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HomeMy WebLinkAboutFIN 13-13Report to Executive Committee PICKERING Report Number: FIN 13 -13 Date: June 10, 2013 From: Paul Bigioni Director, Corporate Services & City Solicitor Subject: 2012 Year End Audit Recommendation: 1. That Report FIN 13 -13 of the Director, Corporate Services & Solicitor be received; 2. That the Year -end Communication Report as submitted by Deloitte LLP ( Deloitte) be received for information; and, 3. That the 2012 draft Audited Consolidated Financial Statements for the City of Pickering be approved. 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, 2012. Again this year, the auditor has provided an unmodified audit report 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 deficiencies in the audit to report to Council and therefore, again this year, the auditor has not issued a management letter. Financial Implications: The financial results for 2012 were once again favourable in all respects. 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 summary, the Balance Sheet continues to improve with total assets increasing from $358.2 million to $365.7 million while liabilities increased from $79.7 million to $84.1 million resulting in a net overall improvement of $3.1 million. Expenditures were well within budget. Although revenue is under budget, this is primarily a timing difference between budget approval and receipt or recognition of the funds which is explained in greater detail in the discussion section. Obligatory Reserve Funds which are provided for specific purpose under legislation and reported as deferred revenue, increased by almost $4.5 million to $47.6 million primarily due to the Report FIN 13 -13 June 10, 2013 Page 2 net change with development charges ($3.4M) and Federal Gas Tax funds ($1.0M). Total discretionary, at Council's direction, Reserves and Reserve Funds decreased by $1 million to $32.6 million almost all of which has been set aside for specific purposes by Council. Long term liabilities decreased by $1.4 million however internal borrowings from the Obligatory Reserve Funds increased by $2.3 million. Overall the City's financial position is healthy. A strong balance sheet provides assurances to the City's lenders, bankers, ratepayers and businesses that the City is able to meet its financial commitments. Discussion: The audit of the consolidated financial statements for the year ended December 31, 2012 has been completed. The auditor's Year -end Communication Report is included as Attachment 1. This report, prepared by Deloitte, summarizes the results of the December 31, 2012 audit and comments on significant matters regarding the audit or other matters they may believe to be of interest to Council. The independence letter in Appendix 1 confirms that Deloitte is independent with respect to the City. Appendix 2 illustrates the draft management 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. Appendix 3 provides a summary of certain items Deloitte is required to communicate to the Executive Committee. During the course of the audit, the auditors may find misstatements that may or may not be adjusted due to materiality. For 2012 there were two items in respect of which adjustments were not made, as they would not have a material effect on the financial statements. Further explanation of these unadjusted amounts is provided on page 3 of the auditor's Year -end Communication Report. 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 (Acting) Division Head, Finance & Treasurer. The auditors are responsible to express an opinion on these Consolidated Financial Statements based on their audit. An unmodified audit report has been provided. The Consolidated Financial Statements include the activities of the City of Pickering Public Library Board. The City's investment in Veridian Corporation is Report FIN 13 -13 June 10, 2013 Page 3 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. The Consolidated Financial Statements are prepared 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 capitalized (recorded) at cost on the Statement of Financial Position (Balance Sheet) and amortized (depreciated, except for land) over their estimated useful lives in current operating expenses. The Statement of Financial Position includes tangible capital assets under the non - financial asset section and shows Accumulated Surplus. Statement of Financial Position Financial assets are those assets which could provide resources to discharge existing liabilities or finance future operations. The financial assets increased by approximately $2.8 million. This increase was offset by an increase in liabilities of approximately $4.4 million which led to a decrease in net financial assets of $1.6 million over the prior year. The increase in financial assets is primarily due to an increase of $2.3 million in the value of the City's Investment in Veridian Corporation. This represents the City's share of Veridian Corporation's net earnings ($4.2M) net of dividends paid to the City ($1.9M) during the year. The main contributor to the increase in liabilities is an increase in Deferred Revenue of $4.9 million. 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. The Federal Gas Tax installment received in November and the overall increase in Development Charges collected has contributed to the increase in deferred revenue. 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. The budget amount includes a $6 million Federal and Provincial grant expected for the Frenchman's Bay Harbour Entrance project. However, Report FIN 13 -13 June 10, 2013 Page 4 the funding agreement was signed in early 2013 with the grant funds being received at the end of March 2013. Therefore, the actual revenue is much lower than the budget. The Sale of land revenue item is another example. The City is expected to be selling land in the Duffin Heights area over the next five years to fund related development costs within the same area. At December 31St, no land had been sold as the City was still finalizing its disposition strategy. That is why actual revenues from land sales show zero on the Statement of Operations. 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 need to reflect the change in reporting for capital budget expenditures to be PSAB compliant. Note 17 of the City's consolidated financial statements reflects the changes made to the 2012 Council approved budget to put it on a basis consistent with the full accrual basis of accounting which incorporates tangible capital asset reporting. Of the 2012 budgeted capital expenditures, a total of $1.315 million were not deemed tangible capital assets and were included in the operating expenses. Actual expenses are under budget in almost all functional areas. This illustrates City staff's commitment to controlling expenditures. There is not one specific area that stands out as to contributing to the overall underage. It is reflected throughout the various cost centres. Accumulated Surplus The components that make up the Accumulated Surplus are disclosed in Note 11 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 $192.6 million and the City's equity in Veridian Corporation of approximately $72.8 million. The accumulated surplus is comprised of the following: Operating fund $ 125,170 Capital fund 8,645,992 Report FIN 13 -13 Reserves and reserve funds Equity in Veridian Corporation Tangible capital assets Post employment benefits liability WSIB benefit liabilities Internal loans Net long -term liabilities Attachments: June 10, 2013 Page 5 32,610,667 72,835,384 192,638,717 (3,473,600) (907,759) (3,113,545) (17, 775, 020) $281,586,006 1. Auditor's Year -end Communication Report 2. 2012 Draft Audited Consolidated Financial Statements Prepared By: Kri tine Senior, CA Manager, Accounting Services Recommended for the consideration of Pickering City Council Tony Prevedel, P.Eng. Chief Administrative Officer Approved / Endorsed By: Stan Karwowski (Acting) Divi 25 Head, Finance & Treasurer Paul Bigioni Director, Co Z7,2-01 & City Solicitor I !n- Lei k dl (7-1 ATTACHMENT # I TO REPORT #jLtf4 B- 13 The Corporation of the City of Pickering Year -end communication For the year ended December 31, 2012 For presentation to the Executive Committee June 10, 2013 Deloitte. Deloitte LLP 5140 Yonge Street Suite 1700 Toronto ON M2N 61-7 Canada Tel: 416- 601 -6150 Fax: 416-601-6610 www.deloitte.ca June 10, 2013 Private and confidential The Members of the Executive Committee The Corporation of the City of Pickering 1 The Esplanade Pickering ON L IV 6K7 Dear Executive Committee Members: Report on audited annual financial statements As agreed in our engagement letter dated October 22, 2012, we have performed an audit of the consolidated financial statements of the Corporation of the City of Pickering (the "City ") as at, and for the year ended, December 31, 2012, in accordance with Canadian generally accepted auditing standards ( "GAAS ") and expect to issue our audit report thereon on the date that the financial statements are approved. This report summarizes our findings from the audit which has been conducted in accordance with the Audit Plan that was presented to the Executive Committee at the meeting on November 12, 2012. Use of this report This report is intended solely for the information and use of the Executive Committee, management and others within the City and is not intended to, 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 management 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 which you may have. Yours truly, IRA Chartered Professional Accountants, Chartered Accountants Licensed Public Accountants © Deloitte LLP and affiliated entities. 2012 Year -end communication — The Corporation of the City of Pickering Table of contents Audit scope and findings ............................. Unadjusted differences ............................... Auditrisks ..................... ............................... Significant accounting practices .................. Appendix 1 - Independence letter Appendix 2 - Draft management representations letter Appendix 3 - Summary of communication requirements 4 © Deloitte LLP and affiliated entities. 2012 Year -end communication — The Corporation of the City of Pickering ii Audit scope and findings This report summarizes the main findings arising from our audit to, date. © Deloitte LLP and affiliated entities. 2012 Year -end communication — The Corporation of the City of Pickering 1 Audit results In accordance with Canadian GAAS, our audit was designed to enable us to express an opinion on the fairness of the presentation of the City's financial statements prepared in accordance with Canadian public sector accounting standards ( "GAAP ") issued by the Canadian Institute of Chartered Accountants. Our audit scope included the following (together, referred to as the "financial statements "): - Consolidated financial statements for the City of Pickering; - City of Pickering Public Library Board; and - City of Pickering Trust Funds. The December 31, 2012 audit was conducted in accordance with our audit plan, which was communicated to the Executive Committee on November 12, 2012. We confirm that there have been no significant amendments to the audit scope and approach communicated in the audit plan. Status of our audit We expect to be in a position to render our audit opinion on the financial statements of the City following approval of the financial statements by Council and the completion of the following outstanding procedures: • Receipt of legal letters; • Completion of our subsequent events procedures; • Receipt of signed management representations letter; and • Completion of the Engagement Quality Control review. Audit risks In accordance with our audit plan, our procedures focused on the following areas of audit risk: • Revenue /deferred amounts; and • Accounting estimates. We have summarized the results of our audit procedures for each of these risk areas as well as the risk of management override of controls on page 4 of this report. Use of the work of As planned external experts assisted in the audit to the extent we considered necessary: experts Actuarial experts Assisted with the assessment of the valuation and disclosure of employee future benefits. Internal control 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 audits and determined whether they have been implemented. We are not, however, required to determine whether all relevant controls 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 internal controls over financial reporting during the year ended December 31, 2012. Fraud and illegal Based on the procedures we performed as required by CAS 240, The Auditor's Responsibilities acts 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 during the year which in our judgement should be discussed with the Committee. Based on the results of our audit procedures, we are not aware of any circumstances that indicate any intent to misstate the financial statements. © Deloitte LLP and affiliated entities. 2012 Year -end communication — The Corporation of the City of Pickering 1 0 Deloitte LLP and affiliated entities. 