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Home My WebLink AboutFIN 12-14 044 Report to Executive Committee PICKERIN G Report Number: FIN 12-14 Date: June 9, 2014 From: Paul Bigioni Director, Corporate Services & City Solicitor Subject: 2013 Year End Audit Recommendation: 1. That Report FIN 12-14 of the Director, Corporate Services & City Solicitor be received; 2. That the Year-end Communication Report as submitted by Deloitte LLP (Deloitte) be received for information; and, 3. That the 2013 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, 2013. 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 significant deficiencies in the audit to report to Council and therefore the auditor has not issued a management letter. Financial Implications: The Balance Sheet continues to improve with net financial assets increasing by approximately $1.1 million which means the City is more than capable of meeting its financial commitments. The increase in the accumulated surplus is directly attributable to the increase in tangible capital assets from $192.6 million to $205.3 million as well as the increase in the value of the City's investment in Veridian. Expenditures were well within budget. Overall operating revenue was in line with the budget. The revenues reported in the Consolidated Statement of Operations are the combined revenues for operating and capital purposes. As a result, variances between budget and actual arise due to the timing of approval in the capital budget as compared to the actual receipt of funds/recognition of revenue. 1 Report FIN 12-14 June 9, 2014 • Subject: 2013 Year End Audit Page 2 Obligatory Reserve Funds which are provided for a specific purpose under legislation and reported as deferred revenue, increased by almost $2.4 million to $50.0 million, primarily due to a net change in development charges. Total discretionary Reserves and Reserve Funds decreased by $2.4 million to $30.2 million. Although noted as discretionary, almost half of these balances have been set aside for specific purposes by Council. Long term liabilities remained at relatively the same level but will be expected to significantly increase in 2014 with the borrowing for the construction of the indoor Soccer Facility and the Whitevale Bridge. 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, 2013 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, 2013 audit and comments on significant matters regarding the audit and other matters they may believe to be of interest to Council. The independence letter in Appendix 1 confirms that Deloitte is independent from the City. Appendix 2 is 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 that 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 communication requirements which Deloitte is required to bring to Council's attention. Appendix 4 provides a list of resources available through the Deloitte website. During the course of any audit, auditors may find misstatements that may or may not be adjusted due to materiality. For 2013, no corrected or uncorrected misstatements arose from the audit. 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 significant matters came to their attention to report in a management letter and, as a result, no management letter has 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 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 2 June 9, 2014 Report FIN 12- 4 12-14 , Subject: 2013 Year End Audit Page 3 Library Board. The City's investment in Veridian Corporation is accounted for on a modified equity basis, which means the City includes its share of Veridian's income or loss in the Consolidated Financial Statements. 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.in Accumulated Surplus. This is different than the City's budget, which notes these capital items as expenditures. Statement of Financial Position (Balance Sheet) Financial assets are those assets which could provide resources to discharge existing liabilities or finance future operations. The financial assets increased by approximately $13.6 million which was offset by an increase in liabilities of approximately $12.5 million. This led to an increase in net financial assets of $1.1 million over the prior year. The increase in financial assets is primarily due to an increase in Cash and Cash Equivalents. In particular, short term investments increased due to the receipt of Federal and Provincial funding up front for the Frenchman's Bay Harbour Entrance project and debt proceeds. In addition, there was a larger cash balance held at the end of the year to meet the City's financial needs in January. The increase in the value of the City's Investment in Veridian Corporation of approximately $3.0 million also contributed. This represents the City's share of Veridian Corporation's net earnings. ($4.9M) net of dividends paid to the City ($1.9M) during the year. The main contributor to the increase in liabilities is an increase in Accounts Payable and Deferred Revenue. At the end of 2013, the City had a number of large construction projects underway such as the Frenchman's Bay Harbour Entrance and the Indoor Soccer Facility. Progress payments for work completed up to December 31 were owing at the end of the year. Furthermore, the costs for winter sand and salt were higher than normal due to the ice storm at the end of the year. The increase in the deferred revenue balance resulted primarily from the unspent Federal and Provincial funding received