Draft representations letter Deloitte Deloitte & Touche LLP 5140 Yonge Street Suite 1700 Toronto ON M2N 6L7 Canada Tel: 416-601-6150 Fax: 416-601-6151 www.deloitte.ca June 20, 2011 , Private and confidential Y, Deloitte & Touche LLP 5140 Yonge Street, Suite 1700 Toronto ON M2N 6L7 " g M•' % Dear Ms Jesty: A f Subject: Consolidated Financial statements arse year endeeter 31, 2010 ' This representation letter is provided in connectio of 1 audit by D 2 Touche LLP ( Deloitte or "you") of the consolidated financial statements o e Co &`kiion of th ' of Pickering (the "City" or "we" or "us") for the year ended j e ember 31, 2 the 'T"! . States t for the purpose of e X, expressing an opinion as to whe ~cial State is pre IN aterial respects, the o accace with Canadian financial position, results of ofa ons, an it flows . . ples , , establ ; y the Pubiij ector Accounting Board. generally accepted accountin pi-Mw : .err f r v.♦ r, ¢ Certain representation , is letter &MIRA c being lim - to matters that are material. An item is considered materi al st f its moialurobs a that its omission from or misstatement in ancial S tements wo»~ i infl uenc deciion of a reasonable person relying on the Financial S~pgen ts,. Y~•r f.•.• ;r We confirm that: r' r{ ~ w Financial statements 1. We have fulfilled our resN©jisibilities AS,.Set out in the terms of the engagement letter between the City and Deloitte dated October .:--,k04£ if e preparation of the Financial Statements in accordance with GAAP. In particular, the Finan # atements are fairly presented, in all material respects, and present the financial position of 'City as at December 31, 2010 and the results of its operations and cash flows for the year then ended in accordance with GAAP. 2. In preparing the Financial Statements in accordance with GAAP, management makes judgments and assumptions about the future and uses estimates. The completeness and adequacy of the disclosures related to estimates are in accordance with GAAP. The City has appropriately disclosed in the Financial Statements the nature of measurement uncertainties that are material, including all estimates where it is reasonably possible that the estimate will change in the near term and the effect of the change could be material to the Financial Statements. © Deloitte & Touche LLP and affiliated entities. Year-end communication -The Corporation of the City of Pickering 14 24 Deloitte & Touche LLP June 20, 2011 Page 2 Financial statements (continued) Significant assumptions used in making estimates are reasonable and appropriately reflect management's intent and ability to carry out specific courses of action on behalf of the entity. The measurement methods, including the related assumptions and models, used in determining the estimates were appropriate, reasonable and consistently applied in accordance with GAAP and appropriately reflect management's intent and ability to carry out specific courses of action on behalf of the entity. There are no changes in management's method of determining significant estimates in the current year. 3. With regard to the fair value measurements and disclosures of certain assets, liabilities, and specific components of equity, we believe that: ~ , a. The measurement methods, including the related assumptions and modeJ';'used in determining fair value were appropriate, reasonable and consistently applied in ae~ozdancc with GAAP. b. The completeness and adequacy of the disclosures related to fair :auesare in accordance with GAAP. c. No events have occurred subsequent to December 31, 201.." a equire ad`i~~tment.to the fair value measurements and disclosures included in the Finatatements. : 1•:: d. They appropriately reflect management's intent and Aall! 'to carry out specifiurses of action on behalf of the City when relevant to the use of fairltte,~measurements or is -es. 4. All related party relationships and transactions (including asgctated amounts receivables ayable) have been appropriately accounted for and disclosed in the Fin vial S.tatei(ents in accordar ce11. ith the requirements of GAAP. is;i•':;~. 5. We have completed our review of events after Dceer, 31, 2010 aridif,to the date when. the Financial Statements were authorized for issue, 3ui e,20 >;~14. A11 even ' bsequent to the date of the Financial Statements and for which GAAP requires adju"....'"ent or disc`s dire have been adjusted or disclosed. Accounting estimate$;anti disclosures in.. ed iri'fl e -in ancial statements that are impacted by subsequent event.......... AW.. ee p b ri:aro riate7y?:adjustedi; r 6. The Financial Statements are ee'of matei7al:errors and griiisss 7. Management has completed its. s§essment dAbe ability o ` l e Crty to continue as a going concern f•: and in.making its assessment did'noY denti . a ly„~material uncertainties related to events or conditions that may cast significant doubt upon7eyGkys ai°l{p o continue,,as a'going concern, which would require disclosure nrt)iebFuanoial Statements In asses5mgwhetlier the going concern assumption is appropriate, management took fSaccounYiitj,tiavailable oXmation out the future, which is at least, but is noflrited to, twelve rnnoths froigre balance sh et date, their plans for future action and the feasibility of ''ese,plans. r`"`'' * ftis''•. 8. We have disclosed 0 , u all known, aoti al or pos's1b o litigation and claims, whether or not they have been discussed with otu=jawyers, whose effects should be considered when preparing the Financial Statements. As appropriate.ese items htave':been disclosed and accounted for in the Financial Statements in accordance Qll C`r AP. , ••'l1.,1 ySti. titiV Information provided ¢f r~ 9. We have provided you with: a. Access to all information of which we are aware that is relevant to the preparation of the Financial Statements, such as records, documentation and other matters; b. Additional information that you have requested from us for the purpose of the audit; and, c. Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence. 10. All transactions have been recorded in the accounting records and are reflected in the Financial Statements. 0 Deloitte & Touche LLP and affiliated entities. Year-end communication -The Corporation of the City of Pickering 15 Deloitte & Touche LLP 25 June 20, 2011 Page 3 Information provided (continued) 11. We acknowledge our responsibility for the design, implementation and maintenance of internal control to prevent and detect fraud. 12. We have disclosed to you the results of our assessment of the risk that the Financial Statements may be materially misstated as a result of fraud. 13. We have disclosed to you all information in relation to fraud or suspected fraud that we are aware of and that affects the entity and involves: a. Management; b. Employees who have significant roles in internal control; or c. . Others where the fraud could have a material effect on the Financial Statements. 14. We have disclosed to you all information in relation to allegations of fraud, or suspected fraud, affecting the entity's Financial Statements and all knowledge of concerns or all gations of potential errors in the selection of accounting policies or the recording of transactions., eating the City that have been communicated by employees, former employees, analysts, re ; or others, whether written or oral. 15. We have disclosed to you all known instances of non-compliance or ete;L n-compliance with laws and regulations whose effects should be considered when p;e in the Firiat taI Statements. 16. We have disclosed to you all communications from: a. taxation authorities concerning assessments or reassess: `that could have a mafal effect on the Financial Statements; and b. regulatory agencies concerning noncompliance with or pote`al deficier}cles in, financi' reporting requirements. We are unaware of any known or prol}a r e instah -.,es of non-compf~a t;e with the requirements of regulatory or gover ze 1 authorities, t ~ Vding their fmancial reporting requirements.,' 17. We have disclosed to you any change in the City' m e.na of over fin 7i c2aI reporting that occurred during the current year that has materially of 84ted, o' r`EOfeasonably i ly to materially affect, the City's internal control oveg. cial reporting 18. We have disclosed to you the ide ,{b tli Igitity, s relate.c~r art``~..e ~a ld he~•.relat&d party relationships and transactions o 01*01c, h we are aryvare, inclu~t ~antees, . rnonetary transactions, transactions for no :de rationatOparticipati'ajt a defined benefit plan that shares ~ risks between group entities_ : ~ d 1. 'r 3`ti Y 4~J } Work of specialists y fi ~ 41 19. We agree with th~vo k of specialfsts eval {ai the valuaonf post employment benefits X d liability and WS '`benefits liability knave a~e~gtately considered the qualifications of the ' specialist in determirtu gaamounts and d bsures ii ft" in the Financial Statements and underlying accounting records. We`d d,,not give any, `ridi pause an ,Mstructions to be given to specialists with respect to values or amougffil;erived in an a` tei~ppt to bias their work, and we are not aware of any matters that have impacted tli dependences-it objectivity of the specialists. Compliance with contractual agreerifefs,•.r;,:>' 20. We have disclosed to you, and the CiN: as:complied with all aspects of contractual agreements that could have a material effect on the FinaMial Statements in the event of non-compliance, including all covenants, conditions or other requirements of all outstanding debt. Title to assets .21. The City has satisfactory title to and control over all assets, and there are no liens or encumbrances on such assets. We have disclosed to you and in the Financial Statements all assets that have been pledged as collateral. 0 Deloitte & Touche LLP and affiliated entities. Year-end communication -The Corporation of the City of Pickering 16 Moitte & Touche LLP June 20, 2011 Page 4 Independence matters For purposes of paragraph 22, "Deloitte" shall mean Deloitte & Touche LLP and Deloitte Touche Tohmatsu Limited, its member firms and the affiliates of Deloitte & Touche LLP, Deloitte Touche Tohmatsu Limited and its member firms. 