2012 Year -end communication — The Corporation of the City of Pickering 2 Legal and Management is responsible for ensuring that the City's operations are conducted in accordance with regulatory applicable laws and regulations. The responsibility for preventing and detecting non - compliance rests compliance with management. The auditor is not, and cannot be held, responsible for preventing non - compliance with laws and regulations. Our procedures did not identify any areas of material non - compliance with laws and regulations by the City. Significant We believe management's selection of accounting policies to be appropriate under Canadian GAAP. accounting Our views on the significant quantitative and qualitative aspects of these accounting policies are policies presented on page 5 of this report. The City's significant accounting policies are set forth in Note 1 to the December 31, 2012 financial statements. Management Accounting estimates are an integral part of the financial statements prepared by management and judgment and are based on management's current judgments. These judgments are normally based on knowledge accounting and experience about past and current events, assumptions about future events and interpretations of estimates the financial reporting standards. During the year ended December 31, 2012, management advised us that there were no significant changes in the types of 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 5 of this report. Audit adjustments In accordance with Canadian GAAS, we request that all misstatements be corrected. and uncorrected misstatements We aggregate all uncorrected misstatements greater than 5% of materiality, and those that are quantitatively insignificant but qualitatively significant. There were no corrected misstatements arising from the audit. Uncorrected misstatements are summarized in our audit findings on page 3. Adjusted and In accordance with Canadian GAAS, we request that all disclosure deficiencies be corrected. unadjusted disclosure During the course of the audit, we did not identify any significant adjusted or unadjusted disclosure deficiencies deficiencies. Post - balance Management is responsible for assessing subsequent events up to the date of the release of the sheet events financial statements. At the date of finalizing this report, we are not aware of any significant post - balance sheet events. The City's reporting entity is disclosed in Note 1 to the consolidated financial statements. Inter - entity Related party transactions and balances are eliminated on consolidation with the exception of Veridian Corporation. transactions Information related to Veridian Corporation balances and transactions can be found in Notes 4, 5 and 14. As part of our audit, we did not identify any unusual related party transactions which are not in the normal course of business. Representations A draft version of the representations letter to be signed by management is included in Appendix 2. letter Independence We have developed appropriate safeguards and procedures to mitigate threats to our independence or to reduce them to an acceptable level. Our annual independence letter is included in Appendix 1 Communications In our audit plan we committed to communicate certain items to the executive committee. These items are summarized in Appendix 3. Conclusion No restrictions have been placed on the scope of our audit. In performing the audit, we were given full and complete access to the accounting records, supporting documentation and other information requested. We expect to issue an unmodified Independent Auditor's Report on the financial statements of the City for the year ended December 31, 2012 once the outstanding items referred to above are satisfactorily completed and the financial statements are approved. 0 Deloitte LLP and affiliated entities. 2012 Year -end communication — The Corporation of the City of Pickering 2 Unadjusted differences During the course of the audit, some misstatements were identified and not adjusted. The impact on the financial statements had the adjustments been recorded is as follows: (1) OMERS - related expenses, erroneously recorded to accounts payable in 2011, therefore impacts 2012 expenses (2) Duffin Heights capital cost sharing amounts relating to 2012 not accrued as received after cut -off. 0 Deloitte LLP and affiliated entities. 2012 Year -end communication — The Corporation of the City of Pickering 3 Current balance Unadjusted factual misstatements (1) (2 Results if misstatements are adjusted Financial assets 172,173,685 - - 172,173,685 Liabilities 84,058,796 - 142,436 84,201,232 Net financial assets 88,114,889 (142,436) 87,972,453 Non - financial assets 193,471,117 142,436 193,613,553 Accumulated surplus 281,586,006 - - 281,586,006 Revenues 78,425,672 - - 78,425,672 Expenses 75,333,229 57,977 - 75,275,252 Annual surplus 3,092,443 57,977 - 3,150,420 Opening accumulated surplus 57,977 57,977 (1) OMERS - related expenses, erroneously recorded to accounts payable in 2011, therefore impacts 2012 expenses (2) Duffin Heights capital cost sharing amounts relating to 2012 not accrued as received after cut -off. 0 Deloitte LLP and affiliated entities. 2012 Year -end communication — The Corporation of the City of Pickering 3 Audit risks Our audit plan identified certain risk areas that we discussed with the Committee when reviewing the audit plan. The results of our audit work on these areas are set out below: ZM3� Revenue/ Revenue recognition of . Substantive testing to deferred grants and determine if restricted revenue contributions contributions (i.e. development charges, gas tax, etc.) and government • Satisfactory transfers have been recognized as revenue in the appropriate period Accounting Estimates require estimates management .Obtain documentation on judgments (i.e. management's controls mana g allowance for over the development of significant property tax accounting estimates for appeals, contingent any significant liabilities, estimated management estimates accrued liabilities, etc.) and assess risk • Focused review of calculations and support . Satisfactory • Discussions with management • Analytic review of related accounts • Assess outcome of retrospective review of estimates from prior years Management override of controls is a presumed area of risk in any financial statement audit due to management's ability to directly or indirectly override controls that otherwise appear to be operating effectively. We address this risk through testing the appropriateness of journal entries and other adjustments made in the preparation of financial statements. We look to the business rationale for significant transactions that are outside the normal course of business and review accounting estimates for bias. In addition, experienced Deloitte personnel were assigned to review these areas and professional skepticism was maintained throughout the audit. 0 Deloitte LLP and affiliated entities. 2012 Year -end communication — The Corporation of the City of Pickering 4 Significant accounting practices Significant accounting policies are those that are most important to the portrayal of the City's financial position and financial performance. In 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. Significant accounting policies During the year ended December 31, 2012, there were no significant changes in previously adopted accounting policies or their application. In our judgment, the significant accounting practices, selected and applied by management are, in all material respects, acceptable under GAAP and are appropriate to the particular circumstances of the City. Management judgment and accounting estimates In our judgment, 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 Canadian GAAP and is appropriate to the particular circumstances of the City. Significant estimates include: Post - employment benefits liability $3,652,600 (2011 - $3,218,000) WSIB benefits liability $907,759 (2011 - $826,859) Allowance for doubtful taxes receivable $367,000 (2011 - $367,000) Allowance for doubtful accounts $521,604 (2011 - $621,604) Assessment appeals $381,355 (2011 - $882,145) © Deloitte LLP and affiliated entities. 2012 Year -end communication — The Corporation of the City of Pickering 5 Appendix 1 - Independence letter © Deloitte LLP and affiliated entities. 2012 Year -end communication — The Corporation of the City of Pickering )n- I Deloitte LLP 5140 Yonge Street Suite 1700 Toronto ON M2N 61-7 Canada Tel: 416- 601 -6150 Fax: 416- 601 -6610 www.deloitte.ca May 15, 2013 Private and confidential The Members of the Executive Committee The Corporation of the City of Pickering 1 The Esplanade Pickering ON L1V 6K7 Dear Executive Committee Members: We have been engaged to audit the consolidated financial statements of the Corporation of the City of Pickering (the "City ") for the year ended December 31, 2012. You have requested that we communicate in writing with you regarding our compliance with relevant ethical requirements regarding independence as well as all relationships and other matters between the City, our Firm and network firms that, in our professional judgment, may reasonably be thought to bear on our independence. In determining which relationships to report, we have considered relevant rules and related interpretations prescribed by the appropriate provincial institute / ordre and applicable legislation, covering such matters as: (a) holding a financial interest, either directly or indirectly, in a client; (b) holding a position, either directly or indirectly, that gives the right or responsibility to exert significant influence over the financial or accounting policies of a client; (c) personal or business relationships of immediate family, close relatives, partners or retired partners, either directly or indirectly, with a client; (d) economic dependence on a client; and (e) provision of services in addition to the audit engagement. We confirm to you that the engagement team and others in the firm as appropriate, the firm and, when applicable, network firms have complied with relevant ethical requirements regarding independence. We have prepared the following comments to facilitate our discussion with you regarding independence matters arising since May 18, 2012, the date of our last letter. The Corporation of the City of Pickering May 15, 2013 Page 2 We are not aware of any relationships between the City and our Firm, including any network firms that, in our professional judgment, may reasonably be thought to bear on independence, that have occurred from May 18, 2012 to May 15, 2013. We hereby confirm that we are independent with respect to the City within the meaning of the Rules of Professional Conduct of the Institute of Chartered Accountants of Ontario as of May 15, 2013. This report is intended solely for the use of the Executive Committee, Council, Management, and others within the City and should not be used for any other purposes. Yours truly, Chartered Professional Accountants, Chartered Accountants Licensed Public Accountants Appendix 2 -Draft management representations letter © Deloitte LLP and affiliated entities. 2012 Year -end communication — The Corporation of the City of Pickering [Client letterhead] June 10, 2013 Deloitte LLP 5140 Yonge Street Suite 1700 Toronto, ON M2N 6L7 Attention: Ms. Paula Jesty Dear Ms. Jesty: Subject: Consolidated financial statements of The Corporation'of,the City of Pickering for the year ended December 31, 2012 This representation letter is provided in connection with the audit by Deloitte LL ( "Deloitte" or "you ") of the consolidated financial statements of The Corporation of the`City of Pickering (the "City" or "we" or "us ") for the year ended December 31, 2012 and a summary.-6f significant accounting policies and other explanatory information (the "Financial Statements") -f6iAe purpose of expressing an opinion as to whether the Financial Statements present fairly,'ih all material respects, the financial position, results of operations, and cash flows of the City in accordance with Public Sector Accounting Standards ( "PSAS "). We confirm that, to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves: Financial statements 1. We have fulfilled our responsibilities as set out in the terms of the engagement letter between the City and Deloitte dated`October'22, 2012 for the preparation of the Financial Statements in accordance with PSAS. In particular, the Financial Statements are fairly presented, in all material respects, and present °the financial position of the City as at December 31, 2012 and the results of its operations and its cash flows for "the year then ended in accordance with PSAS. 2. Significant assumptions used in making estimates, including those measured at fair value, are . reasonable. In preparing the Financial Statements in accordance with PSAS, management makes judgments and assumptions about the future and uses estimates. The completeness and appropriateness of the disclosures related to estimates are in accordance with PSAS. 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. The measurement methods, including the related assumptions and models, used in determining the estimates, including fair value, were appropriate, reasonable and consistently applied in accordance with PSAS and appropriately reflect management's intent and ability to carry out specific courses of action on behalf of the entity. No events have occurred subsequent to December 31, 2012 that require adjustment to the estimates and disclosures included in the Financial Statements. Deloitte LLP June 10, 2013 Page 2 There are no changes in management's method of determining significant estimates in the current year. 3. We have determined that the Financial Statements are complete as of June 10, 2013 as this is the date when there are no changes to the Financial Statements (including disclosures) planned or expected; all final adjusting journal entries have been reflected in the Financial Statements and the Financial Statements have been approved in accordance with our process to finalize financial statements. 