for the Harbour Entrance project and the overall increase in Development Charges collected. Non-financial assets includes tangible capital assets which is the net book value (cost less accumulated amortization) of City-owned assets including land, buildings, roads, bridges and 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. Note 10 of the Financial Statements provides a summary of the City's • 3 Report FIN 12-14 June 9, 2014 Subject: 2013 Year End Audit Page 4 Subject: g tangible capital assets. The December 31, 2013 gross book value of assets is $402.4 million and, after adjusting for amortization, the net book value of the assets is $205.3 • million. In other words, the City has consumed a substantial amount of the life of its assets. For the next term of Council, a key financial priority for the City should be to invest and maintain its infrastructure base. Statement of Operations (Income Statement) Revenue reported includes both operating and capital. Therefore, variances between budget and actual may arise due to the timing of approval in the capital budget as compared to the actual receipt of funds/recognition of revenue. This is clearly illustrated with the Government grants and fees revenue item. The actual amount includes a portion of the Federal and Provincial grant recognized for the Frenchman's Bay Harbour Entrance project. The project was budgeted in 2012 but the funding agreement was not signed until early 2013. Therefore, the actual is higher than the budget. The Sale of land revenue item is another example of this timing differential. The City is expected to be selling land in the Duffin Heights area over the next several years in part 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 as 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 reflect the changes made to the 2013 Council approved budget to put it on a basis consistent with the full accrual basis of accounting. This means excluding capital expenditures that are deemed tangible capital assets and including amortization. Actual expenses are under budget in almost all functional areas. This illustrates City staff's commitment to controlling expenditures. There is no one specific area that stands out as a major contributor to the overall underage. The underage is reflected throughout the various cost centres. 4 Report FIN 12-14 June 9, 2014 Subject: 2013 Year End Audit Page 5 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. In other words, there is no City bank account that has a balance of$295.0 million. 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 $205.3 million and the City's equity in Veridian Corporation of approximately $75.8 million. • The accumulated surplus is comprised of the following: Operating fund $ 125,210 Capital fund 9,649,524 Reserves and reserve funds 30,222,815 Equity in Veridian Corporation 75,770,469 Tangible capital assets 205,294,283 Post employment benefits liability (3,913,800) WSIB benefit liabilities (991,559) Internal loans (3,027,529) Net long-term liabilities (18,049,763) $295,079,650 Attachments: 1. Auditor's Year-end Communication Report 2. 2013 Draft Audited Consolidated Financial Statements Prepared By: Approved ! Endorsed By: • Kristine Senior Stan Karwowski Manager, Accounting Services Divi: • Head, Finance &Treasurer Paul r igi+' • Director, orp*'rate Services & City Solicitor 5 Report FIN 12-14 June 9, 2014 Subject: 2013 Year End Audit Page 6 Recommended for the consideration of Pickering City Council • O! 2612 Tony Preve•el, P.Eng. Chief Administrative Officer 6 ATTACHMENT#1,__TO REPORT#4,24.1.7- Deloittec, • • • • The Corporation of the City of Pickering Year-end communication _cation . • y • :••• • • For the year ended December 31, 2013 To be presented to the Executive Committee June 9, 2014 7 • DeIoitte . b_. Deloitte LLP 5140 Yonge Street Suite 1700 Toronto ON M2N 6L7 • Canada • Tel:416-601-6150 Fax:416-601-6151 www.deloitte.ca May 15,2014 • Private and confidential Members of the Executive Committee The Corporation of the City of Pickering 1 The Esplanade Pickering ON L1V 6K7 • Dear Executive Committee Members: Report on audited annual consolidated financial statements As agreed in our engagement letter dated October 21,2013,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 31,2013, in accordance with Canadian generally accepted auditing standards ("GAAS")and expect to issue our audit report thereon on the date that the consolidated financial statements are approved by council. 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 11,2013. • Use of our 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 the officers and employees of the City with whom we worked to discharge our responsibilities. We look forward to discussing this report with you and to answering any questions which you may have.