22. Prior to the City having any substantive employment conversations with a former or current Deloitte engagement team member the City has held discussions with Deloitte and obtained approval from the Executive Committee of the Council. Liabilities and contingencies:., •:rry, 23. We have disclosed to you all liabilities' provisions, contingd~jrxjiabilities and contingent assets .0.':C ' including those associated with guarantees, whether wriUch' p oral, and they are appropriately reflected in the Financial Statements.`'- . Loans and receivables f?'• 24. The City is responsible for determining and rr aXn a ning the adequat -of the allowance for doubtful notes, loans, and accounts receivable, as w,7V %estimates used to d&T4 ne such amounts. Management believes the allowance's are a`0ghate to absorb currently eaf hated bad debts in the account balances.`" Employee future benefits};: 25. Employee future benefit costs, as 6%;%Ad obligations'ha e been properly recorded and adequately disclosed in the Financial Statemei tMfiQ!djug those arigxgg under defined benefit plans as well as termination arrangements. We belie e that lie:a tuarial assitr~n itions and methods used to measure defined benefit plan assets, liabilities'a d costs` o ;financial accoup ing purposes are appropriate in the circumstances giirr :r}•iyvrr~ r%: ;hl ~rrrr., n~.;,::r•i{:'~~r:., Environmental liNg ties/contifigeucies f '}tip' ,Y F•.. Y:. 26. We have considerea;the effect; tenvironnigM-- matters on the City and have disclosed to you all liabilities rovisions oT contin:g6iicie8 arisinIftom environmental matters. All liabilities rovisions contingfeics:;ad co 'et'aYisiyom enyir:.gnmental matters, and the effect of environmental maLfexs on tt e Cyat sing v ' • e" of the reler, ~.assg~'~%are recognized, measured and disclosed, as apopriate, in tte;E3nanci atements. f~ ~Z•n~ Jf fs, I Yours trU } 'r,:':Y ~ 4 The Corpora.of the City}i. ickering Name Name Title Title © Deloitte & Touche LLP and affiliated entities. Year-end communication -The Corporation of the City of Pickering 17 27 i www.deloittexa Deloitte, one of Canada's leading professional services firms, provides audit, tax, consulting, and financial advisory services through more than 7,600 people in 57 offices. Deloitte operates in Quebec as Samson Belair/Deloitte & Touche s.e.n.c.r.l. Deloitte & Touche LLP, an, Ontario Limited Liability Partnership, is the Canadian member firm of Deloitte Touche Tohmatsu Limited. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. © Deloitte & Touche LLP and affiliated entities. 28 ATTACHMENT #,.t-TO REPORT# Consolidated financial statements of The Corporation of the City of Picked g December 31, 2010 D O FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickerin 2 9 Y g December 31, 2010 Table of contents Independent Auditor's Report .............................................................................................................................1 Consolidated statement of financial position 2 Consolidated statement of operations 3 Consolidated statement of change in net financial assets ..................................................................................4 Consolidated statement of cash flows 5 Notes to the consolidated financial statements ....................................6-24 D O O FOR DISCUSSION PURPOSES ONLY i Deloitte & Touc e LLP 5140 Yonge reet Suite 1700 Toronto O M2N 61-7 Canada Tel: 16-601-6150 F :416-601-6151 .deloitte.ca Independent Auditor's Report To the Members of Council, Inhabitants and Ratepayers of the Corporation of the City of Pickering We have audited the accompanying consolidated financial statements of e Corporation o he City of Pickering, which comprise the consolidated statement of financial posi 'on as at Decemb 31, 2010, and the consolidated statements of operations, change in net financial ass . s, and cash flow for the year then ended, and a summary of significant accounting policies and other planatory info ation. Management's Responsibility for the Consolidated Financia Statements Management is responsible for the preparation and fair prese tat' hese c solidated financial statements in accordance with Canadian public sector acco nting st ards, nd for such internal control as management determines is necessary to enable the pre aration of co o 'dated financial statements that are free from material misstatement, whether due to fr d or error. Auditor's Responsibility Our responsibility is to express an opinion on th se consolidated f ancial statements based on our audit. We conducted our audit in accordance with C a ' n generally ccepted auditing standards. Those standards require that we comply with ethic requi a plan and perform the audit to obtain reasonable assurance about whether-the co solidate nanc' 1 statements are free from material misstatement. An audit involves performing proce res to obtain au ' evidence about the amounts and disclosures in the consolidated financial stateme s. The procedure selected depend on the auditor's judgment, including the assessment of risks f material misst ement of the consolidated financial statements, whether due to fraud or or. I m ing those ri assessments, the auditor considers internal control relevant to the entity's prepa ti a fair pre ntation of the consolidated financial statements in order is in the circumstances, but not for the purpose of expressing to design audit procedures at all ro l5l an opinion on the effecti ness of th tit s internal control. An audit also included evaluating the appropriateness of ace nting policies u d and the reasonableness of accounting estimates made by management, as well s evaluating the verall presentation of the consolidated financial statements. We believe that t audit evidence e have obtained in sufficient and appropriate to provide a basis for our audit opinio . Opinion in our op. ion, th li ted financial statements present fairly, in all material respects, the financial positio of the Corpo ti of the City of Pickering as at December 31, 2010 and the results of its oper ions and its cash ows for the year then ended in accordance with Canadian public sector ace unting standards Chartered Ac ountants Licensed P lic Accountants June 20, 11 Toront ,Ontario FOR DISCUSSION PURPOSES ONLY i The Corporation of the City of Pickering r 31 Consolidated statement of financial position as at December 31, 2010 2010 2009 Financial assets Cash 7,337,107 8,079,1 Investments (Note 3) 67,883,2 4 59,516 01 Taxes receivable 16,005 70 16,0 985 Accounts receivable 3,8 ,9 3 05,321 Investment in Veridian Corporation (Note 4(b)) 41 19 782,645 Promissory notes receivable Note 5 ,069,000 25,069,000 61,286,580 152,418, 359 Liabilities Accounts payable and accrued liabilities 13,173,37 11,794,753 Other current liabilities 94,4 1 122,166 Deferred revenue (Note 6) 40,429 95 37,914,579 Long-term liabilities (Note 9) 16,5 ,742 14,219,970 Post-employment benefit liability (Note 8(a)) 2 82,900 2,715,100 WSIB benefit liabilities Note 8(b)) ,672,898 1,368,198 74,836,395 68,134,766 Net financial assets 86,450,185 84,283,593 Non-financial assets Tangible capital assets (Note 10) 187,669,237 186,242,634 Prepaid expenses O 386,274 398,024 Inventory 391,536 266,506 188,447,047 186,907,164 Accumulated surplus Note 11 274,897,232 271,190,757 Approved by the Board . /icto O P age 2 FOR DISCUSSION PURPOSES ONLY i 32 The Corporation of the City of Pickering Consolidated statement of operations year ended December 31, 2010 2010 2009 Budget Actual Actual (Unaudited) Note 17 Revenues Residential and farm taxation 33,031,579 33 40 78 32 31,448 Commercial and industrial taxation 8,683,405 ,7 6 302,954 Taxation from other governments 7,104,198 7,427,68 7,215,337 User charges 8,289,641 7,661,881 7,466,507 Government grants and fees 11,185,342 4,024,406 5,080,964 Other contributions and donations 1,395,759 980,367 1,640,646 Development charges and developer contributions earned 2,353 93 966 51 966,962 Contributed tangible capital assets - 3,0 ,356 2,774,280 Investment income 00 0 98,499 309,690 Penalties and interests on taxes ,120, ,499,536 2,320,563 Fines 850,100 886,995 811,938 Interest on promissory notes 1,590,250 1,588,823 1,905,244 Equity share of Veridian Corporation earnings (Note 4 (c)) 3,477,285 4,509,327 Other 210,6 261,549 764,876 Gain on disposal of tangible capital assets - 94,823 46,758 Total revenues 77,0 ,860 75,319,812 76,147,494 IV, Expenses (Note 18) Current General government 14,787,205 13,644,762 12,815,997 Protection to persons and prope y 19,805,377 19,016,456 18,768,392 Transportation services 11,344,464 9,558,606 10,160,486 Environmental services 2,177,524 3,363,579 3,085,999 i 468,620 475,524 402,489 Social and family serv ces Recreational and cultur se s~ 31,034,428 22,763,222 22,155,313 Planning and develo ent 3,501,297 2,791,188 2,218,631 83,118,915 71,613,337 69,607,307 Annual surplus (6,104,055) 3,706,475 6,540,187 Accumulated sur /sbeginning of /ar 271,190,757 271,190,757 264,650,570 Accumulated r lus end of a 265,086,702 274,897,232 271,190,757 O Page 3 FOR DISCUSSION PURPOSES ONLY 33 The Corporation of the City of Pickering Consolidated statement of change in net financial assets year ended December 31, 2010 2010 2009 Budget Actual Actual (Unaudited) Note 17 Annual surplus (6,104,055) 3,7 ,475 6,54 ,187 Acquisition of tangible capital assets (11,299,795) (11 6", 30) (15, 4,607) Amortization of tangible capital assets 9,725,086 ,6 11 416,629 (Gain) loss on disposal of tangible capital assets - 4, (46,758) Proceeds on disposal of tangible capital assets 127,839 222,280 7,678,764 2,279,872 717,731 Acquisition of inventory of supplies - (1/6,273) (860,335) Use of inventory of supplies - 786,246 Acquisition of prepaid expenses - (394,788) Use of re aid ex enses 529,102 113,280 60,225 Change in net financial assets (7,678,764) 2,166,592 777,956 Net financial