4. We have completed our review of events after December 31, 2012 and up to the date of this letter. All events subsequent to the date of the Financial Statements and for which PSAS requires adjustment or disclosure have been adjusted or disclosed. Accounting estimates and disclosures included in the Financial Statements that are impacted by subsequent events have been appropriately adjusted. 5. The Financial Statements are free of material errors and omissions. We believe that the effects of any uncorrected Financial Statement misstatements pertaining to the current period presented, are immaterial, both individually_and in the aggregate, to the Financial Statements taken as a whole. A list of the uncorrected misstatements aggregated by you is attached in Appendix A. 6. The City has satisfactory title to and control overall a'ssets, and there are no liens or encumbrances on such assets. We have disclosed ,f you and in the Financial Statements all assets that have been pledged as collateral.` Information provided 7. 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. All financial statements and other financial information�provided to you accurately reflect the activities and expenses of the City and do not`reflect.any activities or expenses of any other person or entity; b. All relevant information as well as 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. 8. Except as listed in Appendix A, all transactions have been properly recorded in the accounting records and are reflected in the Financial Statements. 9. 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. 10. 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. Deloitte LLP June 10, 2013 Page 3 11. 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 allegations of potential errors in the selection of accounting policies or the recording of transactions affecting the City that have been communicated by employees, former employees, or others, whether written or oral. 12. We have disclosed to you all communications from and, all known instances of non - compliance or suspected non - compliance with laws and regulations whose effects should be considered when preparing the Financial Statements. . 13. We have disclosed to you all communications from: a. taxation authorities concerning assessments or reassessments that could have a material effect on the Financial Statements; and b. regulatory agencies concerning noncompliance with or potential deficiencies in, financial reporting requirements. . 14. We have disclosed to you the identity of the entity's related.parties and`all the related party relationships and transactions of which we are aware, Jncluding guaranfees,,non- monetary transactions and transactions for no consideration and participation in a defined benefit plan that shares risks between group entities. 4x` 15. We acknowledge our responsibility for the d6sign,,implemen'tation and maintenance of internal control to prevent and detect fraud. 16. We have communicated to you al def ciencies in internal control of which we are aware. We have disclosed to you an change in the'Ci 's internal control over financial reporting that occurred Y Y g �'�.f � k during the current year that has = materially affected, ,-or is reasonably likely to materially affect, the City's internal control over financiaFreporting.—' 17. We have disclosed to you all known, actual or possible litigation and claims, whether or not they have been discussed with our lawyers, whose effects should be considered when preparing the Financial Statement`s: A sappropriate, these items have been disclosed and accounted for in the Financial Statements in accordance with PSAS. 18. We have disclosed to you all liabilities, provisions, contingent liabilities and contingent assets, including those associated with guarantees, whether written or oral, and they are appropriately reflected in the Financial Statements. 19. We have disclosed to you, and the City has complied with all aspects of contractual agreements that could have a material effect on the Financial Statements in the event of non - compliance, including all covenants, conditions or other requirements of all outstanding debt. Deloitte LLP June 10, 2013 Page 4 Various matters 20. The following have been properly recorded and, when appropriate, adequately disclosed and presented in the Financial Statements: a. losses arising from sale and purchase commitments; b. agreements to buy back assets previously sold; c. provisions for future removal and site restoration costs; d. financial instruments with significant individual or group concentration of credit risk, and related maximum credit risk exposure; e. arrangements with financial institutions involving compensating balances or other arrangements involving restriction on cash balances and line -of- credit or similar arrangements; f. all impaired loans receivable. Independence matters For purposes of the following paragraph, "Deloitte" shall mean Deloitte LLP, Deloitte s.e.n.c.r.l. and Deloitte Touche Tohmatsu Limited, including related member firms and affiliates. 21. Prior to the City having any substantive employment conve ations with a former or current Deloitte engagement team member, the City has held discussions with Deloitte and btained approval from the Executive Committee of the Council. Work of specialists 22. We agree with the work of specialists in evaluating the valuation of post - employment benefits liability and WSIB benefits liability and have adequately considered the qualifications of the specialist in determining amounts and disclosures used in the Financial Statements and underlying accounting records. We did not give`any,Anor cause any, instructions to be given to specialists with respect to values or amounts derived in dn'attempt to bias their work, and we are not aware of any matters that have impacted the independence or objectivity of the specialists. Liabilities and contingencies'_ �., 23. We have disclosed to�you all - liabilities; provisions, contingent liabilities and contingent assets, including those ass,ociated with guarantees, whether written or oral, and they are appropriately reflected in the Financial Statements. Loans and receivables 24. The City is responsible for determining and maintaining the adequacy of the allowance for doubtful notes, loans, and accounts receivable, as well as estimates used to determine such amounts. Management believes the allowances are adequate to absorb currently estimated bad debts in the account balances. Employee future benefits 25.. Employee future benefit costs, assets, and obligations have been properly recorded and adequately disclosed in the Financial Statements including those arising under defined benefit plans as well as termination arrangements. We believe that the actuarial assumptions and methods used to measure defined benefit plan assets, liabilities and costs for financial accounting purposes are appropriate in the circumstances. Deloitte LLP June 10, 2013 Page 5 Government transfers 26. We have disclosed to you all correspondence relating to government transfers that the City has had with the funding body. 27. We have assessed the eligibility criteria and determined that the City is an eligible recipient for the government transfers received. 28. We have assessed the stipulations attached with the funding and have recognized the revenue in accordance with meeting the stipulations required. Environmental liabilities /contingencies 29. We have considered the effect of environmental matters on the City, and have disclosed to you all liabilities, provisions or contingencies arising from environmental "Matters. All liabilities, provisions, contingencies and commitments arising from environmental matters, and the effect of environmental matters on the carrying values of the relevant.assets are recognized, measured and disclosed, as appropriate, in the Financial Statements. Government Business Enterprises and Government "Partnerships 30. The City has appropriately classified its investments in Ve'ridian Corporation as a Government Business Enterprise. 31. With regard to the City's investment in Veridian Corporation, we have disclosed to you any events that have occurred and facts that have been discovered with respect to such investment that would affect the investment's value as reported.in the financial statements. Yours truly, The Corporation of the City of Pickering Stan Karwoski Director, Corporate Services & Treasurer Tony Prevedel Chief Administrative Officer Appendix A The Corporation of the City of Pickering Summary of uncorrected financial statement misstatements Year ended December 31, 2012 The following unadjusted items were identified: Surplus Expenses $57,977 $57,977 To record OMERS related expenses erroneously recorded to accounts payable in 2011, therefore impacting 2012 expenses. Assets under construction $142,436 Accounts payable $142;436 To record capital cost - sharing amounts related to the Duffin Heights agreement pertaining to 2012 that were not accrued in the financial statements as received after cut'-off'. is , Appendix 3 - Summary of communication requirements In our audit plan, we committed to communicate certain items to the Executive Committee on a regular basis, or as specified events occur. These items are summarized below. 1. Our responsibilities under Canadian GAAS. See engagement letter dated October 22, 2012. 2. Our audit strategy and scope. Audit plan communicated on November 12, 2012. 3. Fraud or possible fraud identified through the audit process. None noted. 4. Illegal or possible illegal acts. None noted. 5. Significant transactions inconsistent with the normal course of business, None noted. including related party transactions. 6. Procedures performed on other public documents with which we are None. associated and the results thereof. 7. Management judgment and accounting estimates. Please refer to page 5 of this report. 8. Financial statement adjustments. None. 9. Uncorrected misstatements and disclosure deficiencies determined by management to be immaterial. Please refer to page 3 of this report. 10. Significant accounting policies. Please refer to page 5 of this report. 11. Alternative treatments for accounting policies and practices that have been discussed with management during the current audit period. Please refer to page 5 of this report. 12. Our views about significant qualitative aspects of the City's accounting practices, including accounting policies, accounting estimates and financial statement disclosures. Please refer to page 5 of this report. 13. Disagreements with management. None. 14. Our views about significant matters that were the subject of consultation with other accountants. None noted. 15. Major issues discussed with management prior to our retention. None. 16. Significant difficulties, if any, encountered during the audit. None. 17. Significant deficiencies in internal control, if any, identified in the conduct of the audit of the financial statements. No significant deficiencies noted. 18. Material written communications between management and us. Engagement letter dated October 22, 2012 and management representation letter — Appendix 2 of this report. 19. All relationships between the City and us that, in our professional Independence letter - Appendix 1. judgment, may reasonably be thought to bear on independence. 20. A statement that in our judgment, the engagement team and others in Independence letter - Appendix 1. our firm and, when applicable, network firms have complied with relevant ethical requirements regarding independence. 21. Non - compliance with laws and regulations that come to the auditor's None noted. attention. 22. Limitations placed on our scope. None. 23. Written representations the auditor is requesting. Draft management's representations letter — Appendix 2. © Deloitte LLP and affiliated entities. 2012 Year -end communication — The Corporation of the City of Pickering Deloitte, one of Canada's leading professional services firms, provides audit, tax, consulting, and financial advisory services. Deloitte LLP, an Ontario limited liability partnership, is the Canadian member firm of Deloitte Touche Tohmatsu Limited. Deloitte operates in Quebec as Deloitte s.e.n.c.r.l., a Quebec limited liability partnership. 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 ATTACHMENT #PTO REPORT Consolidated financial statements of The Corporatio of,the City of Pickeri g December 31, 2012 D �t FOR DISCUSSION PURPOSES ONLY A-� 3-13 The Corporation of the City of Pickering December 31, 2012 Table of contents Independent Auditor's Report ................. ............................... Consolidated statement of financial position .......................... Consolidated statement of operations ..... ............................... Consolidated statement of change in net financial assets ..... Consolidated statement of cash flows ..... ............................... Notes to the consolidated financial statements ..................... 1� ........................................... ............................... -2 .......... ............................... .. ............................... 