• Yours truly, • aelaCtA LCD • Chartered Professional Accountants,Chartered Accountants Licensed Public Accountants 8 Table of contents Audit findings • 1 Audit risks 2 Internal control matters - 3 Accounting practices,judgments'and estimates 4 Audit scope matters 5 Appendices Appendix 1 —Independence letter Appendix 2—Draft management representation letter Appendix 3—Communication requirements Appendix 4—Deloitte resources a click away ©Deloitte LLP and affiliated entities. The Corporation of the City of Pickering—2013 Year-end communication i 9 Audit findings • This report summarizes the main findings arising from our audit Status of our audit We expect to be in a position to render our audit opinion on the consolidated financial statements of the City following approval of the consolidated financial statements by Council and the completion of the following outstanding procedures: • Receipt of signed management representation letter • Receipt of legal letters • Completion of required audit procedures between the completion of our field work and the expected date of our audit report, and • • Completion of our Engagement Quality Control review. Internal control No significant deficiencies in internal controls were noted as part of our audit. Internal control matters are discussed in greater detail on page 3 of this report. . Corrected and In accordance with Canadian GAAS,we request that all misstatements be corrected. uncorrected We aggregate all uncorrected misstatements greater than 5%of materiality,and those that misstatements are.quantitatively insignificant but qualitatively significant. There were no corrected or uncorrected misstatements arising from the audit. Conclusion In accordance with Canadian GAAS,our audit is designed to enable us to express an opinion on the fairness of the presentation of the City's annual consolidated financial statements prepared.in accordance with Canadian public sector accounting standards("PSAS"). 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 intend to issue an unmodified audit report on the consolidated financial statements of the City for the year ended December 31,2013 once the outstanding items referred to above are completed satisfactorily and the consolidated financial statements are approved by Council. 1 0 ©Deloitte LLP and affiliated entities. The Corporation of the City of Pickering—2013 Year-end communication 1 Audit risks • Our audit plan highlighted certain areas that we refer to as audit risks. There have been no changes to these areas of risk, nor have any additional areas of risk been identified since our previous communication. The results of our audit work on these areas of risk are set out below Ar as Cfkulathitrx - Des iption, tm co clisj*n y �a Revenue/deferred • Significant revenue streams are a presumed area of audit risk. • Satisfactory—refer to revenue* We will test the design and implementation of controls in these Note 1(b7 to the Revenue recognition revenue streams and perform substantive analytic procedures consolidated financial and detailed testing in these areas. statements for • Substantive testing to determine if restricted grants/contributions disclosure on the (i.e.,development charges,gas tax,etc.)and government adoption of new transfers have been recognized as revenue in the appropriate accounting standards period • Ensure new standards PS 3410"Government Transfers"and PS 3510"Tax Revenue"have been implemented appropriately and that required disclosures have been made Accounting estimates • Obtain documentation on management's controls over the • Satisfactory Estimates require development of accounting estimates for any significant management judgments management estimates and assess risk (i.e.,allowance for • Focused review of calculations and support significant property tax • Discussions with management appeals,contingent liabilities,estimated • Analytic review of related accounts accrued liabilities, etc.) • Assess outcome of retrospective review of estimates from prior years Management override • Our audit tests the appropriateness of journal entries recorded in • Satisfactory of controls* the general ledger and other adjustments made in the preparation Management override of financial statements of controls is a • We obtain an understanding of the business rationale for presumed area of risk in significant transactions that we become aware of that are outside a financial statement of the normal course of business,or that otherwise appear to be audit due to unusual given our understanding of the City and its environment management's ability to • We review accounting estimates for bias and evaluate whether override controls that the circumstances producing the bias, if any, represented a risk of otherwise appear to be material misstatement operating effectively. • In addition, experienced Deloitte personnel are assigned to the testing and review of journal entries and areas of estimates • Professional skepticism will be maintained throughout the audit *Significant risk ©Deloitte LLP and affiliated entities. The Corporation of the City of Pickering—2013 Year-end communication 2 1 1 Internal control matters • As part of our financial statement audit, we are required to consider many components of internal controls, which assist us in determining the risks of material misstatement and the identification of internal controls that will be relevant for our audit. Not all controls are relevant to every audit. For example, some internal controls may exist to address operational risks. For those controls deemed relevant to our audit, we evaluated the design of these controls and determined whether they were implemented. Canadian GAAS requires us to report to the Executive Committee any significant deficiencies or material weaknesses that have come to our attention. Our audit was not designed to provide a high degree of assurance that significant deficiencies and material weaknesses, if any, would be detected. Accordingly, we are unable to and do not provide any assurance on the design or effective operation of internal control over financial reporting. We did not identify