assets, beginning of year 84,283,593 84,283,593 83,505,637 Net financial assets end of year 76,604,84 86,450,185 84,283,593 D O O Page 4 FOR DISCUSSION PURPOSES ONLY 34 The Corporation of the City of Pickering Consolidated statement of cash flows year ended December 31, 2010 2010 2009 Operating transactions Annual surplus 3,706, 5 6,540,1 Non cash items Amortization of tangible capital assets 9,6 1,811 9,41 ,629 Gain on disposal of tangible capital assets (9 23) 46,758) Equity share of Veridian Corporation 85) 509,327) Contributed tangible capital assets recorded in revenue (3,031,3 (2,774,280) sk, Change in non-cash operating items: Decrease (increase) in taxes receivable 60,315 (2,387,404) Decrease in accounts receivable 33,33 986,220 Increase in accounts payable and accrued liabilities 1,378, 6 930,256 (Decrease) increase in other current liabilities (2 ,685) 15,150 Increase in deferred revenue 2,5 5,416 1,788,841 Increase in post-employment benefit liability 167,800 151,600 Increase in WSIB benefit liabilities 304,700 283,000 Increase in inventory (125,030) (74,089) Decrease in prepaid expenses 11,750 134,314 11,024,044 10,454, 339 Capital transactions Acquisition of tangible capital assets (8,030,074) (12,640,327) Proceeds on disposal of tangible capital ass 127,839 222,280 7,902,235 12,418,047 Investing transactions (Increase) decrease in investment/orporation (8,366,963) 4,106,150 Dividends received from Veridian 2,140,382 3,362,000 6,226,581 7,468,150 Financing transactions Proceeds from debentu/iss 4,046,00 0 - Princi al re a ment of es 1,683,228 1,891,393 2,362,772 1,891,393 (Decrease) increas in cash. (742,000) 3,613,049 Cash, beginning ear 8,079,107 4,466,058 Cash end of ar 7,337,107 8,079,107 .O Page 5 FOR DISCUSSION PURPOSES ONLY Z335 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2010 I 1. Significant accounting policies The consolidated financial statements ("the financial statements') of The Corporati n of the City of Pickering (the "City") are the representations of management prepared in accord nce with accounti g standards established by the Public Sector Accounting Board ("PSAB") of the anadian Institute Chartered Accountants. Significant accounting policies adopted by the City a a follows: (a) Reporting entity (i) Consolidated statements The consolidated financial statements reflect the assets, Ii ilities, revenues d expenses of the reporting entity. The reporting entity is comprised of t e activities of all mmittees of Council and the City of Pickering Public Library Board ich is controlled y the City. All material inter-fund transactions and balances ar eliminated on co olidation. (ii) Investment in Veridian Corporation The City's investment in Veridian Corporation i accou for o a modified equity basis, consistent with generally accepted accounti g principles a e mmended by PSAB for investments in government business ente rises. Under the odified equity basis, Veridian Corporation's accounting policies are no adjusted to confo to those of the City and inter- organizational transactions and balan s are not elimina d. The City recognizes its equity interest in the annual earnings or to of Veridian Corp ration in its consolidated statement of operations with a corresponding i rease or decreas in its investment asset account. Dividends that the City may rece e m Veridian orporation and other capital transactions are reflected as adjustments i he in as et account. (iii) Operations of School Boar and the R on Durham The taxation, other reve es, expenditures assets and liabilities with respect to the operations of the school boards a d the Region of D rham are not reflected in these consolidated financial statements. (iv) Trust funds Trust funds an th ted oper tions administered by the municipality are not consolidated, but are repo d y"n e Trust Funds Statement of Financial Activities and Statement of Financi Position. (b) Basis of acc unting (i) Accr al basis of accou ing R enue and expen s are reported on the accrual basis of accounting. The accrual basis of ccounting recogn• es revenues as they are earned and measurable; expenses are recognized as # are incur d and measurable as a result of the receipt of goods and services and the ati of a le al obligation to pay. (ii) Inv t Tempor investments are recorded at the lower of cost plus accrued interest and market value. ong-term investments are recorded at cost and any loss in value which is considered other han temporary is recorded as appropriate. Any premium or discount at purchase of an inv stment is amortized over the life of the investment. Page 6 FOR DISCUSSION PURPOSES ONLY - 1 36 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2010 1. Significant accounting policies (continued) (b) Basis of accounting (continued) (iii) Tangible capital assets ("TCA") Tangible capital assets are recorded at cost less accumulated am iz •on. Cost incl des all costs directly related to acquisition or construction of the tangibl ca asset incl ing transportation costs, installation costs, design and engineering ees, eg es a site preparation costs. Amortization is recorded on a straight-line asis over the sti ated life of the tangible capital asset commencing once the asset is av ilable for use as f Ilows: Buildings 15 to 45 yea Machinery and equipment 2 to 25 ye s Vehicles 5 to 15 y ars Infrastructure - Roads 10 to 5 years Infrastructure - Storm sewers 25 to 0 ears Infrastructure - Sidewalks 20 40 Information technology hardware 4 o 8 years Infrastructure - Parks 0 to 40 years Library collection materials 4 to 7 years Furniture and fixtures 10 to 50 year One-half of the annual amortization 's charged in the ar of acquisition and in the year of disposal. Assets under constructi are not amortiz until the asset is available for productive use. Land is not am iz Tangible capital assets recei ed as o are recorded at their fair value at the date contributed, and that amo t is also re rde s revenue. (iv) Accounting for Property ax Capping Prov ions resulting from the Ontario Fair Assessment System The net impact in operty taxes as a esult of the application of the capping provisions does not affect the Co solidated Statem t of Operations as the full amounts of the property taxes were levied. H e e the cappin adjustments are reported on the consolidated Statement of Financial Po ' io ~ss the o the Region. (v) Deferred r venue Deferr revenues repres nt user charges and fees which have been collected but for which the r ated services hav yet to be performed. These amounts will be recognized as revenues in t e fiscal year the s rvices are performed. In addition, any contributions received with e ernal restrictions re deferred until the related expenditures are made. (vi) Post employmen enefits e sent v ue of the cost of providing employees with future benefit programs is ogn ed s employees earn these entitlements through service. Actuarial gains and losses are rti ed over the average remaining service period ("ARSP"). The actuary determined ARSP t e 15 years. (vii) Inve ory In ntory is valued at the lower of cost and replacement cost. Cost is determined on a eighted-average basis. Page 7 FOR DISCUSSION PURPOSES ONLY 37 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2010 1. Significant accounting policies (continued) (b) Basis of accounting (continued) (viii) Government transfers Government transfers are recognized in the financial statements i he enod in whic the events giving rise to the transfer occur, eligibility criteria are met n sonable a imates of the amount can be made. (ix) Intangible assets Intangible assets are not recognized as assets in the fin cial statements. (x) Use of estimates The preparation of financial statements in conform' with Canadian p blic sector accounting standards requires management to make estima s'd assumptio s that affect the reported amounts in the financial statements and acco an g tes. Ac ounts involving significant estimates include allowance for doubtful acc nts, ac ed liab' ties, employee future s ts. Actual results could differ benefits liabilities and estimates relating to ngible cc from these estimates. 2. Operations of school boards and the Regio of Durham Further to Note 1 (a) (iii) requisitions are ma a by the Region o Durham and School Boards requiring the City to collect property taxes and pay nts in lieu of pro rty taxes on their behalf. The amounts collected and remitted are summarizes foll e ion School board Region' v $ $ Taxation 84,025,691 41,647,961 Payments in lieu of taxes 5,432,182 497,127 89,457,873 42,145,088 3. Investments O 2010 2009 Cost Market value Cost Market value Tempora/investments 33,936,095 33,965,040 27,643,803 27,626,605 Lon -ter 33,947,169 33,944,590 31 872,498 32,064,236 67,883,264 67,909,630 59,516,301 59,690,841 Te porary i e s are composed of banker's acceptances, deposit notes and discount notes. They e recorded at o which is not significantly different from market value. Long-term investments are comprised of dep sit notes and bonds. I I Page 8 FOR DISCUSSION PURPOSES ONLY 33 The Corporation of the City of Pickering Notes to the consolidated financial statements. December 31, 2010 4. Investment in Veridian Corporation (a) Veridian Corporation is owned by the City of Pickering, Town of Ajax, Municip ity of Clarington d the City of Belleville. The City has a 41 per cent interest in Veridian Corpora on. Veridian Corporation, as a government business enterprise, is accounted for on th modified equity b is in these financial statements. Veridian Corporation serves as the electrical is 'bution utility f r a number of communities including the four noted above and conducts n- ulated utilit service ventures through its subsidiaries. The following table provides condensed supplementary consolid ed financial infor tion for the corporation and its subsidiaries for the year ended December 3 The amounts a disclosed in thousands of dollars: 2 0 2009 00's) (000's) Financial position: Assets Current 74,256 78,839 Capital and intangibles 173,846 160,303 