3 .............................................. ............................... 4 .............................................. ............................... 5 ................................ ....:........ ...... ............ 6 ............................................. ...........................7 -24 Q FOR DISCUSSION PURPOSES ONLY Independent Auditor's Report To the Members of Council, Inhabitants and Ratepayers of the Corporation of the City of Pickering Deloitte LLP 5140 Yonge reet Suite 1700 Toronto O WN 61-7 Tel: 16- 601 -6150 F 416- 601 -6151 Oww.deloitte.ca A� We have audited the accompanying consolidated financial st e %eltf the Co poration of the City of Pickering, which comprise the consolidated statement of fi ncon as t December 31, 2012, and the consolidated statements of operations, change in net f anciao cash flows for the year then ended, and a summary of significant accounting policie and other expla tory information. Management's Responsibility for the Consolida#d Financial Management is responsible for the preparation//an fair presenta 'on of these consolidated financial statements in accordan/hopinion anadian pub c se Tthrepar nt' g standards, and for such internal control as management determcessary to nable ion of consolidated financial statements that are free from material ent, wh her due r error. Auditor's Responsibil Our responsibility is to n opinion on the consolidated financial statements based on our audit. We conducted our audi with Ca dian generally accepted auditing standards. Those standards require that w a equirements and plan and perform the audit to obtain reasonable assurance athe co olidated financial statements are free from material misstatement. An audit involves rforming proce res to obtain audit evidence about the amounts and disclosures in the consolidated nancial state s. The procedures selected depend on the auditor's judgment, including the a sessment of risk of material misstatement of the consolidated financial statements, whether due o f r error. making those risk assessments, the auditor considers internal control relevant to e ty's ep ation and fair presentation of the consolidated financial statements in order to desig audit pro es hat are appropriate in the circumstances, but not for the purpose of expressing an opi ion on the effect' eness of the entity's internal control. An audit also includes evaluating the appr priateness of ac unting policies used and the reasonableness. of accounting estimates made by m agement, as we as evaluating the overall presentation of the consolidated financial statements. We believe that fhe audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit oni on. FOR DISCUSSION PURPOSES ONLY Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the position of the Corporation of the City of Pickering as at December 31, 2012 and the results o operations, changes in its net financial assets and its cash flows for the year then ended in ac o with Canadian public sector accounting standards. Chartered Professional Accountants, Chartered Accountants Licensed Public Accountants June 10, 2013 Q FOR DISCUSSION PURPOSES ONLY Page 2 The Corporation of the City of Pickering Consolidated statement of financial position as at December 31. 2012 2012 2011 Financial assets Cash and cash equivalents 45,111,221 47,408,45 Investments (Note 3) 36,956,1 33,659K2,�'30 4 Taxes receivable 17,047 59 17,249 Ac counts receivable 3,2 ,0 3, ,81 Investment in Veridian Corporation (Note 4(b)) 44 23 4 ,473,124 Promissory notes receivable Note 5 ,069,000 5,069,000 112.173.685 169.399.984 Liabilities Accounts payable and accrued liabilities 12,451,636 12,104,482 Other current liabilities 92,0 85,259 Deferred revenue (Note 6) 49,179 33 44,327,687 Long -term liabilities (Note 9) 17,7 ,020 19,131,687 Post - employment benefit liability (Note 8(a)) 3 52,600 3,218,600 WSIB benefit liabilities Note 8(b)) 907,759 826,859 84,058,796 79.694.574 Net financial assets / / 88,114,889 89,705,410 Non - financial assets Tangible capital assets (Note 10) 192,638,717 187,940,852 Prepaid expenses D 593,381 618,043 Inventory 239,019 229,258 193 471,117 188,788,153 Accumulated surplus Note 11 _ 281,586,006 278.493.563 Approved by Council 1� The accompanying notes are an integral part of these financial statement. Page 3 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Consolidated statement of operations as at December 31, 2012 2012 2011 Budget Note 17 Actual Actual Revenues Residential and farm taxation 35,160,035 35,56 ,752 34,1 217 Commercial and industrial taxation 9,858,242 91 8,425 9, 66,405 Taxation from other governments 7,993,393 ,0 , 4 ,236,418 User charges 8,594,104 8,976,90 10,658,960 Government grants and fees 10,171,999 2,137,551 2,487,283 Other contributions and donations 2,556,500 894,383 834,092 Development charges and developer contributions earned 1,393,75 1,309,5 864,631 Contributed tangible capital assets - 1,747 05 681,938 Investment income 2501052 3 ,542 452,893 Penalties and interests on taxes 2, 0 2, 40,853 2,678,684 Fines 882,0 945,702 919,576 Interest on promissory notes 426,850 1,426,852 1,426,852 Sale of Land - - Equity share of Veridian Corporation /7,000,000 earnings (Note 4 (c)) - 4,177,240 3,838,176 Other 161,0 297,209 509,215 Gain on dis osal of tan ible ca ital assets - - 373,707 87,94 ,874 78,425,672 77,598,047 Expenses (Note 19) General government 4,933,977 12,895,782 13,580,197 Protection to persons and property 21,359,079 20,810,361 19,208,938 Transportation services 11,500,725 11,240,547 11,293,153 Environmental services 3,838,585 3,627,664 3,486,332 Social and family services 590,499 664,397 574,734 Recreational and cultural se is 24,006,768 23,537,837 23,272,214 Planning and developmen 3,372,320 2,385,419 2,586,148 Loss on disposal of tan le ca ita sets - 171,222 - 79,601,953 75,333,229 74,001,716 Annual surplus 8,345,921 3,092,443 3,596,331 Accumulated sur s, be innin of ar 278,493 563 278,493,563 274,897,232 Accumulated s r lus end of ye 286.839.484 281.586.006 278.493.563 l The accompanying notes are an integral part of these financial statement. Page 4 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Consolidated statement of change in net financial assets as at December 319 2012 Transfer of assets under construction to tangible capital assets 891,52 2012 2011 - 100, 2 Budget 99;,478 3,099,245 Note 17 Actual Actual Use of inventory of supplies - 1,112,422 1,373,621 Acquisition of prepaid expenses Annual surplus 8,345,921 Use of prepaid expenses 3,596, 1 Acquisition of tangible capital assets (30,094,625) /092, ( (13,09 736) Amortization of tangible capital assets 9,734,503 3,255,225 9, 0,560 Loss (Gain) on disposal of tangible capital assets - Net financial assets. end of vear 373,707) Proceeds on dis osal of tan ible ca ital assets - 531,023 (12.014.2011 (2.597.9001 225.471 Transfer of assets under construction to tangible capital assets 891,52 3,077,113 Assets under construction expensed - 100, 2 22,132 99;,478 3,099,245 Acquisition of inventory of supplies (,122,183) (1,211,343) Use of inventory of supplies - 1,112,422 1,373,621 Acquisition of prepaid expenses - (993,225) (614,183) Use of prepaid expenses - 1,017,887 382,414 - 14,901 69,491 Change in net financial assets (12,014, 1) (1,590,521) 3,255,225 Net financial assets, be innin of ear 89,70 ,410 89 705,410 86,450,185 Net financial assets. end of vear 1.209 88.114.889 89.705.410 The accompanying notes are an integral part of these financial statement. Page 5 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Consolidated statement of cash flows 2012 E 2011 Operating transactions Annual surplus 3,092,44 3,596,33 Non cash items (12,666,332) (9,317,553) Amortization of tangible capital assets 9,50 ,116 9,57 ,560 Loss (Gain) on disposal of tangible capital assets 1 1, 2 ( 3,707) Equity share of Veridian Corporation (,17 (,838,176) Contributed tangible capital assets recorded in revenue 1,747,10 (681,938) Change in non -cash operating items: 1,927 000 2,484,600 Decrease (increase) in taxes receivable 180,190 (1,222,379) Decrease in accounts receivable 295,296 310,610 Increase (decrease) in accounts payable and accrued liabilities 347,15 (1,068,897) Increase (decrease) in other current liabilities 6, 9 (9,222) Increase in deferred revenue 4,85 ,046 3,897,692 Increase in post - employment benefit liability 4,000 335,700 Increase (decrease) in WSIB benefit liabilities 80,900 (846,039) (Increase) decrease in inventory (9,761) 162,278 Decrease increase in prepaid expenses 24,662 231,769 Cash an cash v nt consists of 13,053,712 9,601,044 Capital transactions Acquisition of tangible capital assets (net of transfers and contributions) (12,666,332) (9,317,553) Proceeds on disposal of tangible ca ital as ets D 41 234 531,023 12 625,098 8,786,530 Investing transactions (Increase) decrease in investment (3,296,182) 287,195 Dividends received from Veridia Cor oration 1,927 000 2,484,600 1369,182 2,771,795 O Financing transactions Proceeds from debentur s issued 7/ 2,332,000 4,707,000 Principal repayment o debentures (3,688,667) 2,158,055 1356,667 2,548,945 (Decrease) incre a in cash and cas equivalents (2,297,235) 6,135,254 Cash and cash uivalents, be in n of ear 47 408,456 41,273,202 Cash and ca a 'valents a of ear 45,111,221 47,408,456 Cash an cash v nt consists of Cash 5,260,557 23,906,305 Ca equivalents 39,850,664 23,502,151 45,111,221 47,408,456 The accompanying notes are an integral part of these financial statement. Page 6 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2012 Significant accounting policies The consolidated financial statements ( "the financial statements ") of The Corporato of the City of Pickering (the "City ") are the representations of management prepared in accord ce with accounti standards established by the Public Sector Accounting Board ( "PSAB ") of the 9bnadian Institute Chartered Accountants. Significant accounting policies adopted by the City a a follows: (a) Reporting entity (i) Consolidated statements N / The consolidated financial statements reflect the assets, li ilities, revenues Od expenses of the reporting entity. The reporting entity is comprised oft a activities of all 96mmittees of Council and the City of Pickering Public Library Board #hich is controlled y the City. All material inter -fund transactions and balances are/eliminated on consVidation. (ii) Investment in Veridian Corporation The City's investment in Veridian Corporation 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 odifed equity basis, Veridian Corporation's accounting policies are no adjusted to confo 1 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 rporation 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 (the "Region ") are not reflected in these consolidated financi statements. (iv) Trust funds Trust funds pan t� ted oper tions administered by the City are not consolidated, but are reported se rat us Funds Statement of Financial Activities and Statement of Financial P sition. (b) Basis of 716basis unting / (i) Accr of accou ing Relenue and expen s are reported on the .accrual basis of accounting. The accrual basis of ccounting recogni es revenues as they are earned and measurable; expenses are recognized a are incur d and measurable as a result of the receipt of goods and services and the atl of a le al obligation to pay. (ii) Ca c h equivalents Cash an cash equivalents consist of cash on hand, demand deposits and short-term, highly liquid i estments that are readily convertible to known amounts of cash. Cash equivalents have short -term maturity of three months or less from the date of acquisition. (iii) In estments Long-term investments are recorded at cost and any loss in value which is considered other than temporary is recorded as appropriate. Any premium or discount at purchase of an investment is amortized over the life of the investment. Page 7 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2012 1. Significant accounting policies (continued) (b) Basis of accounting (continued) (iv) Tangible capital assets ( "TCA ") Tangible capital assets are recorded at cost less accumulated amo za ' n. Cost inclu es all costs directly related to acquisition or construction of the tangible ap' sset inclu ' g transportation costs, installation costs, design and engineering f es, ga s an site preparation costs. Amortization is recorded on a straight -line sis over the tt�'rated life of the tangible capital asset commencing once the asset is availa a for use as foli Buildings 15 to 45 yea Machinery and equipment 2 to 25 ye s Vehicles 5 to 15 y ars Infrastructure -Roads y ars Infrastructure - Storm sewers ea s Infrastructure - Sidewalks Information technology hardware ars /4to Infrastructure - Parks years Library collection materials ars Furniture and fixtures vears/ One -half of the annual amortization i charged in they r of acquisition and in the year of disposal. Assets under constructi0 are not amortize until the asset is available for productive use. Land is not amortized. Tangible capital assets receiv d as c n are recorded at their fair value at the date contributed, and that amou is also rec ed s revenue. (v) Accounting for Property ax Capping Provi ions resulting from the Ontario Fair Assessment System The net impact in pr perty taxes as a r suit of the application of the capping provisions does not affect the Con olidated Stateme of Operations as the full amounts of the property taxes were levied. Ho ev , he capping djustments are reported on the consolidated Statement