any significant deficiencies in the audit that have a material or significant impact on the consolidated financial statements. However, during our review of the IT policies and procedures, we noted that the following policy and procedure documents have not been reviewed by management in over two years: • Information Technology Policy • Personal Computer Procedure We recommend that management review and update (at least annually)the IT policies and procedures to ensure that they are applicable to the current IT landscape and operating environment. We understand that this review will be completed in the current calendar year. 1 2 ©Deloitte LLP and affiliated entities. The Corporation of the City of Pickering—2013 Year-end communication 3 Accounting practices, judgments and estimates During the course of our audit of the consolidated 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 consolidated financial statements. Significant accounting policies In our judgment, the significant accounting practices, selected and applied by management are, in all material respects, acceptable under PSAS and are appropriate to the particular circumstances of the City. Adoption of new accounting standards • As at January 1, 2013, the City adopted Public Sector Accounting Handbook, Section PS 3410, Government transfers, and PS 3510, Tax revenue. There was no impact on the consolidated financial statements as a result of the adoption of these standards. 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 consolidated financial statements with respect to estimation uncertainty is in accordance with PSAS and is appropriate to the particular circumstances of the City. • Significant estimates include: Post-employment benefits liability $4,092,800 (2012—$3,652,600) WSIB benefits liability $991,559 • (2012—$907,759) Allowance for doubtful taxes receivable $nil (2012—$367,000) • Allowance for doubtful accounts . $505,000 (2012—$521,604) Provision for assessment appeals $536,490 (2012—$381,355) Accrual for retroactive pay—unsettled contract $290,000 (2012—0) ©Deloitte LLP and affiliated entities. The Corporation of the City of Pickering—2013 Year-end communication 4 1 3 • Audit scope matters • Canadian GAAS require that we also communicate to the Executive Committee on the following matters Audit strategy and scope The audit planning and the preliminary risk assessment activities we conduct enable us to set the scope of our audit and to design procedures tailored to that scope. 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. Refer to our engagement letter dated October 21,2013. Materiality Materiality is the magnitude of misstatements, including omissions,in the consolidated financial statements that, individually or in the aggregate,could reasonably be expected to influence the economic decisions of the financial statement users.Judgments about materiality are made in the light of surrounding circumstances,and are affected by our perception of the information needs of the financial statement users,and by the size or nature of a misstatement,or a combination of both.We are responsible for providing reasonable assurance that your consolidated financial statements as a whole are free from material misstatement. Materiality levels were determined as follows: • Consolidated financial statements for the City—approximately 2.5%of budgeted expenses; • City of Pickering Public Library Board—approximately 3%of budgeted expenses;and • City of Pickering Trust Funds—approximately 3%of fund balance. Significant difficulties During the course of our audit,we did not encounter any significant difficulties in encountered in dealing with management related to the performance of the audit. performing the audit Related party transactions Related party transactions are consistent with the ordinary course of business. Management judgment Accounting estimates are an integral part of the consolidated financial statements and accounting estimates prepared by management and are based on management's current judgments.These judgments are normally based on knowledge and experience about past and current events,assumptions about future events and interpretations of the financial reporting standards. During the year ended December 31,2013, management advised us that there were no significant changes in accounting estimates or in judgments relating to the application of the accounting policies. Our views on the significant quantitative and qualitative aspects of the judgments and estimates made by the City's management are presented on page 4 of this report. 1 4 ©Deloitte LLP and affiliated entities. The Corporation of the City of Pickering—2013 Year-end communication 5 Legal and regulatory Management is responsible for ensuring that the City's operations are conducted in compliance accordance with the laws and regulations applicable to the City in the jurisdictions in which it operates.The responsibility for preventing and detecting non-compliance rests with management.The auditor is not and cannot be held responsible for preventing non-compliance with laws and regulations.We did not identify any instances where the City was not compliant with laws and regulations applicable to it. Post-balance sheet events Management is responsible for assessing subsequent events up to the date of the release of the consolidated financial statements. At the date of finalizing this report,we are not aware of any significant post balance sheet events. Management