Other 20 20,515 19,350 Total assets 268,617 258,492 Liabilities Current 58,286 72,613 Long-term debt D 76,928 60,794 Other 33,136 28,054 Total liabilities 168,350 161,461 Shareholders' equity Share capital 67,260 67,285 Contributed capital 25 25 Retained earnin 32,982 29,721 Total equity 100,267 97,031 Total liabilities and e u 268,617 258,492 Financial a ivities: Reven 256,203 246,319 Other ncome 6,165 6,554 Ex nses 253,852 243,691 min s from disco /tinuedrations 35 1,817 Nit e s for the ear 8,481 10,999 I I I Page 9 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering 39 Notes to the consolidated financial statements December 31, 2010 4. Investment in Veridian Corporation (continued) (b) City of Pickering's equity represented by: /010 09 Promissory notes receivable Note 5 zo /069,000 Investments in Veridian Corporation 30,496,196 Initial investment in shares of the Corporation 30,496/)(11,817,020) Accumulated earnings 23,47119,994,648 Accumulated dividends received /(13,957,4 Increase in value of investments 1 108 1,108 821 Total investment 411,11 lb,548 39,782,645 (c) Equity in Veridian Corporation 2010 2009 Balance, beginning of year 67,894,665 66,747,338 Equity. share of net earnings for the ye 3,477,285 4,509,327 Dividend received from Veridian Cor ration (2,140,382) 3,362,000 Balance end of year Note 11 69,231,568 67,894,665 (d) Contingencies and guarantees Veridian or ion (the "Corporation') as disclosed in their financial statements are as fol ws: (i) Insurance claims The Corporation is member of the nicipal Electric Association Reciprocal Insurance Exchange ("ME IF) which was c ated on January 1, 1987. A reciprocal insurance exchange may a •ned as a gr up of persons formed for the purpose of exchanging reciprocal co ra o ndemnit or inter-insurance with each other. MEARIE provides general liability ins ance r ectric utilities. Insuran premiums c r d to each member utility consist of a levy per $1,000 of service reveh subject to a cre ' or surcharge based on each electric utility's claims experience. Insu nce limits of up t $30,000,000 per occurrence are covered by MEARIE. O Page 10 FOR DISCUSSION PURPOSES ONLY 40 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2010 4. Investment in Veridian Corporation (continued) (d) (continued) (ii) Other claims An action has been brought under the Class Proceedings Act: 199 . T plaintiff cla seeks $500,000,000 in restitution for amounts paid to Toronto Hydro a t er Ontario unicipal . electric utilities ("LDCs") who received late payment penalties ich on to int rest at an effective rate in excess of 60% per year, contrary to Section 47 of the Cri a ode. An Ad Hoc Committee of Electricity Distributor Associatio ("EDA") participa d in a court- supervised mediation process to explore possible settle ent of the case a ainst the LDCs and reached a settlement in principle of this litigation behalf of all LD in March 2010. In order to become effective, this tentative settlement r quired the conse and approval of all LDCs and approval of the Ontario Superior Court J stice. As per e terms of the settlement: (i) LDCs collectively pay $17,000,000 plus osts a axes; (ii) Payment is not due until June 30, 20 1; and (iii) LDCs are at liberty to seek OEB rmission to recov r settlement costs through rates and the EDA is investigating th est mechanism f r obtaining OEB approval. The settlement was approved by t e Ontario Superio court of Justice in the minutes of the settlement dated April 21, 2010 nd the Corporatio gave its consent to pay $347,000 for its share of the costs and damag re this cl ss action. On October 29, 2010, the B conve d a g eric proceeding on its own motion to determine whether amou s related to t s tlement should be allowed to be recovered from ratepayers. As per the Board's o er dated Februa 22, 2011, the costs and damages arising from the settlement of this ss action shall b recoverable from all ratepayers of the Affected Electricity Distrib tors. The order all at 5,000 to e Corporation, as a share of its costs and damages and, accordingly D r _xie or this liability and a corresponding regulatory asset in the amount o 345,00 at D ember 31, 2010, and a request for the recovery of the same has be filed with. the E . (iii) Cont ctual obligation - ydro One Networks Inc. (WONT) T Corporation's s sidiary, Veridian Connections Inc. ("VCI"), is party to a connection and ost recovery agre ment with HONI related to the construction by HONI of a transformer station designat to meet VCI's anticipated electricity load growth. Construction of the project mplete during 2007 and VCI connected to the transformer station during 2008. he to that the cost of the project. is not recoverable from future transformation con io revenues, VCI is obliged to pay a capital contribution equal to the difference betwee these revenues and the construction costs allocated to VCI. The construction costs alloca d to VCI for the project are $9,975,000. Th Corporation has recorded a liability and a corresponding intangible asset for $1,212,000 at December 31, 2010, based on management's best estimate of the present value of the uture transformation connection revenue shortfall. Page 11 FOR DISCUSSION PURPOSES ONLY /441 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2010 4. Investment in Veridian Corporation (continued) (iv) Environmental liability In 2008, Environment Canada issued its final regulations governing th management of PCBs. As at December 31, 2010, the cost of testing performed to d e has been inclu d within regulatory assets. Costs relating to future expenditures ass is d with the re oval and destruction of PCB contaminated transformers and re media ' n heroically- contaminated lands has been estimated in the amount of $824 00, hi as be n recorded as a liability at December 31, 2010. Because such expendit es are expec d be recoverable in future rates, the Corporation has recorded a equivalent amou t as a regulatory; asset. (e) Lease commitments Future minimum lease payment obligations under opera ' g leases are as f lows: (000's) 2011 604 2012 165 2013 3 2014 2 2015 2 Thereafter 72 848 D 5. Promissory notes receivable 2010 2009 Promissory note receivable rom Veridian Cor ration maturing November 12 012 and bearing interest at 7.62% until April 30, 1 tfie the gre er of 6% or the Ontario Ener y B d ng term debt rate on an annu basis to m ity % effective May 1, 2010) 7,095,000 7,095,000 Promissory to receivable fro Veridian Connections Inc. maturin ovember 1, 203 and bearing interest at 7.62% ntil April 30, 201 , then 5.57% from May to Decem er 31, 2014 and then the Ontario E rg oar eem long-term debt rate for each uccessi iv a period thereafter 17,974,000 17,974,000 25,069,000 25,069,000 Interest revenu earned from these notes receivable totaled $1,588,823 (2009 - $1,905,244).- The promissory n es from Veridian Corporation are convertible into common shares at the rate of one common s re for every $1,000 of principal amount, at the option of the City. Page 12 FOR DISCUSSION PURPOSES ONLY 42 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2010 6. Deferred revenue 2 /10 20 Obligatory Reserve Funds Development charges /2,185,222 95 714,332 Parkland , 1,914,793 Federal gas tax ,410 3,032,702 Third party/Developer's Contributions Reserve Fund 2,210,924 37,063,1 34,872,751 Other unearned revenues 3,36 ,886 3,041,828 40 9 995 37,914 579 Continuity of deferred revenue is as follows: 2010 2009 Balance, beginning of year 37,914,579 36,125,738 Restricted funds received 4,667,912 4,246,730 General funds received D 325,058 442,460 Interest earned 908,828 1,283,835 5,901,798 5,973,025 Earned revenue transferred to erations 7' 3,386,382 4,184,184 Balance end of year 40,429,995 37,914,579 7. Interfund loans As a means of fundi vario~apita a quisitions, funds are borrowed by the Capital Fund from Development Char es and Park d eferred revenue (obligatory reserve funds). These funds are secured by prom sory notes with i erest rates ranging from 3.5% to 4.7% and various payment terms ranging from 1 ear to 7 years. T financing arrangements and ultimate repayment are approved by Council thro h the current budget process. Although these notes have payment terms as noted above, they are re ayable on deman . The following is a summary of the related loans: 2010 2009 ads and s ig s 193,716 711,509 ommunity faciliti s, libraries and parks 360,844 829,558 Protection servi es 520,145 694,491 Environment services 23,475 34,554 Municipal b ildin 25,292 29,716 1,123,472 2,299,828 Page 13 FOR DISCUSSION PURPOSES ONLY ~I i A7 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2010 8. Post-employment benefit liability i (a) Post-employment benefit liability The City makes', available to qualifying employees who retire before the ag of 65, the opport ity to continue their coverage for benefits such as post-retirement extended ealthcare benefit . Coverage ceases at the age of 65. The City also provides full time and er nent part-ti employees a sick time entitlement and any unused entitlement is acc m ear to ar. This accumulated entitlement is not vested and is forfeited at the time of etirement rm. ation. The most recent actuarial valuation of the post-employment benefits s performed at J nuary 1, 2008. Information about the City's benefits liability is as follows: 2 0 2009 Accrued benefits liability, beginning of year /226,000 100 2,563,500 Current service costs 214,200 1k 1 Interest on accrued benefits 100 186900 Amortization of, actuarial losses 000 49,000 Benefits aid durin the ear (298,500) Accrued benefits liability, end of ear 2,882,900 2,715,100 Accrued benefit obligation 3,554,100 3,435,300 Unamortized actuarial losses (671,200) 720,200 Accrued benefits liability, end of e r 2,882,900 2,715,100 The main actuarial assumption employed in a tuarial valuations are as follows: (i) Discount rate The present value a at December 31, 010 of the future benefits was determined using a discount rate of 5. /o (2009 - 5.5%). (ii) Dental costs The dental st to as .0% increase per annum. (iii) Health c is Healt costs were assu d to increase at 8.5% in 2010 and decrease by 0.5% increments per ar to an ultimate ate of 5% per year in 2017 and thereafter. Page 14 FOR DISCUSSION PURPOSES ONLY 44 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2010 8. Post-employment benefit liability (continued) (b) Workplace Safety and Insurance Board (WSIB) benefit liabilities Effective January 1, 2001, the City became a Schedule fl employer under t e Workplace Saf & Insurance Act and follows a policy of self insurance for the risk associate with paying bene is for workplace injuries for all its employees. The WSIB administers the clai s r_ ted to work ace injuries and is reimbursed by the Corporation. The most recent actua al on of th SIB benefits was performed at December 31, 2008. Information about the City's WSIB liability is as follows: 20 2009 Accrued WSIB liability, beginning of year 1, 8,198 1,085,198 Current service cost 301,800 293,000 Interest on accrued benefits 97,400 80,000 Benefits paid during the year (94,5100) (90,000) Accrued WSIB'liabilit end of ear 1,672,898 1,368,198 The main actuarial assumptions employed ' the actuarial val tions are as follows: (i) Discount rate The present value as at Decem er 31, 2010 of the uture benefits was determined using a discount rate of 6% (2009 - 6. /o). D (ii) Inflation rate The rate of inflation was ssumed to be 31 / per annum. (iii) WSIB Administration ate Liabilities for WSI benefits have be increased 30% to reflect the administration rate charged by WSI . A WSIB Res e n, was est lished in 2001. The Reserve Fund balance at December 31, 2010 was 02 - 1,658,462). In addition, the City purchased two insurance policies t at protect ity gainst significant claims to the Corporation. The occupational accide insurance pays I s claims up to $500,000 per work related accident. The excess work s compensation i demnity insurance has a $500,000 deductible and will pay for claims up and including $1 ,000,000 per work related accident. 9. Long-ter liabilities (a) T e b e of long- erm liabilities is made up of the following: 2010 2009 The munic' ality is responsible for the payment of princi I and interest charges on long-term liabi ' ies issued by the Regional Municipality of D ham on the City's behalf. At the end of the year, e outstanding principal amount of this liability is 16,582,742 14,219 970 Page 15 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering 45 . Notes to the consolidated financial statements December 31, 2010 9. Long-term liabilities (continued) (b) The above long-term liabilities have maturity dates of July 12, 2011, 2016 an 021, November , 2012, November 21, 2012 and 2018, July 15, 2014, December 23, 2014 an October 15, 201 and 2020 with various interest rates ranging from 1.55% to 5.6%. Principal rep yments are sum rized as follows: $ 2011 2,158,055 2012 3,208,669 2013 1,818,256 2014 1,698,596 2015 1,277,073 Thereafter 6,422,093 16,582,742 (c) Long-term liabilities include a principal sum of $1 57,000 as ` fun able Debentures' which may be raised by the issuance of debentures over a urther period not exceed 10 years. (d) The above long-term liabilities have been ap roved by Council 6y-law. The annual principal and interest payments required to service thes liabilities are wit ' the annual debt repayment limit prescribed by the. Ministry of Municipal airs and Housing (e) Interest expense recorded in the year elating to these I g-term liabilities is $ 692,082 (2009 - $742,139). D 10. Tangible capital assets Information relating to tangible c ital assets is as f ows: (i) Contributed tangible capi I assets The City records tangi a capital assets ntributed by an external party at fair value on the date contributed. Typical a le , are road , storm sewers and sidewalks installed by a developer as part of a subdivisi or a opment greement. Contributions of tangible capital assets in 2010 amounted to $3, 1,3 0 74,280). (ii) Tangible capi I assets reco iz d at nominal value Land unde roads are assign a nominal value of one Canadian dollar because this land only supports r is intended to s pport road infrastructure and the majority of land acquired supporting road al wances was acq fired at no cost. (iii) Wor s of art and histor' al treasures T e a mus um which holds various historical treasures and historical buildings pertaining o th rita an history of the City of Pickering. These items are not recognized as tangible capital a i he financial statements because a reasonable estimate of the future benefits associated wi such property cannot be made. Any acquisition or betterment of these assets is recognized s an expense in the financial statements. (iv) Other Then book value of tangible capital assets not being amortized because they are under con ruction is $3,962,111 (2009 - $1,841,341). ring the year, there were no write-downs of assets (2009 - $Nil) and no interest was capitalized during the year (2009 - $Nil). Page 16 FOR DISCUSSION PURPOSES ONLY 4 6 O M 00 T M O co N N M O M GO N tq I : co OD tD N N oD to 00 co N m h a) co -N n R O M O tO P m rn r" ~f! to o to LLo r two m of d M M r ° 0 a- c EA co O v o v m _ ~ v 7 j c (O N N N W r- N (D O m m 00 0) m O C c- C \i M Q 8 N to M M 01 O m O N N N r O f V ` j M M M M co O M M O C \i O C O O O N N r j Z. C N to r- m (D t0 M m f~ O O l6 M O n r- C O V O O w 00 N fD - M O N N f~ N O E M V OD (O tO to N U to t° M V rn vi w CO O N n O) Y O N co V tO m M N N j t0 M f~ M C O r O CO a N co m O M m r N C ` N N O m 0) tD N 0) tD R O N C 00 0 O M N C C m .0 N M r C3, It .0 (r0 M M ((0 m o,3 N v rn (o r~ v m o 0 E C'E N D 0 (D I- N N N O Q V f0 M N N r N N n (0 L C N f9 n M V O) co r O 0) Y m ? V O N N M'o OD , ~p CD V N N 7 O t0 W ID N (D (t1 7 M ID D) O M V N N N 2 -O OD t0 W M V J y to M (D (6 Z m Q c U) W co Q i2 EA r (D M N N d N 0). N (D m r N N t- 3: N N V C' N N T P N O M tO (D N O N o- z N O N M O W V N E O N M r N p r a0 a V M !n C C) U M t ' N f9 N m m 00 r- .0 (O O ^A , j co a0 N N oC N O OMi II Q a°. V lO M O) 0) LL ` O O (0 M O 0 M N r r ` V) O N cl q: N tO v 12 O • ~ C (~--I y fA N O Y co tO (D v I- (D N v w t0 N V V V ~ O M N O u') U U N- Q) M t[) y O > a ? N W 'r N a t` U m O N (O M 1-- qj f9 N (0 O .0 N V V ~ V CO m M 00 OD d 1~ C E m t0 O t` " O O O O v r (o (0 v r (0 (0 0 • ~"'yI L J O N M ° N (rp (gyp u 0) t` V Et N ~.t O '--I C to fA tr QI V 04 M m 'r ((D I- 100 N ° 0) C V 7 N O t` N N O u) O M a) V tb O O d' M N Q~ v m N N N r M O co (D M M N 'D 60 w U) ^y O N J V M C O 0 r-i m °m w (n O N N N N 00 v v U m c c L AAl1 M 0 4 d T N O _ y N y O N .C 'C `N t0 C L40 0) i~•11 r N 0) t0 (I1 C d 4) C V 4- U f6 O T . C Z" 0 N A S] N J N Y d E a r^> a t a E p o p° o U m Q J m a m Q J m z" m (A O co c- N m a0 M v O (D M (D M w N O O M . O N O M m (D m I~ R N (O / 7 m v (D (O N N (O l N co ? O N N M I- N rf1 M m m m (O v r N O O O M M ~ O) a c 6% (D (o o n M y v c U o) O m M M O ` r M m w ID M v C N (D o cc o0 c N N c N O Q U etf N FA 1- co M (O C O V N c0 M N I- O I- v j M m M 7 m M m Y N t- M N O N (D m a0 O m m M L c w» ~ M M r- (o M M (D O ~p co O r- m N t- O t M M O m m N o o (D d a) (h N m N v J (p M f~ u7 r m w o E C M m m r (D O • U m r Y') M M U) (n N (O N M OD I~ V N N Y v) N m O I~ N v U) N 3 N v o m M M R O n U a (o (O N N O O M m m D v M m c m 2 (D O O O m N (O ~ ~ 00 m m OD C C oo (A a0 (A (D 1- N (D r O 0 3 m (y N N w 04 co O N m V) E O c 'O M v m (oD m m r ~ N N n (O O U O th N N L L C r CO 1 N N N (A O f~ 7 M O Y m m m M N r ~ ~p M _ c0 1- V N fD O 3 m 1 m co N O ` (D o N m _ O m M M m wI(O <\\\\/F (D (O t0 J (`0 ' Z C O M N ` fA r O r` v O 1~ o N a) CN') Cr0 N v N v lL 3 3 U M M V N r D_ N M N m m 00 y E (D N m z t0 `p I~ M v M O M r C (n M ~1 - UU m r N (A V m N m o M m t N m 1- 1" O I- N N //^II 1~~1 j v (D N a0 I~ m m m 0 m m v V N V N LL m o (0 O N O m N ~ ~ • N UA N O ' N M r ' m n 'N M c0 1~ m m M N N v m (n (D O > m V N m (D m m O }~y1 (O M m N (D m m O 4- 64 ~.y- aD aD t0 t0 N n c m N (MD (N N m N M m r ` C (O I~ m. m O (O V (O -Ir V M N M N N ~O N 03 L (O eD M O OD t0 M m (0 (u (D 1l M V N U g ~i ct d rn o m I- m v v M o) 113 _ m O (n m (n V m O N m co O N N rl 7 O O 7:$ -1 LQ m r- (D - N r N O N (D M M M 4> O C'3 f/1 a (n (n o - v ' r • co M N v v J O y N co N O R W co O o N CL c o tt^ o I~1 M V 10 T N N ` N _ O w N 0 O O (0 N Q c c 9 m N° c.3 c y `0 01 c c o O aai N o m .I_+ m v C v a 'rn !O G w c « m T 's f0 ~r d c T (0 C(D (0 m N J N N> N VJ N N N N O C N N E N o O v>_ n o E o o o 0 o Zj Q CD Um Q J m amQ .o.) m2 48 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2010 11. Accumulated surplus The City's accumulated surplus is comprised of the following: /010 09 Capital fund 13 , 935,216 Operating fund 125,09 125,089 Equity in Veridian Corporation 69,231,568 67,894,665 Tangible capital assets 187,669,237 186,242,634 Post employment benefits liability (2,703,900 (2,536,100) Internal loans (1,123,4 ) (2,299,828) Net long-term liabilities (16,582 42) (14,219,970) WSIB benefit liabilities (1,67 ,898) (1,368,198) Reserves set aside for special purposes by Council Working capital 400,000 400,000 Self insurance 962,707 962,707 Replacement of capital equipment 1,090,998 854,338 Contingencies 1,277,278 1,471,140 Rate stabilization 16,579,632 16,565,777 City's share for development charge 3,695,929 1,946,216 Continuing studies 406,984 390,315 Vehicle replacement 149,158 237,547 Easement settlement D - 131,279 Eastern branch 130,000 105,000 Move Ontario 14,533 267,033 Capital asset management 165,000 90,000 Economic stabilization 830,000 1,235,000 Reserve funds set aside fors ecial purpose by buncil Recreation programs and acilities 145,483 215,350 Acquisition of tangible c pital assets 1,419,538 1,585,630 Squash courts 116 1,315 WSIB O 2,021,105 1,658,462 Animal shelter 173,850 162,553 Men's slow itc 136,359 137,587 274,897,232 271,190,757 12. Pension a eements The City akes contributio to the Ontario Municipal Employees Retirement Fund (OMERS), which is am Iti m o. plan, on ehalf of the members of its staff. The plan is a defined benefit plan which spec' Ies a am nt of a retirement benefit to be received by the employees based on the length of se ice an e f p Y. ontributions on a count of current service for 2010 were $2,219,285 (2009 - $2,117,873). 