of Financial Posi "on a ceivabl payable from /to the Region. (vi) Deferred r enue Deferre revenues repres t user charges and fees which have been collected but for which the rel ted services hav et to be performed. These amounts will be recognized as revenues in th fiscal year the s ices are performed. In addition, any contributions received with e rnal restrictions a deferred until the related expenditures are made. (vii) ost employment enefits e p ent va a of the cost of providing employees with future benefit programs is ni d a employees earn these entitlements through service. Actuarial gains and losses are i d over the average remaining service period ( "ARSP "). The actuary determined ARSP to e 14 years. (viii) Invent ry Inv ntory is valued at the lower of cost and replacement cost. Cost is determined on a w ighted- average basis. Page 8 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2012 1. Significant accounting policies (continued) (b) Basis of accounting (continued) (ix) Government transfers Government transfers are recognized in the financial statements in epenod in whic he events giving rise to the transfer occur, eligibility criteria and /or sti ul s are met, nd reasonable estimates of the amount can be made. (x) Intangible assets Intangible assets are not recognized as assets in the fina ial statements. (xi) Use of estimates The preparation of financial statements in conformit with Canadian p lic sector accounting standards requires management to make estimat a assumption that affect the reported amounts in the financial statements and a om ny' es. Acc unts involving significant estimates include allowance for doubtful acc o ts, ce accru liabilities, employee future benefits liabilities and estimates relating tot a useful lives t gible capital assets. Actual results could differ 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 folly Taxation Payments in lieu of taxes 3. Investments 2012 Cost Market value Reaion School board Lon -ter investments 36,956,156 37,660,143 33 659,974 34,334,282 Lonoer Anves ents re comprised of deposit notes and bonds. Page 9 FOR DISCUSSION PURPOSES ONLY 89,946,477 41,533,945 6,057,029 446,744 96,003,506 41,980,689 2011 Cost Market value Lon -ter investments 36,956,156 37,660,143 33 659,974 34,334,282 Lonoer Anves ents re comprised of deposit notes and bonds. Page 9 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 315 2012 4. Investment in Veridian Corporation (a) Veridian Corporation is owned by the City of Pickering, Town of Ajax, Mun/Veridian of Clarington d the City of Belleville. The City has a 41 per cent interest in Veridian Corpoeridian Corporation, as a government business enterprise, is accounted for on th d equity b is in these financial statements. Veridian Corporation serves as the electrical in utility f r a number of communities including the four noted above and conducts n- d utilit service ventures through its subsidiaries. The following table provides condensed supplementary consolid ed finanr tion for the corporation and its subsidiaries for the year ended December 3 The am disclosed in thousands of dollars: 2011 (0 (000's $ $ Financial position Assets Current 86,594 79,455 Capital and intangibles 191,528 183,895 Other 21,919 19,296 Total assets 300,041 282,646 Liabilities D Current 49,230 69,996 Long -term debt 115,553 86,649 Other 26,202 22,433 Total liabilities 190,985 179,078 Shareholders' equit Share capital O 67,260 67,260 Contributed pital 25 25 Retained a rnin s 41,771 36,283 Total equity" 109,056 103,568 Total lia ' ities and equity 300,041 282,646 Fin cial activities: 295,957 286,271 O a 117 4,313 E tarninr 285,618 285,142 E discontinued operations 268 3,919 Net earnin for the year 10,188 9,361 Page 10 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2012 4. Investment in Veridian Corporation (continued) (b) City of Pickering's investment represented by: (c) Equity in Veridian Corporation Balance, beginning of year Equity share of net earnings for Dividend received from Veridian 2012 70,585,144 4,177,240 2011 69,231,568 3,838,176 Balance, end of year (Note 11 72,835,384 70,585,144 (d) Contingencies and guarardees of Veridian Corporation (the "Corporation') as disclosed in their financial statements are /as follows: / (i) Insurance clai The Corpora 'on ' a ber o the Municipal Electric Association Reciprocal Insurance Exchange MEA w i h as created on January 1, 1987. A reciprocal insurance exchang may be de %d a group of persons formed for the purpose of exchanging recipro al contracts of in mnity or inter - insurance with each other. MEARIE provides general liabili insurance to me ber electric utilities. Insurance premiums harged to each member utility consist of a levy per $1,000 of service venue subject toO credit or surcharge based on each electric utility's claims experience. Insurance limits pf up to $30,000,000 per occurrence are covered by MEARIE. on tual o igation - Hydro One Networks Inc. ( "HONI ") T o tion's subsidiary, Veridian Connections Inc. ( "VCI "), is party to a connectior and cost co ery agreement with HONI related to the construction by HONI of a transformer station esignated to meet VCI's anticipated electricity load growth. Construction of the project was mpleted during 2007 and VCI connected to the transformer station during 2008. T the extent that the cost of the project is not recoverable from future transformation onnection revenues, VCI is obliged to pay a capital contribution equal to the difference between these revenues and the construction costs allocated to VCI. The construction costs allocated to VCI for the project are $9,975,000. The Corporation has recorded a liability and a corresponding intangible asset for $1,212,000 as at December 31, 2012 (2011 - $1,212,000), based on management's best estimate of the future transformation connection revenue shortfall. HONI shall perform a true -up based on actual load at the end of the fifth, tenth and fifteenth anniversaries of the in- service date. Page 11 FOR DISCUSSION PURPOSES ONLY 7012 2,011 Promissory notes receivable Note 5) 5,0 ,0 ,069,000 Investments in Veridian Corporation Initial investment in shares of the Corporation ZO 30,496,196 30,496,196 Accumulated earnings 31,487,3 27,310,109 Accumulated dividends received 8 ,369 02) (16,442,002) Increase in value of investments 1,1 ,821 1,108,821 Total investment 44 23,364 42,473,124 (c) Equity in Veridian Corporation Balance, beginning of year Equity share of net earnings for Dividend received from Veridian 2012 70,585,144 4,177,240 2011 69,231,568 3,838,176 Balance, end of year (Note 11 72,835,384 70,585,144 (d) Contingencies and guarardees of Veridian Corporation (the "Corporation') as disclosed in their financial statements are /as follows: / (i) Insurance clai The Corpora 'on ' a ber o the Municipal Electric Association Reciprocal Insurance Exchange MEA w i h as created on January 1, 1987. A reciprocal insurance exchang may be de %d a group of persons formed for the purpose of exchanging recipro al contracts of in mnity or inter - insurance with each other. MEARIE provides general liabili insurance to me ber electric utilities. Insurance premiums harged to each member utility consist of a levy per $1,000 of service venue subject toO credit or surcharge based on each electric utility's claims experience. Insurance limits pf up to $30,000,000 per occurrence are covered by MEARIE. on tual o igation - Hydro One Networks Inc. ( "HONI ") T o tion's subsidiary, Veridian Connections Inc. ( "VCI "), is party to a connectior and cost co ery agreement with HONI related to the construction by HONI of a transformer station esignated to meet VCI's anticipated electricity load growth. Construction of the project was mpleted during 2007 and VCI connected to the transformer station during 2008. T the extent that the cost of the project is not recoverable from future transformation onnection revenues, VCI is obliged to pay a capital contribution equal to the difference between these revenues and the construction costs allocated to VCI. The construction costs allocated to VCI for the project are $9,975,000. The Corporation has recorded a liability and a corresponding intangible asset for $1,212,000 as at December 31, 2012 (2011 - $1,212,000), based on management's best estimate of the future transformation connection revenue shortfall. HONI shall perform a true -up based on actual load at the end of the fifth, tenth and fifteenth anniversaries of the in- service date. Page 11 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2012 4. Investment in Veridian Corporation (continued) (d) (continued) (iii) Environmental liability In 2008, Environment Canada issued its final regulations governing a management PCBs. Costs relating to future expenditures associated with the r m9ol and destru ion of PCB - contaminated transformers and remediation of chemically on ted land has been estimated in the amount of $206,000, which has been record as a liabi t D cember 31, 2012. Because such expenditures are expected to be reco rable in future ra s, the Corporation has recorded an equivalent amount as a reg tory asset. (e) Lease commitments Future minimum lease payment obligations under operati g leases are as f ows: Promissory ote receivable fr Veridian Connections Inc. maturi Novem/dIlrondg-term and bearing interest at 7.62 ° / until April hen 5.57% from Ma 1, D1, 2014 and then the Ontario ergy rd debt rate for each successive thereafter 17,974,000 17,974,000 25.069.000 25.069.000 Interest reve a earned from these notes receivable totaled $1,426,852 (2011 - $1,426,852). The promissory otes from Veridian Corporation are convertible into common shares at the rate of one common hare for every $1,000 of principal amount, at the option of the City. Page 12 FOR DISCUSSION PURPOSES ONLY (000's) 2013 32 2014 32 2015 32 2016 24 2017 2 Thereafter 70 192 5. Promissory notes receivable 2012 2011 Promissory note receiv le Veridian orporation maturing December 1, 1 ear" g interest at the greater of 6% r the O o Ene y Board deemed long to debt rate on n nnual basis to maturity (6% ective Novembe 1, 2012) 7,095,000 7,095,000 Promissory ote receivable fr Veridian Connections Inc. maturi Novem/dIlrondg-term and bearing interest at 7.62 ° / until April hen 5.57% from Ma 1, D1, 2014 and then the Ontario ergy rd debt rate for each successive thereafter 17,974,000 17,974,000 25.069.000 25.069.000 Interest reve a earned from these notes receivable totaled $1,426,852 (2011 - $1,426,852). The promissory otes from Veridian Corporation are convertible into common shares at the rate of one common hare for every $1,000 of principal amount, at the option of the City. Page 12 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2012 6. Deferred revenue Page 13 FOR DISCUSSION PURPOSES ONLY 2P1 2 20 $ $ Obligatory Reserve Funds 572,089 92,868 Development charges 7, 2 4,107,294 Parkland 1,433,50 1,818,118 Federal gas tax 6,017,337 4,977,097 Third art /Develo er.s Contributions Reserve Fund . 2,670,168 2,233,978 47,607,0 4 43,136,487 Other unearned revenues 1,5 2,709 1,191,200 49 79,733 44,327,687 Continuity of deferred revenue is as follows: 2012 2011 Balance, beginning of year 44,327,687 40,429,995 Restricted funds received D 6,668,447 7,556,772 General funds received 767,617 74,724 Interest earned 928,717 795,497 8,364,781 8,426,993 Earned revenue transferred /o operations 3,512,735 4,529,301 Balance, end of year 49,179,733 44,327,687 O 7. InterfuX1O As a ming various capit acquisitions, funds are borrowed by the Capital Fund from Develorges deferred re enue (obligatory reserve funds). These funds are secured by promiswith interest r es ranging from 1.97% to 4.7% and various payment terms ranging from 1 years. The fi ancing arrangements and ultimate repayment are approved by Council through nt budget p cess. Although these notes have payment terms as noted above, they are repayaand. Th ollowing is a summary of the related loans: Page 13 FOR DISCUSSION PURPOSES ONLY 2012 2011 $ $ Roads ts 572,089 92,868 /stre Comm, libraries and pa rks 1,885,809 235,770 Protec 639,809 445,579 Enviroces - 11,962 Munici 15,838 20,669 3,113,545 806,848 Page 13 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2012 8. Post - employment benefit liability (a) Post - employment benefit liability The City makes available to qualifying employees who retire before /�near the opport ity to continue their coverage for benefits such as post- retirement extere benefit . Coverage ceases at the age of 65. The City also provides full time part -ti employees a sick time entitlement and any unused entitlement is ac toy ar. This accumulated entitlement is not vested and is forfeited at the time of rm ation. The most recent actuarial valuation of the post - employment benefits s performed at J uary 1, 2011. Information about the City's benefits liability is as follows: 2 2 2011 Accrued benefits liability, beginning of year ,218,600 2,882,900 Current service costs 341,000 257,100 Interest on accrued benefits 236,100 274,700 Amortization of actuarial losses 219,900 145,900 Benefits aid during the year (363,000 342,000) Accrued benefits liability, end of year 3,652,600 3,218,600 Accrued benefit obligation 6,350,100 6,136,000 Unamortized actuarial losses 2,697,500 2,917,400) Accrued benefits liability, end of ear 3,652,600 3,218,600 The main actuarial assumpt' ns employed in t actuarial valuations are as follows: (i) Discount rate The present val as at December 1, 2012 of the future benefits was determined using a discount rate o 3.