A draft version of the management representation letter to be signed by management representation letter is included in Appendix 2. Independence We have developed appropriate safeguards and procedures to eliminate threats to our independence or to reduce them to an acceptable level. You have requested that we report all relationships and other relevant matters that, in our professional judgment, may reasonably be thought to bear on our independence and confirmed our independence to the Executive Committee for the year ended December 31,2013 in Appendix 1. Quality control Our firm's quality control process embraces each of the elements identified in the Chartered Professional Accountants of Canada("CPA Canada") Handbook sections covering Canadian standards of quality control for firms that perform audits and reviews of consolidated financial statements and other assurance engagements. • ©Deloitte LLP and affiliated entities. The Corporation of the City of Pickering—2013 Year-end communication 6 1 5 Appendix 1 ® Independence letter • • • • 1 6 ©Deloitte LLP and affiliated entities. The Corporation of the City of Pickering—2013 Year-end communication • Deloitte.; Deloitte LLP 5140 Yonge Street Suite 1700 Toronto ON M2N 6L7 Canada • Tel:416-601-6150 Fax:416-601-6610 www.deloitte.ca • May 15, 2014 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 31,2013. 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. You have also requested us to communicate the related safeguards that have been applied to eliminate identified threats to independence or reduce them to an acceptable level. 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 15, 2013,the date of our last letter. • 17 • The Corporation of the City of Pickering May 15,2014 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 15,2013 to May 15, 2014. We hereby confirm that we are independent with respect to the.City within the meaning of the Rules of Professional Conduct of Chartered Professional Accountants of Ontario as of May 15,2014. 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, ado:Lx LL!' • Chartered Professional Accountants,Chartered Accountants Licensed Public Accountants • • 18 Appendix 2 ® Draft management representation letter ©Deloitte LLP and affiliated entities. The Corporation of the City of Pickering—2013 Year-end communication 1 9 [Client letterhead] [Date] • 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 31,2013 This representation letter is provided in connection with the audit by Deloitte LLP("Deloitte"är"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 31,2013, and a summary of significant accounting policies and other explanatory information(the"Financial Statementsq for the purpose of expressing an opinion as to whether the Financial Statements present fairly, in 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 21,20.13 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, 2013and the results of its operations and 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, 2013 that require adjustment to the estimates and disclosures included in the Financial Statements. 20 • Deloitte LLP • [Date] 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[Date] 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, 2013 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. 6. The City has satisfactory title to and control over all assets, and there are no liens or encumbrances on such assets. We have disclosed to you and in the Financial Statements,all assets that have been pledged as collateral. 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. All transactions have be en 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 Stateients 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. 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. 21 Deloitte LLP [Date] Page 3 • 12. We have disclosed to you all communications from regulatory agencies 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 the identity of the entity's related parties and all the related party relationships and transactions of which we are aware,including guarantees,non-monetary transactions and transactions for no consideration and participation in a defined benefit plan that shares risks between group entities. 14. We acknowledge our responsibility for the design, implementation and maintenance of internal control to prevent and detect fraud and error: • 15. 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 Statements. As appropriate,these items have been disclosed and accounted for in the Financial Statements in accordance with PSAS. 16. We have disclosed to you all liabilities,provisions,contingent liabilities and contingent assets, including those associated with guarantees,whether written or oral,and the y are appropriately reflected in the Financial Statements. 17. 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. • Independence matters For purposes of the following paragraph,"Deloitte"shall mean Deloitte LLP and Deloitte Touche Tohmatsu Limited,including related member-firms and affiliates. 18. Prior to the City having any substantive employment conversations with a former or current Deloitte engagement team member,the City has held discussions with Deloitte and obtained approval from the Executive Committee of the Council. • Communications with taxation and regulatory agencies 19. 