13 Trust Funds Trust funds dministered by the municipality amounting to $308,443 (2009 - $297,350) have not been included i the Consolidated Statement of Financial Position nor have their operations been included in the Co olidated Statement of Operations. Page 19 FOR DISCUSSION PURPOSES ONLY 49 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2010 14. Related party transactions Veridian Corporation The City of Pickering receives electricity and services from Veridian Corpo/Note corpor tion in which the City is a principal shareholder. 2009 Transactions Revenues Interest on promissory notes 1,588, 3 1,905,244 Property taxes levied 4 ,652 41,375 Expenses Electrical energy and services 1668,472 1,765,955 Balances Accounts payable and accrued liabilities 378,767 316,068 Promissory notes receivable 25,069,000 25,069,000 15. Guarantees In the normal course of business, the City e ters into agreem is which contain guarantees. The City's primary guarantees are as follows: (i) The City has provided indemnitie under I a re ents for the use of various facilities or land. Under the terms of these agree ents the Ci gr s to indemnify the counterparties for various items including, but not limite to, all liabilities, I s, suits, and damages arising during, on or after the term of the agreement. a maximum am nt of any potential future payment cannot be reasonably estimated. (ii) The City indemnifies al employees and a cted officials including Library employees and board members for various ' ems including, b not limited to, all costs to settle suits or actions due to association with th Ci ject to c ain restrictions. The City has purchased liability insurance to mitigate the co t of .al ture suits or actions. The term of the indemnification is not explicitly defin , but is Ii d to e period over which the indemnified party served as an employee or ected official t City. The maximum amount of any potential future payment cannot be r asonably estimat d. (iii) The City as entered into reements that may include indemnities in favour of third parties, such as pur ase and sale ag ements, confidentiality agreements, engagement letters with advisors and onsultants, outso cing agreements, leasing contracts, information technology agreements an se . e agreeme ts. These indemnification agreements may require the City to compensate urea s for I ses incurred by the counterparties as a result of breaches in representation and r lati ns o as a result of litigation claims or statutory sanctions that may be suffered by the counterp a consequence of the transaction. The terms of these. indemnities are not explicitly defined and t e maximum amount of any potential reimbursement cannot be reasonably estimated. The nature of t se indemnification agreements prevents the City from making a reasonable estimate of the maximum Xposure due to the difficulties in assessing the amount of liability which stems from the unpredictabMy of future events and the unlimited coverage offered to counterparties. Historically, the City has t made any significant payments under such or similar indemnification agreements and therefor no amount has been accrued in the balance sheet with respect to these agreements. Page 20 FOR DISCUSSION PURPOSES ONLY 50 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2010 16. Contingent liabilities Litigation The City has been named as a defendant in certain legal actions in which dama es have been so ht. The outcome of these actions is not determinable as at the date of reporting d accordingly, no provision has been made in these financial statements for any liabilities whi result. 17. Budget figures The 2010 Budget adopted by Council on March 29, 2010 was not pr ared on a basis nsistent with that used to report actual results. The budget was prepared on a dified accrual ba ' while Public Sector Accounting Standards require a full accrual basis of acco ting. The budget gures treated all tangible capital asset acquisitions as expenditures and did not ' clude amortizatio expense on tangible capital assets. As a result, the budget figures presented in th Statements of O rations and Change in Net Financial Assets represent the budget adopted by Cou cil March 29, 10 with adjustments as follows: • 21~~ 010 2010 Counci Non TCA Budget approv d expenditure presented in bu get from cap' al Amortization statements Revenue Taxation /48 - 48,819,182 Capital 4 - 13,638,244 Other 7, , - - 14,557,434 77,014,860 - - 77,014,860 Expenditures General government 13,6 ,633 529,500 588,072 14,787,205 Protection to persons an pro erty 18 11,679 412,250 581,448 19,805,377 Transportations ervice Q~7, 551,157 245,000 3,548,307 11,344,464 Environmental servi es 213,245 - 1,964,279 2,177,524 Social and family ervices 458,620 10,000 - 468,620 Recreational a cultural services 19,282,848 8,708,600 3,042,980 31,034,428 Planning and evelopment 3,501,297 - - 3,501,297 63,488,479 9,905,350 9,725,086 83,118,915 Annuals rplus 13,526,381 (9,905,350) (9,725,086) (6,104,055) Capita xp ures (21,205,145) 9,905,350 - (11,299,795) Tran er om r rve d serve 4,476,040 ividend from rid' n Corporation 2,009,000 Principal repaym t of debt (3,243,676) Debt proceeds 4,312,400 Prior year sur lus 125,000 18. Compa tive figures Cert n of the prior year comparative figures have been reclassified to conform to the current year's pr entation. Page 21 FOR DISCUSSION PURPOSES ONLY i The Corporation of the City of Pickering 51 Notes to the consolidated financial statements December 31, 2010 19. Segmented information The City of Pickering is a diversified municipal government that provides a wide ra a of services to i residents. Distinguishable functional segments have been separately disclosed i the segmented information. The nature of the segments and the activities they encompass are s follows: General Government This item relates to 'revenues and expenses of the municipality itself and ann b ectly tributed to a specific segment. Protection to Persons and Property Protection includes fire services, animal control, bylaw services, ilding inspection nd enforcement of the building code to,ensure the safety and protection of all citiz s and their prop y. Public Works Services Public works includes construction and maintenance of t C' s dways ncluding snow removal, sidewalk repairs, street lighting, maintenance of the sto wate tem a d environmental services. Social and Family Services Social services for assistance or services for sen' rs. Recreation and Culture Services Recreation and cultural services include re eation programs, aintenance and rental of facilities and parks, operation of the City's museum an lib services. Planning and Development Planning and development provide a number of s rv' es including municipal planning and review of all property development plans. Segmented information has b n provided in the ollowing pages. O O Page 22 FOR DISCUSSION PURPOSES ONLY N 5 O 'a 69 Cprl~rtOOMMN hCf>MrrhCO r d OOOhtptp00NMr of NMrNMh rn O ~OOONMNOONOO rrCOMtOM~ m d' I r: (6 1: t6 a M 00 O I r: M CO NtO~tOMI~Mrr O~OOMrO ~ OtOOMO~ OM Md`NCOMtOh N ethN MM le ts rtnMMrrM W) G I~ r I~ U O CK? NhhM ' OMnO P<O tO 00 NC'9 L 41 nn~00 MOrM MO MrCD 00 40 0p 0 00 N O 1~ 0 M r OMrOr h hONM h4Vor; 406 d C f`M~ hMLO M rWMWNIt V le O dt NM Mvmwmwh C LO M N N h d C4 4 C N tH CO CO . . . . . . W "r-v ' r V 00 m r- r- 04 CO r 1~~N ^toCD `•E.V of Ca r I- M co N C4 L6 c 0) Mr O Nr Mt-w r r V W r N N N O -Ca+EA ' w ' O NM I- rr ' MW C C le a) NCO NCOM le coN m d I, I- OOm hMLo Mr00 ME O CD CO to OrM co r 0 0 L n M M M co •C O r r ~ N Ot0 t` O C ' N N N m y a a C (D 619. hM MN-4 MOeovCONQo OIv R r O O~ r N Ii o C M R N M CO t` N N M t6 00 !t MMr Or~OCOMr ap. V t0 ti tON nrMrhtO~ ~N Mtn MMMMOI-N O d'C NO 00 NO N N4 cn r N r fw O a N NtA ~O ' tO ' t0 ~rvMtnM a Y O) 00h O N NtOMNMO z 0 Md' W _OM rM_N10rN O 3 rO 00r htD CO O COO ti Cl O CO et t0M Or coM rd'NO C) Nr MO rM Cl MCnrMO U y r M !t M M N M o p r O ~ a O LL V C N 40 N N' O M co 00 le co CO co • ICI O C le 00 I, M M O M co le LO O y y 00 M I~ M M N r M y O r ti t- O M M r r M ~F•I C CL CO co O O CO O tO O v L r $ N CO r Co O a r r O 4 'IL) O U~ ct ~.y 'V _ ~..I = 'a rn ~..i 0i a~ O ~ 7C C L" = Q C m m - O ` 0 m • p o cn azi > rn O CL C: a) C: CM , > mom Cl) ~"I w rn d> M O c a> in N x Q O N c m m-0o~c t3CNC aio n p7 '0 m 41- c m .a O N V -a > 15 m N ' C a) 76 a) M .d+ ai rn s O =3 U) O N cn cn m U N M M, O C a) O C U v O O M CL C x> C C. L O C f6 d p N d a) O > m a> o CT Fu m a~ m o E w r, a,CD~~iz)L)w00 o XU) C)<O o ~ N w H w Hz h z Q 0; r 53 O 'D ell vIl- NNOfl- 00 It It a0 '7 TmNI~ I~ N O O (OOCD CD wNU")mm mm'ITNO000 O OIQ MONMf-M~ 0O)- (OCOM m N a OCOOCO Itm0NI- 0MCn000nl-- O d co CO I- CO I- O "t CO rt I- M V) CO O V O 0 V* co 0 1- CS') 'j, tl- 0- co ~ d• CO LO co Lr-: 0 N V vi 6 O L6N W - 6 6 U =EA tnN N l~ ' 1-0000 MO 00001l- m Cl) C l) O N N 6) O Cl) N LO LO 00 1-- O co E t l-C+') C M M M O N N C O C n C'! A N O N MOON 0dt00co M001-CC) tol- (D C: E O rl- 00 O I- O) LO co N C•) w N M N N 00 Cn.- ON -MMCnNW"T > O V N OO r_ cM N L6 r c{ O 'IT LO a >.rnCR I,- M ' ' ' ' ' 00 1-- 000 ' ~tOO) c= N Ct7N 000 MNO N000 C6 E .U co ~ UI C) N CO V N d' v ~ u I-OO CnN COMA NO .U r- - CO CO O M O N O N V CO Cn -O ~6F). C•.) ~N It 0UeM (0 MO (6 ~ 6) CO U-) LO CO CO I- CO 0) O O CO O CO M P_ O N «O I- M~ . N N a) N 6) p N O N ~a c Cu ER F~,t (.6 ' t CO O) I- V Lo CO T M CO m .r O co Cl) CO O w 00 O t` M CA O O co C\\J"' CO 00 O CO 00 _ N M 'cY t co co LO O J O Cn Cn cM f~ N LO 0 z 0,0 O~ O M M 00 In M LO M O O O co m O C Cn N N U) O N (n O a Y co ' O ' CO O O) In In a d 00 00 M V V CO O co V z .U O OD O t` CO n N L O It 00 O Z NN O'tt MN Ld co COOMCOO co O O fl- CO M O CO In (O U upi .0 Mn ~0 OCO M'ctNN • ICI -0 N M M Cl) OD o IL/I+M ° W W O O ~ V p N Cfl r- O ' ' ' ' ' CO I- Ict U') CO N • 1••1 O c 'C 00 rn 00 LO ~ M- v O M 'U cn d CO ~t NCO C, (A Cn Cl) I- 4* O N 2 stn MO co ~(TOM COCO 0 0- a N ON 0~'It.