� (2011 — 3. 5 %). (ii) Dental cost The den I cost tren e s 4.0% increase per annum. (iii) Healt costs He th costs were as med to increase at 7.8% in 2012 and decrease by 0.2% increments r year to an ultim a rate of 5.0% per year in 2026 and thereafter. llz� FOR DISCUSSION PURPOSES ONLY Page 14 The Corporation of the City of Pickering Notes to the consolidated financial statements December 315 2012 8. Post - employment benefit liability (continued) (b) Workplace Safety and Insurance Board (WSIB) benefit liabili/associate Effective January 1, 2001, the City became a Schedule II em Workplace Saf & Insurance Act and follows a policy of self insurance for the riith paying bene is for workplace injuries for all its employees. The WSIB administeted to work ace injuries and is reimbursed by the City. The most recent actuaa WSIB nefits was performed at December 31, 2011. Information about the City's WSIB liability is as follows: 01 2011 Accrued WSIB liability, beginning of year 59 1,672,898 Current service cost 00 /(77,400) 118,460 Interest on accrued benefits 00 105,300 Amortization of estimation adjustment gain - (996,074) Benefits aid during the year 73,725 Accrued WSIB liabilitv. end of vear 907,759 826,859 The main actuarial assumptions employ d in the actuarial luations are as follows: (i) Discount rate The present value as at Dec ber of a future benefits was determined using a discount rate of 3.75% (20 —3.75%. (ii) Inflation rate The rate of inflation s assumed to (iii) WSIB Administrat' n Rate Liabilities for IB nefits have e charged by I . 5% per annum. increased 25% to reflect the administration rate A WSIB serve was tablished in 2001. The Reserve Fund balance at December 31, 2012 w $2,532,549 1 - $2,374,028). In addition, the City purchased two insurance policie that protect the ty against significant claims to the City. The occupational accident insu nce pays loss cl 'ms up to $500,000 per work related accident. The excess workers co pensation indem ity insurance has a $500,000 deductible and will pay for claims up to d including $15, 0,000 per work related accident. 9. Long -kr itie (a) f s to g -term liabilities is made up of the following: 2012 2011 The m/uhicipality is responsible for the payment of pri cipal and interest charges on long -term H bilities issued by the Regional Municipality of Durham on the City's behalf. At the end of the year, the outstanding principal amount of this liability is 17,775,020 19,131,687 Page 15 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2012 9. Long -term liabilities (continued) (b) The above long -term liabilities have maturity dates of July 12, 2016, 2021 and 022, November 2018, July 15, 2014, December 23, 2014, October 15, 2015 and 2020 and ptember 29, 201 and 2021 with various interest rates ranging from 1.10% to 5.6 %. Principal rep yments are sum rized as follows: 14� 2013 2,598,256 2014 2,491,596 2015 2,085,073 2016 2,047,168 2017 2,078,852 Thereafter 6,474, 075 17,775,020 (c) Long -term liabilities include principal sums of $ 2,000 which may/be refinanced by the issuance of debentures over a further period not to excee 10 years, and $1, 72,000 which maybe refinanced by the issuance of debentures over a furth period not to exc ed 5 years. (d) The above long -term liabilities have bee approved by Co cil by -law. The annual principal and interest payments required to service t ese liabilities are ithin the annual debt repayment limit prescribed by the Ministry of Muni ci I s and Hou ng. (e) Interest expense recorded in the ar rela ' o e e long -term liabilities is $744,814 (2011- $734,143). 10. Tangible capital assets Information relating to tang/1a pital assets is follows: (i) Contributed tangible ssets The City records t gi c ital ass s contributed by an external party at fair value on the date contributed. /Tpi7 ale r ads , storm sewers and sidewalks installed by a developer as part of a subon or de pm nt agreement. Contributions of tangible capital assets in 2012 amounted to 47,105 (20 1 $681,938). (ii) Tangible gapital assets recognized at nominal value Land u der roads are as ned a nominal value of one Canadian dollar because this land only supp rts or is intended support road infrastructure and the majority of land acquired supporting road allowances was zicauired at no cost. (iii) WWbr�kof (iv) treasures The City a a useum which holds various historical treasures and historical buildings pertaining to the herltag and history of the City of Pickering. These items are not recognized as tangible capital asse in the financial statements because a reasonable estimate of the future benefits associate with such property cannot be made. Any acquisition or betterment of these assets is recogni d as an expense in the financial statements. T net book value of tangible capital assets not being amortized because they are under onstruction is $4,242,525 (2011 - $2,327,618). During the year, there were no write -downs of assets (2011 - $Nil) and no interest was capitalized during the year (2011 - $Nil). FOR DISCUSSION PURPOSES ONLY Page 16 O C = 0 N O R C C y O = E a y 'm 4 o o u R N N N 41 C N f6 N 11 C N 3 a 0) N (1 = U U O V c U O a N ffI O 'O Q N 0 a @ U � a Q aN) Q a r o 'o U m Q J co Q m Q J co z '01 f6 CL } J z w Q a a z O U) U O LL N N N! N N O O C Cl) a a O O m m m h h N N O C Cl) a a) 0 00 O O C C 0 000 e e09 L L� N f fA t to M M m m f fD M M m O O m m t0 A 0 0 0 n M f n o o a) D Do C Cl) a1 b b N N N N m 0 m m r a a) N N Cl) M M C f ffi m m f f0 m m f fn ' ' ' ' f fn 0 0 m (O M m � � N N N N c_ U C N O CA 2 2 N O a an d d N N N M M m m m m N N N O Q U Ou N ( (A m m m m L Lo m m m m m m N N u m m r r- m m m m v v 7 X O O O O O O m m V V M M m m .� m m � �2 N N m m ( (Or) _ LL m m m M M V V @ a a�i O O N N h h M M f fl7 N m m O O U N N M M O O m m N N M M M J N 7 L Lo L Lo f� M M O O \\2- N p O O m m M M m m N N N� N N m m N u u! O O L � m m m m N N M V V 1 12 m m N N O O m m m f f` V V O O m m m m M M m m R R O O m m O O m m m m m m N m M M E c° r r- m m m m r rn m m m n n U U L N N M M m m f fn � � m m n n o m m O O Y m m m m m m m L Lo �0 m m f f` N N M M m m m m N M M O O U N N N f f` M d M V M O 7 7 n t4 v _ M v r r r r m m N y f fl V V m m m m M M O M 0 V Lo u = 3 _ M 0 V O O U m m ui h� N N V I� n n O fn m m _ O N N _ �'N y y N N t to f _ m f- 7 7 (0 O m m m m V V V V M M C � •C . . ' N f fA m m L Lo M M m m m m m m m V V (U f N O N m m t ti o o M f V fah N f` r OG) N m r r) V f� V co = N M � � � � O O O f f� O O w � � M M � C C w ( (A m m m m N N m m N N M M m m m m m m O O L A�CD4�:: Lo 0 04 c co M m V V c cm� m V clj C m E V C) M M m m m 0 E m CIS O _ O O O m m m m - /�� L L J O O f f- M M M M N N m m M m m to N m m m m m m N N c m m m m m M co co L Lo m _. C C m ff) m oo m f f� O = _ a a m m o o f N V V o m o o m 0 0 M M —J m m m m m m m m m m N N m m 0 m m m m o off") ! M c M O ( (� ) ) ' 'O f fA m m L L V V O O C m m m m N N M M M M 6 N N m m M M O O N N N N 4-0 N m m m m m c N m co N O o o N CL o_ cc o y T N y d W M M E E2 N N m m w f V- O o O f O w O) N N f f0 V o O N f0 '01 f6 CL } J z w Q a a z O U) U O LL '0 m 01 (a a } J Z O U) W U) Q a a Z O U) U) U Q r EA N m m N 10 O LO O N O m m M r" m m co m l0 m m 1() m O 10 m N m m m m r- O N CO O r� m O tf1 N m O ti 1(J O O r` m C m 10 m ti m m m Cl) � m m M r m C (H M m m m O O O _ � N m (p = U 3 N V m r` n N N Cl) m C m M V O M Cl) N N rn U Q prf w (n Cl) ' V m m O O T O N O M O N (( V M m 7 X Cl) Cl) O N N 10 m O C .0 04 cli I C 7 Cl) 7 LL Z, N 6- m N m m m m m m O m _ N 'U 111 O LO 1n N V m r m O- r N N M N m a N O O m r- m m m Mi J p m m '7 m V r n Cl) 1(1 O m m V 10 m - (� m V - V N EA m m m n CO N N 1n O Y N V M r- m ': 1n ' N O m m N m 1n m a m O r- N m Cl) m O U O r m O V V n m V 10 to C O V V 0 m - m O m m C C a) (e m co N m n 111 r O � (31 m m L O M m m N CO EE; E C m 111 N m Cl) O U m N r N m 111 C w � r ^ N Y O N m co m m m 5 3 m m V m m m m m C m m 1n m m m m 3 N 2 'O V m Cl) N N M M t d M v (n Cl) M n N m m C to En M V N m O r.- a) m N N � Cl) 3 00 n v_ m U a) N r m 1D m N Cl) O N E Cl! co ck m 1n m 1l1 1p O m m V V Cl) C CO J •� ' N (» m u7 n m m O m m h °7 m m v 10 m v 1n rl� r- 3 O U m N V f` O N M m r-- j11 m N N m O M 111 (o r_ N N m m Cl) m to v C� �APEA _ WC/] w EA m CO N m N N_ N �1 N m O m 1[) m Cl) I- m 1� Ut N O W r- m O m M � M v m O m V _ of C EA m m O N N f- 4] f� •� �.� �` a) f� M rn O 1n N M m V] C m O Cl) M O m O m M M M N O m Vm �H L 3 M � O to m 1n N f� (d N a) r- m V' 16 N g N Cl) N �m to i��..�l cd C m L O M t` O C (o Cl! D�1 C A 3 a m r r` m m m i 3 r- m m N m V 1n m rl- 111 m (l1 r� V m m ry m N V m M -7 -' O`y--1 - m m M Cl) Cl) 1A 1l W V -O (ri M m m m C 0) m m m O L J O O V (D m m m m m m •^j d ^l N V m m t�t N O o C- U ca a N d N M r d o o m R Od �1 lT m m N O O C E O C C T T E m to T C) ca cc w lug m o_ c m (n a `m C (6 m a) R a N y a a1 Y d o h °z t: E a 'a � - a E (°1i o U o (mi o° �I E H r U o0 Q J m Q a0 Q J ca Z '0 m 01 (a a } J Z O U) W U) Q a a Z O U) U) U Q The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2012 11. Accumulated surplus The City's accumulated surplus is comprised of the following: 12. Pension abreements The Cit makes contributions to the Ontario Municipal Employees Retirement Fund (OMERS), which is a mu - employer plan, on behalf of the members of its staff. The plan is a defined benefit plan which spe ifies the amount of the retirement benefit to be received by the employees based on the length of spervice and rates of pay. ntributions on account of current service for 2012 were $3,122,703 (2011 - $2,561,177). Page 19 FOR DISCUSSION PURPOSES ONLY 012 7011 Capital fund 8,6 0,062,439 Operating fund 125,170 125,092 Equity in Veridian Corporation 72,835,384 70,585,144 Tangible capital assets 192,638,717 187,940,852 Post employment benefits liability (3,473,6 ) (3,039,600) Internal loans (3,113 45) (806,848) Net long -term liabilities (17,77 ,020) (19,131,687) WSIB benefit liabilities 07,759) (826,859) Reserves set aside for special purposes by Council Working capital 400,000 400,000 Self insurance 962,707 962,707 Replacement of capital equipment 1,426,012 852,792 Contingencies 1,514,339 1,447,278 Rate stabilization 15,793,551 16,310,644 City's share for development charge 3,165,288 4,370,874 Continuing studies D 720,472 582,055 Vehicle replacement 197,215 93,722 Easement settlement 17,595 17,595 Eastern branch 180,000 155,000 Move Ontario 40,883 97,483 Capital asset managemen - 240,000 Economic stabilization 830,000 830,000 Land Purchase 99,403 194,403 Seaton Developme R ew 1,905,948 2,133,752 Financial System, 314,647 175,000 Senior Centre 75,000 - Accessibility I itiatives 13,713 - Reserve fund set aside for spe al purpose by Council Recreati programs and fa ilities 151,468 148,547 Acquis' on of tangible ca ' al assets 1,477,697 1,451,430 Squ h c urts 2,088 - W B 2,532,549 2,374,028 imal ter 228,882 196,370 Men's slow h 141,652 138,985 Operations Ce re 419,558 412,365 281,586,006 278,493,563 12. Pension abreements The Cit makes contributions to the Ontario Municipal Employees Retirement Fund (OMERS), which is a mu - employer plan, on behalf of the members of its staff. The plan is a defined benefit plan which spe ifies the amount of the retirement benefit to be received by the employees based on the length of spervice and rates of pay. ntributions on account of current service for 2012 were $3,122,703 (2011 - $2,561,177). Page 19 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2012 13. Trust Funds Trust funds administered by the City amounting to $325,969 (2011 - $318,169) hay not been inclu in the Consolidated Statement of Financial Position nor have their operations be included in the Consolidated Statement of Operations. 14. Related party transactions Veridian Corporation The City of Pickering receives electricity and services from Veridian corporation (Note Ax, a corporation in which the City is a principal shareholder. / 7 Transactions Revenues Interest on promissory notes Property taxes levied Expenses Electrical energy and services Balances Accounts payable and accrued liabilities Promissory notes receivable D 15. Guarantees In the normal course of business, a City enters int agreements primary guarantees are as follo s: (i) The City has provided i emnities under I se agreements for the use of various facilities or land. Under the terms of th a agreements th City agrees to indemnify the counterparties for various items including, but of i * ed to, all li ilities, loss, suits, and damages arising during, on or after the term of the ag a nt. maxi um amount of any potential future payment cannot be reasonably esti al 1. 