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 rep orting'requ irement s. Deficiencies in internal control 20. We have communicated to you all deficiencies in internal control of which we are aware. We have disclosed to you any change in the City's internal control over financial reporting that occurred during the current year that has materially affected,or is reasonably likely to materially affect,the City's internal control over financial reporting. • 22 Deloitte LLP [Date] Page 4 Work of management's experts 21. We agree with the work of management's experts in evaluating the valuation of post-employment benefits liability and WSIB benefits liability and have adequately considered the capabilities of the experts in determining amounts and disclosures used in the Financial Statements and underlying• accounting records. We did not give any,nor cause any, instructions to be given to management's experts with respect to values or amounts derived in an attempt to bias their work, and we are not aware of any matters that have impacted the independence or objectivity of the experts. Liabilities and contingencies 22. 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. • Loans and receivables • 23. 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 . 24. 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. • Government transfers 25. We have disclosed to you all correspondence relating to government transfers that the City has had with the funding body. • 26. We have assessed the eligibility criteria and determined that the City is an eligible recipient for the government transfers received. 27. We have assessed the stipulations attached with the funding and have recognized the revenue in accordance with meeting the stipulations required. 28. All government transfers that have been recorded as deferred revenue give rise to an obligation that meets the definition of a liability.Those liabilities have been properly recorded and presented in the Financial Statements. 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 Veridian Corporation as a Government Business Enterprise. • 23 Deloitte LLP [Date] Page 5 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 Karwowski Division Head,Finance&Treasurer • Tony Prevedel Chief Administrative Officer • • • • • 24 Appendix 3 — Communication requirements • • • As indicated 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. $egtui )commun cation Comm 1. Our responsibilities under GAAS Engagement letter dated October 21,2013. 2. Our audit strategy and scope Audit plan dated November 11, 2013. 3. Management judgment and accounting estimates Refer to page 4. 4. Financial Statement adjustments None noted. 5. Uncorrected misstatements and disclosure deficiencies No uncorrected misstatements or significant disclosure deficiencies noted. 6. Matters related to going concern None noted. 7. Significant accounting policies Refer to page 4 and to Note 1 of the consolidated financial statements. 8. Alternative treatments for accounting policies and practices that None noted. have been discussed with management during the current audit period 9. Our views about significant qualitative aspects of The City's No issues noted. accounting practices, including accounting policies, accounting estimates and financial statement disclosures 10.Our responsibility for other information in documents containing None. audited consolidated financial statements,any procedures performed,and the results 11.Disagreements with management None. 12.Our views about significant matters that were the subject of None. consultation with other accountants 13.Major issues discussed with management prior to our retention None. 14.Significant difficulties, if any,encountered during the audit None. 15.Significant deficiencies in internal control, if any, identified by us No significant deficiencies noted. during the audit of the consolidated financial statements. 16.Material written communications between management and us Engagement letter dated October 21,2013 and Management Representation letter (see Draft Appendix 2). 17.All relationships between the City and us that, in our professional Independence letter—Appendix 1. judgment, may reasonably be thought to bear on independence 18.A statement that, in our judgment,our engagement team and Independence letter—Appendix 1. others in our firm as appropriate,our firm itself and,when applicable,network firms have complied with relevant ethical requirements regarding independence ©Deloitte LLP and affiliated entities. The Corporation of the City of Pickering—2013 Year-end communication 25 it ra H x+'swS-_+lix Lair S toTtl "tW ai ''#'curie -IMW7- 'S*i1 :r ''- -w- r eye° 19.Illegal or possible illegal acts None noted. 20.Fraud or possible fraud identified through the audit process None noted. 21.Significant transactions inconsistent with normal course of None noted. business, including related party transactions 22.Non-compliance with laws and regulations that come to the None noted. auditor's attention 23.Limitations placed on our scope None. 24.Written management representations the auditor is requesting Management representation letter— Appendix 2. 