(fl r- tf) O ~ (6 ~ CCS U 4-0 ct O 7:$ c U ca ca C'~ = U U - d N U) O N a(n O a) a) 0 = ~i Q f~6 C CD~~ U) cl C: ~QU C rl ` m .L N . > d C w a 0) ~I N 'o rn ;o o 3 a N <n x O O m p _cc ac c °a) m c ctsa o N U O L V) > C6 N N' C O U) M V) 7a) O U 4- f X C N O C f6 d p N d f0 (U O 6 f6 (9 r l > E -Fu (1) (6 co O 0- x02000 o m !Y cn W H Z ` Q cr; r 54 Financial statements of The Corporation of the City of Picked g Trust unds December 31, 2010 O 00 O i FOR DISCUSSION PURPOSES ONLY I 55 The Corporation of the City of Pickering Trust Funds December 31, 2010 Table of contents Independent Auditor's Report 1 Statement of financial position 2 Statement of financial activities and fund balances 3 Notes to the financial statements 4 D O O I FOR DISCUSSION PURPOSES ONLY 56 Deloitte & Touc a LLP 5140 Yonge reet Suite 1700 Toronto M2N 61-7 Canad Tek 416-601-6150 F :416-601-6151 .deloitte.ca Independent Auditor's Report To the Members of Council, Inhabitants and Ratepayers of The Corporation of the City of Pickering We have audited the accompanying financial statements of The Corpo tion of the City f Pickering Trust Funds, which comprise the statement of financial position as at Dec ber 31, 2010, a d the statement of financial activities and fund balances for the year then ended, and summary of sig ficant accounting policies and other explanatory information. Management's Responsibility for the Financial Statemen Management is responsible for the preparation and fair pr sentation o es financial statements in accordance with Canadian generally accepted accounti principles, and r such internal control as management determines is necessary to enable the pr aration of finan 'al statements that are free from material misstatement, whether due to fraud or erro . Auditor's Responsibility Our responsibility is to express an opinion o thes ial s tements based on our audit. We conducted our audit in accordance with Ca adian g al y cepted auditing standards. Those standards require that we comply with ethical requi ements and an nd perform the audit to obtain reasonable assurance about whether the financial atements are fre from material misstatement. An audit involves performing proc ures to obtain evidence about the amounts and disclosures in the financial statements. The proced es selected depe on the auditor's judgment, including the assessment of the risks of material misstate ent of the finan 'al statements, whether due to fraud or error. In making those risk assessments, ea it siders in mal control relevant to the entity's preparation and fair presentation of the financia stat r r_to design audit procedures that are appropriate in the circumstances, but not fo the purpo f e ressing an opinion on the effectiveness of the entity's internal control. An au t also includes e aluating the appropriateness of accounting policies used and the reasonableness of ac unting estimates ade by management, as well as evaluating the overall presentation of the nancial stateme s. We believe that e audit evidenc we have obtained is sufficient and appropriate to provide a basis for our audit opt 'on. Opinion O In our inion, the fi n 'al statements present fairly, in all material respects, the financial position of The orporation of the ity of Pickering Trust Funds as at December 31, 2010 and the results of its, op ations for the ye then ended in accordance with Canadian generally accepted accounting principles. Chartered Ac ountants Licensed P lic Accountants June 13, 11 FOR DISCUSSION PURPOSES ONLY 57 The Corporation of the City of Pickering Trust Funds Statement of financial position as at December 31, 2010 2010 2009 Assets Investments /35 277 51 Interest receivable •1 ,999 3W.443 7,350 Trust Fund osition 308A 297 350 D O O Page 2 FOR DISCUSSION PURPOSES ONLY 58 The Corporation of the City of Pickering Trust Funds Statement of financial activities and fund balances year ended December 31, 2010 2010 /2009 Revenues Interest 1 093 1 Expenditures Provincial payments - 1,827 Administration charges 96 1,923 Net revenues 11,0 3 9,280 Fund balance, beginning of year 297 50 288,070 Fund balance end of year 30t,443 297,350' D O O Page 3 FOR DISCUSSION PURPOSES ONLY 59 • The Corporation of the City of Pickering Trust Funds Notes to the financial statements December 31, 2010 1. Accounting policies The financial statements of The Corporation of the City of Pickering Trust Fun are the represe ations of management prepared in accordance with Canadian generally accepted co ting principl using accounting standards for Not-for-Profit Organization. Significant accounting policies adopted include: Basis of accounting Revenues are recorded in the period in which the transactions or vents occurred th t gave rise to the revenue. Expenditures are reported on the accrual basis of accountin which recognizes xpenditures as they are incurred and measurable as a result of the receipt of good or ices and t creation of a legal obligation to pay. Investments Investments are recorded at cost. The cost of inve ments approxima s their fair value. 2. Future accounting changes In December 2010, the CICA issued anew ccounting framew rk applicable to Not-for-Profit. Organizations. Effective for fiscal years b in ing on or after anuary 1, 2012 Not-for-Profit Organizations will have to choose betw n In I Fi ancial Reporting Standards (IFRSs) and Canadian accounting standards for N -for-Pro i rgani tions, whichever suits them best. Early .adoption of these standards is perm ed. The Tru Fu ds currently plan to adopt the new accounting standards for Not-for-Profit Organi ations for its fisca year beginning on January 1, 2012. The impact of transitioning to these new stand ds is expected to a minimal. 3. Dorothy Card Estate The City of Pickering ad nis a trust fun for the Dorothy Card Estate for the care and upkeep of the destitute elderly. The f d an is corn rised of investments and accumulated interest amounting to $308,443 (2009 - $29 ,350 4. Statement of ca flows A statement o cash flows has no been presented as the information is readily determinable from the financial sta ments presented O • Page 4 FOR DISCUSSION PURPOSES ONLY 60 Financial statements of City of Pickerin Public Library oard December 31, 2010 D O . O FOR DISCUSSION PURPOSES ONLY 61 City of Pickering Public Library Board December 31, 2010 Table of contents Independent Auditor's Report ............................................................................................................................1 Statement of financial position 2 Statement of operations 3 Statement of change in net debt ..........................................................................:.............................................4 Statement of cash flows 5 Notes to the financial statements 6-9 D O O FOR DISCUSSION PURPOSES ONLY 62 Deloitte & Touc e LLP 5140 Yonge reet Suite 1700 Toronto O M2N 61-7 Canada Tel: 16-601-6150 F :416-601-6151 .deloitte.ca Independent Auditor's Report To the Members of The City of Pickering Public Library Board, Members of Council, Inhabitants and Ratepayers of the City of Pickeri We have audited the accompanying financial statements of the City Pickering Publi Library Board, which comprise the statement of financial position as at December 1,20H, and the tatements of operations, change in net debt and cash flows for the year then e ded, and a sum ry of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Stateme is Management is responsible for the preparation and fair esentation of th e financial statements in accordance with Canadian public sector accounting st dards, and for s ch internal control as management determines is necessary to enable the eparation of fina cial statements that are free from material misstatement, whether due to fraud ore r. Auditor's Responsibility Our responsibility is to express an opinion these n al tatements based on our audit. We conducted our audit in accordance with nadian gen lly accepted auditing standards. Those standards require that we comply with ethical re irements and pla and perform the audit to obtain reasonable assurance about whether the financia statements are fr e from material misstatement.' An audit involves performing pro edures to obtain idence about the amounts and disclosures in the financial statements. The proce res selected dep nd on the auditor's judgment, including the assessment of the risks of material missta in f the fina cial statements, whether due to fraud or error. In making those risk assessments, the dit c ide s ' temal control relevant to the entity's preparation and fair presentation of the financ' 1 statem in o der to design audit procedures that are appropriate in the circumstances, but not r the purpose f pressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluati g the appropriateness of accounting policies used and the reasonableness of a ounting estimat made by management, as well as evaluating the overall presentation of th financial statem ts. We believe th the audit evide e we have obtained is sufficient and appropriate to provide a basis for our audit op" io Opinion In our opinion, the fina ial statements present fairly, in all material respects, the financial position of the Ci of Pickering Pub c Library Board as at December 31, 2010 and the results of its operations and its c flows for they ar then ended in accordance with Canadian public sector accounting standards. Chartered ccountants Licensed ublic Accountants June 1 , 2011 FOR DISCUSSION PURPOSES ONLY 53 City of Pickering Public Library Board Statement of financial position as at December 31, 2010 2010 2009 Financial assets Cash 2,2 0 2,31 Accounts, receivable 80 9 Due from the Government of Canada ,456 - Due from the City of Pickering 60 140 1 564 3W,436 50133 Liabilities Accounts payable and accrued liabilities 388,920 174,851 Deferred revenue 13,913 Due to the Government of Canada 351 Post-employment benefits liability Note 2 119, 0 19,200 50 420 308,315 Net debt 1 2 984 158,182 Non-financial assets Tangible capital assets (Note 4) Z1,535,730 1,993,685 Prepaid expense 23,484 38,982 1,559,214 2,032,667 Accumulated surplus Note 5 1,416,230 1,874,485 D O O Page 2 FOR DISCUSSION PURPOSES ONLY i .64 City of Pickering Public Library Board Statement of operations year ended December 31, 2010 2010 2009 Budget (Unaudited) Note 6 Revenue City of Pickering grants 4,746,464 X4,5, /4,6,315 Federal grants - Province of Ontario grants 135,696 Fines and other revenue 218 715 Total revenue 5,100,875 5,092,544 5,039,411 Expenses Operating Salaries Salaries and wages 3, 43 52 3,0 ,779 2,969,487 Fringe benefits 70 1 52,302 630,094 3,7 0,728,081 3,599,581 Material, supplies and utilities Books 87,000 96,574 104,841 Utilities 189,75 172,463 179,631 Other supplies 61, 0 69,447 60,586 33W58 . 