2 2011 /1,426,852 1,426,852 48,329 46,785 1,986,034 1,788,931 369,049 371,799 25,069,000 25,069,000 which contain guarantees. The City's (ii) The City ind nifies all emp1by es and elected officials including Library employees and board members f various items in ding, but not limited to, all costs to settle suits or actions due to associate with the City, s ject to certain restrictions. The City has purchased liability insurance to mite to the cost of any otential future suits or actions. The term of the indemnification is not expli ' ly defined, but is ' ited to the period over which the indemnified party served as an em oyee or elected o icial of the City. The maximum amount of any potential future payment c n�eeasonab estimated. /aximum ' ha nt ed into agreements that may include indemnitie s in favour of third parties, such urch a sale agreements, confidentiality agreements, engagement letters with advisors consulta s, outsourcing agreements, leasing contracts, information technology agreements service greements. These indemnification agreements may require the City to compensate nterp ies for losses incurred by the counterparties as a result of breaches in representation re lations or as a result of litigation claims or statutory sanctions that may be suffered by the nt rparty as a consequence of the transaction. The terms of these indemnities are not explicitly ed and the maximum amount of any potential reimbursement cannot be reasonably estimated. re of these indemnification agreements prevents the City from making a reasonable estimate of mum exposure due to the difficulties in assessing the amount of liability which stems from the tability of future events and the unlimited coverage offered to counterparties. Historically, the not made any significant payments under such or similar indemnification agreements and therefore no amount has been accrued in the balance sheet with respect to these agreements. Page 20 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2012 16. Contingent liabilities Litigation The City has been named as a defendant in certain legal actions in which dam 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 2012 Budget adopted by Council on February 21, 2012 was not repared on a bas' consistent with that used to report actual results. The budget was prepared on a m dified accrual ba ' while Public Sector Accounting Standards require a full accrual basis of ac co 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 pp February 21, 2012 with adjustments as follows: 2012 2012 Council Non TCA Budget approv�d expenditure presented in bu et from cap i I Amortization statements Revenue 13,9 ,850 405,000 Taxation 3,01 - - 53,011,670 Capital ,3 - - 20,305,651 Other - - 14,630,553 - 87,947,874 - - 87,947,874 Expenditures General go/seices 13,9 ,850 405,000 547,127 14,933,977 Protection d erty 20 02,949 - 756,130 21,359,079 Transportaes ,676,807 - 3,823,918 11,500,725 Environmees 1,695,656 - 2,142,929 3,838,585 Social and vices 590499 - - 590,499 Recreationtural servic 20,632,369 910,000 2,464,399 24,006,768 Plannin a ment 3,372,320 - 3,372,320 68,552,450 1,315,000 9,734,503 79,601 953 Annual urplus (deficit) 19,395,424 (1,315,000) (9,734,503) 8,345,921 Capit a res (31,409,625) 1,315,000 - (30,094,625) Tra sfer m r ery and eserve fu 5,706,931 ividend from Ver ian Corporation 1,927,000 Principal repay ent of debt (3,214,730) Debt proceed 7,470,000 fund surplus Page 21 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2012 18. Segmented information The City of Pickering is a diversified municipal government that pro/e/ a of services to residents. Distinguishable functional segments have been separate segmented information. The nature of the segments and the activities they encllows: General Government This item relates to revenues and expenses of the City itself and caribute 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 sidewalk repairs, street lighting, maintenance of the sto Social and Family Services Social services for assistance or services for sen/rs Recreation and Culture Services Recreation and cultural services include re eatic parks, operation of the City's museum an libran Planning and Development 7 Planning and development provide a number of property development plans. Segmented information has b n provided in the n programs services. i including snow removal, environmental services. intenance and rental of facilities and including municipal planning and review of all lowing pages. FOR DISCUSSION PURPOSES ONLY Page 22 NI O N Q � CIS 0 �V U .a CD 40 c Q 0 -z� o N •O '� .0 En � w O O N c U � � O 0-0 as r 0) R O to C O I ui rWt:PWL0000IN O O r W O 17 O 1- O O w O r N W W ti w w M ti ti O O Cl) ti O O d' ti 00 N V- M r M ti r 00 V N O w r r MIco R tf! 00 O B I ' O I CD 0) ti t- r N t0 O tD O � M N N E N 00 t0 N ti N N L O ti d' M M h 0 t7 M N O r r Q1 0) O CL C r O t0 M QI ` V tp U N t- M O C M co -0 0) I- O O tp t) M lqt M CD O R w � N o V 3 N O to .a �. N ' �M O Y N R 0) E O 00 f` M CL O L C) /> r ti 00 O N O N t0 ti 00 ti O M N O w N h [t 0) to °- o .. 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Statements of financial activities and fund balances Statements of financial position ............................... Notes to the financial statements ............................. 11:: ............. 7k ... 7" FOR DISCUSSION PURPOSES ONLY ../ ...... 1 -2 3 4 5 Independent Auditor's Report To the Members of Council, Inhabitants and Ratepayers of The Corporation of the City of Pickering Deloitte LLP 5140 Yonge treet Suite 1700 Toronto 91 M2N 61_7 Canad Tel/416-601-6150 F :416 -601 -6151 .deloitte.ca A� We have audited the accompanying financial statements of e ration the City of Pickering Trust Funds, which comprise the statements of financial positio as at Dec er, 1, 2012, December 31, 2011 and January 1, 2011, the statements of financial activiti sand fund balan for the years ended December 31, 2012 and December 31, 2011, and a s mary of signifi nt accounting policies and other explanatory information. Management's Responsibility for the Management is responsible for the pre accordance with Canadian accounting control as management determines is t free from material misstatement, wht Auditor's Responsibility Our responsibility is to conducted our audits in Those standards require obtain reasonable assrfr, An audi/se p financiats of the ri those risei presenta tances, but i control. An )leness of a, inan al Statements on and pres tation of these financial statements in adards for n fo -profit organizations, and for such internal ;ssary to enabl the preparation of financial statements that are due to fraud br error. 6ss �o o hese financial statements based on our audits. We rdanc th C adian accounting standards for not - for -profit organizations. V e comp ith ethical requirements and plan and perform the audits to about wheel the financial statements are free from material misstatement. rforming proc dures to obtain evidence about the amounts and disclosures in the The proced ,)Ares selected depend on the auditor's judgment, including the assessment 1 misstat ment of the financial statements, whether due to fraud or error. In making he it considers internal control relevant to the entity's preparation and fair ci statements in order to design audit procedures that are appropriate in the f r the purpose of expressing an opinion on the effectiveness of the entity's it also includes evaluating the appropriateness of accounting policies used and the ,ounting estimates made by management, as well as evaluating the overall of thg financial statements. We believe t t the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. FOR DISCUSSION PURPOSES ONLY Opinion In our opinion, the financial statements present fairly, in all material respects, the financial po ' ion of The Corporation of the City of Pickering Trust Funds as at December 31, 2012, December 3X, 2011 and January 1, 2011, and the results of its operations for the years ended December 31, 2012 add December 31, 2011 in accordance with Canadian accounting standards for not - for -profs organizations. Chartered Professional Accountants, Chartered Accountants Licensed Public Accountants June 10, 2013 1� Q �t FOR DISCUSSION PURPOSES ONLY Page 2 The Corporation of the City of Pickering Trust Funds Statements of financial activities and fund balance years ended December 31, 2012 and December 31, 2011 20,12 2011 (Note 1 Revenues Interest „ 7,800 /9,726 Net revenues 00 9,726 Fund balance, beginning of year 318, 69 308,443 Fund balance. end of vear 325.969 318.169 1z:7 Q The accompanying notes are an integral part of these financial statements. Page 3 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Trust Funds Statements of financial position as at December 31, 2012, December 31, 2011 and Janaury 1, 2011 The accompanying notes are an integral part of these financial statements. Page 4 FOR DISCUSSION PURPOSES ONLY December 31, December 31, January 1, 2012 201 2011 Not 1 Note Assets /�4&1 /277,351 Cash and investments 319,815 5 Interest receivable 6 154 92 325,969 318,169 308,443 Trust Fund position 325,9 318.16 308.443 The accompanying notes are an integral part of these financial statements. Page 4 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Trust Funds Notes to the financial statements December 31, 2012 and December 31, 2011 1. 2. 3. Adoption of a new accounting framework During the year ended December 31, 2012, the Trust Funds adopt/hene w ccounting standa s for not - for - profit organizations (the "new standards ") issued by the Caitu of Chartered Accountants ( "CICA "). In accordance with the CICA Handbook Pa-ti doption, C ection 1501 "), the date of transition to the new standards is January 1, 20e rus nds prepared and presented an opening balance sheet at the date of transition t standard . T is opening balance sheet is the starting point for the Trust Fund's accounting new stand ds. In its opening balance sheet, under the recommendations of Section 15 ust Fund . (a) recognized all assets and liabilities whose recognition is ;andards q Ired by the new s ndards; (b) did not recognize items as assets or liabilities if the new do not pg►`/mlt such recognition; (c) reclassified items that it recognized previously as o ty asset, I' bility or component of net assets, but are recognized as a different asset, abili compo nt of equity under the new standards; and (d) applied the new standards measuring all recognized assets and liabilities In accordance with the requirement of Section 1/501, the accountin /gf policies set out in Note 1 have been consistently applied to all years presented an there were no ad� stments resulting from the adoption of the new standards. Accounting policies The financial statements of The Corp ration oft City f Pickering Trust Funds are the representations of management prepared in accor nce with Can i generally accepted accounting principles using accounting standards for Not -for- rofit Organization . Significant accounting policiesAdopted include Basis of accounting Interest revenue is recor a arned. Expenses are report on b sis of accounting which recognizes expenses as they are incurred and meas able as a It o the receipt of goods or services and the creation of a legal obligation to pay. Investments Investment are recorded at a ortized cost. The cost of investments plus accrued interest approximates their fair v lue. Doro y r tate Th City o ' k ng dministers a trust fund for the Dorothy Card Estate for the care and upkeep of the stitute elder fund balance is comprised of investments and accumulated interest amounting to $325,969 (2011 - 318,169) Statement o cash flows A stateme of cash flows has not been presented as the information is readily determinable from the financial tatements presented. FOR DISCUSSION PURPOSES ONLY Page 5 FOR DISCUSSION PURPOSES ONLY City of Pickering Public Library Board December 31, 2012 Table of contents Independent Auditor's Report ........................... Statement of financial position .......................... Statement of operations ..... ............................... Statement of change in net debt ....................... Statement of cash flows ..... ............................... Notes to the financial statements ...................... 11:: Q FOR DISCUSSION PURPOSES ONLY 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 Deloitte LLP 5140 Yonge treet Suite 1700 Toronto M2N 61-7 Canad A�� 416- 601 -6150 416 - 601 -6151 .deloitte.ca We have audited the accompanying financial statements of e Picker' g Public Library Board, which comprise the statement of financial position as at D ember 3 Ol ,and the statements of operations, change in net debt and cash flows for the ye r then ended, an a summary of significant accounting policies and other explanatory informatio . Management's Responsibility for the Management is responsible for the preparatigii an accordance with Canadian public sector ac ounting management determines is necessary to able the pi material misstatement, whether due to and or error. Auditor's Responsibility Aion of these financial statements in and for such internal control as of financial statements that are free from Our responsibility is to /the a inion on t se financial statements based on our audit. We conducted our audit in w ana 'an generally accepted auditing standards. Those standards require that we comply ic quire ents and plan and perform the audit to obtain reasonable assurance about whethe ancia a ments are free from material misstatement. An audit involves p rforming proced res to obtain evidence about the amounts and disclosures in the financial stateme s. The procedur selected depend on the auditor's judgment, including the assessment of the risks of aterial misstate nt of the financial statements, whether due to fraud or error. In making those risk ass ss ka he aud' or considers internal control relevant to the entity's preparation and fair presentatio of ial atements in order to design audit procedures that are appropriate in the circumst ces, b r e purpose of expressing an opinion on the effectiveness of the entity's intern control. A also includes e valuating the appropriateness of accounting policies used and the real ableness of acc nting estimates made by management, as well as evaluating the overall Pr entation of the f