25.Modification to our opinion None. 2 6 ©Deloitte LLP and affiliated entities, The Corporation of the City of Pickering—2013 Year-end communication Appendix 4 ® Deloitte resources a click away At Deloitte, we are committed to excellence in the provision of professional services and advice, always focusing on client service. To this end, we have developed numerous resources, which contain relevant and timely information for our clients and are accessible by our clients. Included below is an overview of these resources. These resources are available through the Deloitte Portal (www.deloitte.com/ca/portal). Arit :7 -777: t - Canadian resources Audience Description and frequency Centre for Corporate Governance • Council members Web site specifically designed to help www.corpgov.deloitte.ca • Legal counsel board members with their responsibilities. It provides the latest information on regulatory and legislative developments,accounting and financial reporting,board roles and responsibilities,and best practices. DeloitteLlNK • Treasurer Weekly e-newsletter that helps the www.deloitte.com/ca/DeloitteLlNK • Financial reporting team finance team to stay on top of standard-setting initiatives. Deloitte Learning Academy • Treasurer A range of courses targeted to www.deloittelearningacademy.ca/ • Financial reporting team accounting professionals which may be selected a la carte, bundled into a specific learning program,or delivered as a full start-to-finish suite.Our current offerings include International Financial Reporting Standards(IFRS); Accounting Standards for Private Enterprises(ASPE);and Public Sector Standards(PSAS). Deloitte Update • Treasurer Learning webcasts offered throughout www.deloitte.com/ca/update • Financial reporting team the year featuring Deloitte professionals discussing critical issues that affect your business. Directors'Series • Council members Live satellite broadcasts to locations www.deloitte.com/ca/DirectorsSeries across the country conducted three or four times per year.They provide Canadian corporate directors with an opportunity to keep up with their learning requirements in a time of frequent change and new demands. Standard-Setting Activities Digest • Treasurer Monthly online updates on recent www.deloitte.com/ca/standards • Financial reporting team developments in standard-setting from a comprehensive list of standard- setting organizations. ©Deloitte LLP and affiliated entities. The Corporation of the City of Pickering—2013 Year-end communication 27 • • • Canada's Top litt Employers a zoo: www.deloitte.ca 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. 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ATTACHMENT# TO REPORT# 1a' Consolidated financial statements of The Corporation of the City of Pickeri e g December 31, 2013 • • FOR DISCUSSION PURPOSES ONLY 2 9 The Corporation of the City of Pickering December 31, 2013 Table of contents Independent Auditor's Report -2 Consolidated statement of financial position 3 Consolidated statement of operations 4 Consolidated statement of change in net financial assets 5 Consolidated statement of cash flows 6 Notes to the consolidated financial statements 7-24 i • 30 / FOR DISCUSSION PURPOSES ONLY Deloitte LLP 5140 Yonge reet Suite 1700 Toronto O M2N 6L7 Canada Tel: 16-601-6150 F :416-601-6151 • .deloitte.ca Independent Auditor's Report To the Members of Council,Inhabitants and Ratepayers of the Corporation of the City of Pickering We have audited the accompanying consolidated financial st.-es .f the Co 'oration of the City of Pickering,which comprise the consolidated statement of fi . cia ..:ition a t December 31,2013,and the consolidated statements of operations,change in net 4 ancial asses: . a cash flows for the year then , ended, and a summary of significant accounting polici-: and other expla .tory information. Management's Responsibility for the Consolida •d Financial S . ements Management is responsible for the preparation . • fair presenta on of these consolidated financial statements in accordance with Canadian pub c se :sunt'. g standards, and for such internal control as management determines is necessary to -nable th: •repar ion of consolidated fmancial statements that are free from material misstatement,wh: her due to frr,d •r error. Auditor's Responsibility Our responsibility is to express .n opinion on the - consolidated financial statements based on our audit. We conducted our audit in ac•or..-. with C .dian generally accepted auditing standards. Those standards require that we c. pl o-..i, a equirements and plan and perform the audit to obtain reasonable assurance abo t whethe iy co olidated financial statements are free from material misstatement. An audit involves •-rforming procedures to obtain audit evidence about the amounts and disclosures in the consolidated ` ancial statemenn. The procedures selected depend on the auditor's judgment, including the a:sessment of risk9/:of material misstatement of the consolidated financial statements, whether due o f•� iN error. In making those risk assessments,the auditor considers internal control relevant to e - . epa tion and fair presentation of the consolidated financial statements in order to desig audit pro es at are appropriate in the circumstances, but not for the purpose of expressing an op'•ion on the effect. eness of the entity's internal control.An audit also includes evaluating the appr priateness of ac canting policies used and the reasonableness of accounting estimates made by m agement, as well as evaluating the overall presentation of the consolidated financial statements. We believe tha e audit evidence we have obtained is sufficient and appropriate to provide a basis for / our audit opin 'on. / / // 31 FOR DISCUSSION PURPOSES ONLY Opinion In our opinion,the consolidated financial statements present fairly, in all material respects,the f ancial / position of the Corporation of the City of Pickering as at December 31,2013 and the results o is operations, and its cash flows for the year then ended in accordance with Canadian public se for . accounting standards. Chartered Professional Accountants,Chartered Accountants Licensed Public Accountants , 2014 • O Page 2 32 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Consolidated statement of financial position as at December 31, 2013 . 