338,484 345,058 Services Repairs and mainten/ance D 296,516 305,257 374,551 Insurance 45,990 43,894 38,845 Travel 4,500 4,443 5,480 Consulting and profe36,090 37,165 77,510 Advertising 12,000 17,526 20,035 Conference 7,200 6,061 8,485 Postage 6,000 4,248 5,587 Telephone 46,394 70,618 49,698 Seminars and educa26,858 15,606 18,748 Vehicle repairs and 5,200 2,708 3,248 Miscellaneous 88,757 85,314 49,390 575,505 592,840 651,577 Capital related Amortization /xpense 895,188 891,394 968,682 Total o eratin a ses 5,553,713 5,550,799 5,564 898 Annual d cit (452,838) (458,255) (525,487) Accum ted sur lu~ i nin of ear 1,872,322 1,874,485 2,399,972 Accu ulated surplus. d of year 1,419,484 1,416,230 1,874,485 Page 3 FOR DISCUSSION PURPOSES ONLY 65 City of Pickering Public Library Board Statement of change in net debt year ended December 31, 2010 2010 2009 Budget (Unaudited) Note 6 Annual deficit (452,838) 45 255 525 87 Acquisition of tangible capital assets (442,350) 43 39) 42,295) Amortization of tangible ca ital.assets 895,188 968,682 452,838 457,95 526,387 Change in prepaid expense 15,498 9,745 Change in net debt 15,19 (8,845) Net debt beginning of year - 058,11 2 (149,337) Net debt end of year 142 84 (158,182) D O O Page 4 FOR DISCUSSION PURPOSES ONLY City of Pickering Public Library Board /67 Notes to the financial statements December 31, 2010 1. Significant accounting policies The financial statements of the City of Pickering Public Library Board (the "Library oard") are the representations of management prepared in accordance with Canadian public s for accounting standards established by the Public Sector Accounting Board (PSAB) of the C adian Institute of Chartered Accountants. Significant accounting policies adopted by the Library Board are as follow . Basis of accounting (a) Accrual basis of accounting Revenues and expenses are reported on the accrual bas' of accounting. a accrual basis of accounting recognizes revenues as they are earned and easurable; expen es are recognized, as they are incurred and measurable as a result of the rec pt of goods and rvices and the creation of a legal obligation to pay. (b) Non-financial assets (i) Tangible capital assets Tangible capital assets are recorded at ost less accumu ted amortization. Cost includes all amounts that are directly attributable o acquisition, dev lopment or betterment of the asset. The cost of the tangible capital ass is amortized on straight-line basis over the estimated useful life as follows: Machinery & equipment 2 to 25 ears Information technology hard re D to years Library collection material 4 t 7 years Furniture and fixtures 1 to 50 years One-half of the annu amortization is c arged in the year of acquisition and in the year of disposal. Other major asse including the Lib ary buildings are owned by the City and are not reflected in these financi statements. (ii) Contribution/ on on of tangibl capital assets Tangible apital ass rece' ed as contributions or donations are recorded at their fair value at the d e of receipt, a d at fair value is also recorded as revenue. Inta ible assets I ngible assets ar not recognized as assets in. the financial statements. (c) Defe ed revenue D fer nue re resents amounts which have been received for expenditures not yet incurred. hes ou s wi be recognized as revenue in the fiscal year the related items are purchased. ( Post empl e t benefits The present alue of the cost of providing employees with future benefits programs is recognized as employee earn these entitlements through service. Any actuarial gains or losses are amortized on a straig -line basis over the average remaining service period (ARSP) of employees. The actuary estima d the ARSP to be 15 years. (e) Us of estimates e preparation of financial statements in conformity with Canadian public sector accounting standards requires management to make estimates and assumptions that affect the reported amount of assets, liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the period. Actual results could differ from those estimates. Page 6 FOR DISCUSSION PURPOSES ONLY - - I City $ of Pickering Public Library Board Notes to the financial statements December 31, 2010 2. Post employment benefits liability The Library Board makes available to qualifying employees who retire before the a e of 65, the opportunity to continue their coverage for benefits such as post-retirement exte ded healthcare benefits. Coverage ceases at the age of 65. The Library Board also provides f time and perma nt part-time employees a sick time entitlement and any unused entitlement.is a u fated year to ear. This accumulated entitlement is not vested and therefore is forfeited at the 'm retirement termination. The post-employment benefits obligation at December 31, 2 0 a d hang s in the accrued benefit obligation for the 2010 fiscal year was determined by ctuarial valu n repared as at January 1, 2008. Information about the Library Board's post employment benefits li ilities is as follow . 2010 2009 Post-employment benefits liability, beginning of year 1.19,200 120,100 17,500 16,600 Current service costs Amortization of actuarial losses 3,900 3,900 Interest expense 9,300 9,500 Benefits aid during the year 30,400 30,900 Post-employment benefits liability, end of ea 119,500 119,200 2010 2009 D $ $ Accrued post-employment benefits bligation 162,900 166,500 Unamortized actuarial losses 43,400 47,300 Post-employment benefits liabi i 119,500 119,200 The main actuarial assump 'ons employed in a actuarial valuations are as follows: (a) Discount rate The present valu as a e -er 1, 2010 of the future benefits was determined using a discount rate of 5.5% ( 09-5.50o (b) Dental cost The curr t dental cost tren cost at January 1, 2008 was 4.0% per annum. (c) Healt costs He th o is were as med to increase at 8.5% in 2010 and decrease by 0.5% increments per year t an i rate 5% per year in 2017 and thereafter. 3. P nsion agre n The Library Boar makes contributions to the Ontario Municipal Employees Retirement Fund (OMERS), whi is a multi-employer plan, on behalf of eligible members of its staff. The Plan is a defined bene ' plan that specifies the amount of the retirement benefit to be received by the employees based on t length of service and rates of pay. Contribu ons in the amount of $166,343 (2009 - $163,185) were paid to OMERS on behalf of its memb rs during the year. Page 7 FOR DISCUSSION PURPOSES ONLY 60, City of Pickering Public Library Board Notes to the financial statements December 31, 2010 4. Tangible capital assets Machinery Information Library /iture and technology collection e ui ment hardware materials 010 Cost Balance beginning of year 9,992 405,830 5,376, 7 29 2 6,084,521 Additions during the year - - 43 ,439 433,439 Disposals during the year 26,335 26,335 Balance end of year 9,992 379,495 5/810,056 292 82 6 491 625 Accumulated amortization Balance, beginning of year 500 313,511 3,692,006 84,819 4,090,836 Amortization 999 38,6 845,873 5,842 891,394 Accumulated amortization on disposals - 335 26,335 Balance end of year 1,499 45,856 7,8 9 90,6611 4,955,895 Net book value 8,493 53,639 1,272 77 201,421 1,535,730 Machinery /Itnforma tio n /ma brary Furniture and echnogy ction and equipment hardware rials fixtures 2009 Cost Balance beginning of year /9,992 D 405 30 6,115,387 292,082 6,813,299 Additions during the year - 432,303 - 442,295 Dis osals durin the ear 1,171,073 - 1,171,073 Balance end of year 9,992 /405,830 5,376,617 292,082 6,084,521 Accumulated amortization Balance, beginning of year /500 262,394 3,951,856 78,977 4,293,227 Amortization 51,117 911,223 5,842 968,682 Accumulated amortizati on dis osals 1,171,073 1,171,073 Balance, end of year 500 313,511 3,692 006 84,819 4,090,836 Net book value 9,492 92,319 1,684,611 207,263 1,993,685 O Page 8 FOR DISCUSSION PURPOSES ONLY 70 City of Pickering Public Library Board Notes to the financial statements December 31,-2010 5. Accumulated surplus Accumulated surplus consist of the following: 2010 009 Invested in capital assets 30 993,685 Post employment benefits liability 119 119 200 1,416,230 1,874,485 6. Budget figures The 2010 budget was not prepared on a basi/expensen nt with hat used to repo actual results. The budget was prepared on a modified accrual e pu is ctor accoun 'ng standards require a full accrual basis of accounting. The budget fite all n le capit asset acquisitions as expenditures and did not include amortization to ' capit assets. The following provides reconciliation from theapproved budbudget n ers resented in the financial statements. 2010 TCt n TCA 2010 budget Council approved y ex nditures presented in bud t o s om capital Amortization statements Revenue City of Pickering 4,956,464 O 0) - 4,746,464 Federal and provincial grants 375,6 (2 ,0 0) - 135,696 Other 218, 15 - - 218,715 5,55 875 4 000 - 5,100,875 Expenditures Salaries 3,745,262 - 3,745,262 Material, supplies and utilities Qle337,758 Services 68,100 - 575,505 Amortization 895188 895,188 4 590 25 68,100 895,188 5,553,713 Annual surplus L.450) (450,000) (68,100) (895,188) (452,838) Capital expen ures/ additions 450,000 68,100 (442,350) • O Page 9 FOR DISCUSSION PURPOSES ONLY