ancial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit oni w6n. FOR DISCUSSION PURPOSES ONLY Opinion In our opinion, the financial statements present fairly, in all material respects, the financial p City of Pickering Public Library Board as at December 31, 2012 and the results of its operat' in its net debt and its cash flows for the year then ended in accordance with Canadian pub 'c accounting standards. Chartered Professional Accountants, Chartered Accountants Licensed Public Accountants June 10, 2013 (r FOR DISCUSSION PURPOSES ONLY A-� os' ion of the ns, changes sector Page 2 City of Pickering Public Library Board Statement of financial position as at December 31, 2012 2012 $ Financial assets 2011 Cash 2 50 7875 0 Accounts receivable 1 ,812 Due from the Government of Canada 18,716 1,134 Due from City of Pickering 031 ;40,224 09 154,493 Liabilities Accounts payable and accrued liabilities 313,869 211,233 Post-employment benefits liability Note 2 194:2 150,800 508 69 362,033 Non - financial assets Tangible capital assets (Note 4) /1,561,060 97,376 1,341,173 Prepaid expense 56,740 1,658,436 1 397,913 Accumulated surplus (Note 5) 1.403.176 1.190.373 The accompanying notes are an integral part of these financial statements. Page 3 FOR DISCUSSION PURPOSES ONLY City of Pickering Public Library Board Statement of operations year ended December 31, 2012 Expenses 2012 2011 Operating Budget Salaries Note 6 Salaries and wages $ 3,225 00 $ Revenue 81 1 7 ,478 721,340 City of Pickering grants 5,385,270 /,,610 4,89 689 Federal grants 8,894 19,057 Province of Ontario grants 135,505 162,781 Fines and other recei is 196 117 182,174 187,463 Total revenue 5,725,786 5,569,060 5,260,990 Expenses Operating Salaries Salaries and wages 3,194, 9 3,225 00 3,133,517 Fringe benefits 81 1 7 ,478 721,340 4 1 73 4 13,578 3,854,857 Material, supplies and utilities Books 92,000 102,853 111,241 Utilities 166,350 182,174 172,851 Other supplies 439,878 61,250 299,350 324,905 345,342 Services D Repairs and maintenance 8,590 248,979 255,786 Insurance 33,783 40,933 46,268 Travel 4,000 5,166 4,524 Consulting and professional 26,840 39,744 54,878 Advertising 17,500 17,075 19,909 Conference - 518 6,111 Postage 4,500 3,828 4,152 Telephone O 67,087 71,341 69,228 Seminars and educati n 16,000 17,756 19,747 Software /hardware aintenance 89,626 68,750 60,671 Vehicle repairs an maintenance 5,130 3,474 2,706 Minor capital pu hases 71,500 86,772 71,503 Miscellaneou 21,800 18,867 26,456 676 356 623 203 641 939 Capit/r�el Am xpe a 392,475 376,618 644,709 Los o - 17 953 - T al operatinq ex a ses 5,379,911 5 356 257 5,486,847 nnual surplus (/e�j ) 345,875 212,803 (225,857) Accumulated sue innin of year 1,190,373 1 190 373 1,416,230 Accumulated ur lus end of year 1,536,248 1 403 176 1,190,373 The accompanying notes are an integral part of these financial statements. FOR DISCUSSION PURPOSES ONLY Page 4 City of Pickering Public Library Board Statement of change in net debt year ended December 31, 2012 2012 Budget Note 6 2011 Annual surplus (deficit) 345.875 212803 (225,,857 Acquisition of tangible capital assets (788,350) 50 F4) 50,152) Amortization of tangible capital assets 392,475 3 Z644,709 Loss on disposal of tangible capital assets - 17,95 - (395,875) (256,203) 194,557 Change in prepaid expense (4,320 33,256 Change in net debt (50,t010) (47,7 ) (64,556) Net debt, beqinninq of year (207 0) (207 40) (142,984) 'Q7, The accompanying notes are an integral part of these financial statements. FOR DISCUSSION PURPOSES ONLY Page 5 City of Pickering Public Library Board Statement of cash flows year ended December 31, 2012 2012 2011 Operating transactions Annual surplus (deficit) 212 03 (225,8 7) Non cash item Amortization of tangible capital assets 76,618 6 4,709 Loss on disposal of tangible capital assets 953 - 74 418.852 Change in non -cash operating items (Increase) in accounts receivable (295) (Increase) decrease in due from Government of Canada 10,008 Decrease in due from City of Pickering /(4,320) 112,663 Increase (decrease) in accounts payable and accrued liabilities (89,120) Increase in post - employment benefit liability 31,300 Increase in prepaid expense 33,256 43,390 31,300 650,764 450,152 Capital transactions Acquisition of tangible assets (650,774) 450,152 Net decrease in cash (10) - Cash beginning of year 2,260 2,260 Cash. end of vear 2.2sn 2 grin The accompanying notes are an integral part of these financial statements. Page 6 FOR DISCUSSION PURPOSES ONLY City of Pickering Public Library Board Notes to the financial statements December 31, 2012 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 publics ctor accounting standards established by the Public Sector Accounting Board ( "PSAB ") of the anadian Institute 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 basis accounting. The basis of accounting recognizes revenues as they are earned and le; expen s are recognized, as they are incurred and measurable as a result of the rece' t of goods ands ices and the creation of a legal obligation to pay. (b) Non - financial assets (i) Tangible capital assets 11�t Tangible capital assets are recorded at c st less accumulat d amortization. Cost includes all amounts that are directly attributable to acquisition, devel ment or betterment of the asset. The cost of the tangible capital asset ' amortized on a raight -line basis over the estimated useful life as follows: Machinery & equipment Ito 25 ye s Information technology hardw e y ars Library collection material to 7 ears Furniture and fixtures o years One -half of the aZincluding ortization is cha ed in the year of acquisition and in the year of disposal. Other major ass the Libr buildings are owned by the City and are not reflected in these financial s . (ii) Contribution /c na n Tangible c vital asse the date f receipt, and (iii) Intan ' le assets Int gible assets are (c) Pos em to ment bene its (d) I as contributions or donations are recorded at their fair value at value is also recorded as revenue. recognized as assets in the financial statements. The s alue o the cost of providing employees with future benefits programs is recognized as mp es a rn t se entitlements through service. Any actuarial gains or losses are amortized on a straigh ' b is over the average remaining service period (ARSP) of employees. The actuary estimated the RSP to be 14 years. The pre aration of financial statements in conformity with Canadian public sector accounting stand ds requires management to make estimates and assumptions that affect the reported amo nt of assets, liabilities and the disclosure of contingent assets and liabilities at the date of the fin ncial statements and the reported amounts of revenues and expenses during the period. Actual r sults could differ from those estimates. Balances which require significant estimates include tangible capital assets which are based on estimated useful lives and employee future benefits. Page 7 FOR DISCUSSION PURPOSES ONLY City of Pickering Public Library Board Notes to the financial statements December 315 2012 2. Post employment benefits liability The Library Board makes available to qualifying employees who retire before the a of /Th' opportunity to continue their coverage for benefits such as post- retirement exten ed healfits. Coverage ceases at the age of 65. The Library Board also provides full time a permane employees a sick time entitlement and any unused entitlement is accumulat y r to yeaccumulated entitlement is not vested and therefore is forfe ited at the time f r ' ment on. The post - employment benefits obligation at December 31, 2012 and the han es a aefit obligation for the 2012 fiscal year was determined by actuarial valuatio prepared as J 011. Information about the Library Board's post employment benefits liabifities is as follows D $ $ Accrued post - employment benefi/ig� tio n 388,600 361,800 Unamortized actuarial losses (194,400) (211,000) Post - employment benefits liabi' y 194,200 150,800 The main actuarial assumpti s employed in th actuarial valuations are as follows: (a) Discount rate The present value s ber 3 , 2012 of the future benefits was determined using a discount rate of 3.75% (2 11 — o). (b) Dental cost The dents cost trend rate w 4.0% increase per annum. (c) Health osts Heal costs were ass ed to increase at 7.8% in 2012 and decrease by 0.2% increments per year to n yJtir�.�te rate of % per year in 2026 and thereafter. 3. Pe sio/a"ent nt he Lib akes contributions to the Ontario Municipal Employees Retirement Fund ( OMERS), which iployer plan, on behalf of eligible members of its staff. The Plan is a defined benefit plan th the amount of the retirement benefit to be received by the employees based on the length and rates of pay. Contribhe amount of $241,707 (2011 - $206,947) were paid to OMERS on behalf of its membe he year. Page 8 FOR DISCUSSION PURPOSES ONLY 012 2011 Post - employment benefits liability, beginning of year 150,800 119,500 .Current service costs 32,000 23,300 Amortization of actuarial losses 16,600 11,100 Interest expense 14,400 15,300 Benefits paid during the year (19,600) (18,400' Post - employment benefits liability, end of yea 194,200 150,800 2012 2011 D $ $ Accrued post - employment benefi/ig� tio n 388,600 361,800 Unamortized actuarial losses (194,400) (211,000) Post - employment benefits liabi' y 194,200 150,800 The main actuarial assumpti s employed in th actuarial valuations are as follows: (a) Discount rate The present value s ber 3 , 2012 of the future benefits was determined using a discount rate of 3.75% (2 11 — o). (b) Dental cost The dents cost trend rate w 4.0% increase per annum. (c) Health osts Heal costs were ass ed to increase at 7.8% in 2012 and decrease by 0.2% increments per year to n yJtir�.�te rate of % per year in 2026 and thereafter. 3. Pe sio/a"ent nt he Lib akes contributions to the Ontario Municipal Employees Retirement Fund ( OMERS), which iployer plan, on behalf of eligible members of its staff. The Plan is a defined benefit plan th the amount of the retirement benefit to be received by the employees based on the length and rates of pay. Contribhe amount of $241,707 (2011 - $206,947) were paid to OMERS on behalf of its membe he year. Page 8 FOR DISCUSSION PURPOSES ONLY City of Pickering Public Library Board Notes to the financial statements December 31, 2012 4. Tangible capital assets Machinery Information Library Furniture Assets and technology collection an under eaumment hardware materials fixtures Construction 2012 Cost Machinery Info mation Libr </ - Assets Balance beginning of year 9,992 379,495 1,771,949 292,082 - 2,453,518 Additions during the year - 55,765 442,027 25,462 1 7,520 650,774 Disposals during the year - 272,254 173,271 13,024 - 458,549 Balance, end of year 9,992 163,006 2,040,7 304,520 127,520 2,645,743 Balance beginning of year Accumulated amortization 379,4 5 5,810,056 292,082 - 6,491,625 Balance, beginning of year 2,498 355,015 6 8,329 - 1,112,345 Amortization 999 16,192 5 , 73 - 376,618 Accumulated amortization 4,488,259 Balance, end of year 9,992 75;,60 1,771,949 on disposals - 261,724 17 1 1 - 440,596 Balance, end of year 3,497 109,48 837,63 97,756 - 1,048,367 Net book value 6.495 53. 5,23 1.203.074 206.764 127.520 1.597.376 /\ J FOR DISCUSSION PURPOSES ONLY Page 9 Machinery Info mation Libr Furniture Assets and t chnology colle ion and under equipment h rdware ma rials fixtures construction 2011 Cost Balance beginning of year 992 379,4 5 5,810,056 292,082 - 6,491,625 Additions during the year - - 450,152 - - 450,152 Disposals during the year - - 4,488,259 - - 4,488,259 Balance, end of year 9,992 37 ,495 1,771,949 292,082 - 2,453,518 Accumulated amortizatio Balance, beginning o ye 1,499 325,856 4,537,879 90,661 - 4,955,895 Amortization O 9 29,159 608,709 5,842 - 644,709 Accumulated am ization on disposals - - 4,488,259 - - 4,488,259 Balance, end f year 498 355,015 658,329 96,503 - 1,112,345 Net book value/ _7,494 24,480 1,113,620 195,579 - 1,341,173 /\ J FOR DISCUSSION PURPOSES ONLY Page 9 City of Pickering Public Library Board Notes to the financial statements December 31, 2012 5. Accumulated surplus Accumulated surplus consist of the following: 2012 011 Invested in capital assets 9 6 1, 341,173 Post employment benefits liability (194,2 ) (150,800) 1.403.176 1,190.373 6. Budget figures The 2012 budget was not prepared on a basis consistent wi th/de rep actual results. The budget was prepared on a modified accrual basis while pu is un " g standards require a full accrual basis of accounting. The budget figures treated to l set acquisitions as expenditures and did not include amortization expens on tangi assets. The following provides a reconciliation from the approved budget to the bud et numbered in the financial statements. 2012 TCA adju tment 2012 budget Council approved for City expepresented in budget ow ed assets fro Amortization statements 7 Revenue City of Pickering 5,385,27 D - - 5,385,270 Federal and provincial grants 1 ,399 - - - 144,399 Other 6,117 - - - 196,117 725,786 - - - 5,725,786 Expenditures Salaries and benefits 11,730 - - - 4,011,730 Material, supplies and utilities 99, 0 - - - 299,350 Services 3 - 50,000 - 676,356 Amortization - - - 392,475 392,475 4,9#,436 - 50,000 392,475 5,379,911 Annual /s— 788,350 - (50,000) (392,475) 345,875 Capital ures/ additi (788,350) - 50,000 - (738,350) 'Certain comparati a figures for the year ended December 31, 2011 have been reclassified to conform to the current year' presentation. FOR DISCUSSION PURPOSES ONLY Page 10