2013 2012 $ $ Financial assets Cash and cash equivalents 54,141,8 45,111,22 Investments (Note 3) . 38,9492 36,956 56 • Taxes receivable 16,15022 17,0 ,859 Accounts receivable 3, 861-6 3 66,085 Investment in Veridian Corporation (Note 4(b)) 4 ,6 ,,,9 ,723,364 Promissory notes receivable (Note 5) 5,069,00i 25,069,000 /185,755,656 v 172,173,685 Liabilities Accounts payable and accrued liabilities 18,730,1 12,451,636 Other current liabilities 96/29 92,048 Deferred revenue (Note 6) 54,587,493 49,179,733 Long-term liabilities (Note 9) 18 49,763 17,775,020 Post-employment benefit liability(Note 8(a)) ,092,800 3,652,600 WSIB benefit liabilities (Note 8(b)) 991,559 907,759 / 96,547,911 84,058,796 • Net financial assets / / 89,207,745 88,114,889 Non-financial assets Tangible capital assets (Note 10) D 205,294,283 192,638,717 Prepaid expenses 281,689 593,381 Inventory 295,933 239,019 205,871,905 193,471,117 Accumulated sure lus Note 11 295 079 650 281 586 006 • O O • / The accompanying notes to the consolidated financial statements are an integral part of this financial / statement. / Page 3 33 / FOR DISCUSSION PURPOSES ONLY • / / The Corporation of the City of Pickering Consolidated statement of operations as at December 31, 2013 2013 / 2012 Budget (Note 17) Actual Actual $ $ $ Revenues Residential and farm taxation 37,902,203 38,0 ,035 35,5. ,752 Commercial and industrial taxation 9,853,990 10 3 4,.6 9 88,025 Taxation from other governments 7,984,919 75`,• 9 ,004,984 User charges 8,968,612 8,494,8 8,976,906 Government grants and fees 4,086,911 6,183,653 2,137,551 Other contributions and donations 2,380,565 3,218,128 894,383 Development charges and developer contributions earned 4,307,3 2,544,2 4 1,309,568 - Contributed tangible capital assets 4,916 45 1,747,105 Investment income 1 ,5' ' 5 ,444 316,542 Penalties and interests on taxes 2, 50 I /0 2 09,162 2,740,853 Fines 897,1 a v� 866,162 945,702 Interest on promissory notes 1,426,850 1,426,852 1,426,852 . Sale of Land 1,100,000 - - Equity share of Veridian Corporation . earnings (Note 4 (c)) - 4,862,085 4,177,240 Other 167,6 1 253,073 297,209 Gain on disposal of tangible capital assets - 394 - / 81,9 I-,557 92,667,859 78,425,672 U Expenses (Note 19) General government 15,076,057 14,109,587 12,895,782 Protection to persons and property 21,915,845 21,901,042 20,810,361 Transportation services 12,490,259 12,205,455 11,240,547 Environmental services 3,725,913 3,346,577 3,627,664 Social and family services 625,033 651,004 664,397 Recreational and cultural se, ic- 24,622,900 24,211,894 23,537,837 Planning and developmen,t 3,630,767 2,748,656 - 2,385,419 Loss on disposal of tangible capita -.sets - - 171,222 / / 82,086,774 79,174,215 75,333,229 Annual (deficit) sure s (182,217) 13,493,644 3,092,443 Accumulated sur s, beginning of y ar 281,586,006 281,586,006 278,493,563 Accumulated s ir•lus end of eaf 281 403 789 • 295 079 650 281 586 006 O • / The accompanying notes to the consolidated financial statements are an integral part of this financial / statement. Page 4 34 / FOR DISCUSSION PURPOSES ONLY 1 The Corporation of the City of Pickering Consolidated statement of change in net financial assets as at December 31, 2013 2013 / 2012 Budget (Note 17) Actual Actual $ $ $ Annual(deficit)surplus (182,217) 13,493 44 3,092 •43 Acquisition of tangible capital assets (23,296,778) (24,369,658) (15,4 ,915) Amortization of tangible capital assets 10,681,500 9, 28 4 9 03,116 (Gain) loss on disposal of tangible capital assets - 4) 171,222 Proceeds on disposal of tangible capital assets - 215,5 41,234 (12,797,495) / (932,371) / (2,597,900) Transfer of assets under construction to / tangible capital assets - 1,589,032 891,526 Assets under construction expensed 181, 17 100,952 / n 1,77,9,449 992,478 Acquisition of inventory of supplies - ,252,086) (1,122,183) Use of inventory of supplies - 1,195,172 1,112,422 • Acquisition of prepaid expenses - (274,189) (993,225) Use of prepaid expenses - 585,881 1,017,887 254,778 14,901 Change in net financial assets (12,7971 95) 1,092,856 (1,590,521) Net financial assets, be•innin• of ear 88,114,889 88,114,889 89,705,410 Net financial assets end of ear W.414'5 17 394 89 207 745 88,114 889 The accompanying notes to the consolidated financial statements are an integral part of this financial statement. Page 5 35 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Consolidated statement of cash flows • as at December 31, 2013 2013 / 2012 $ $ Operating transactions Annual surplus 13,493, 3,092,483 Non cash items / Amortization of tangible capital assets 9,7 8,484 9,503,116 (Gain) loss on disposal of tangible capital assets. . 94) /71,222 Equity share of Veridian Corporation 4,:. 185) ,177,240) Contributed tangible capital assets recorded in revenue (4,916, , 44 (1,747,105) Change in non-cash operating items: Decrease in taxes receivable 897,237 180,190 (Increase) decrease in accounts receivable (520,11 295,296 Increase in accounts payable and accrued liabilities 6,278, 1 347,154 Increase in other current liabilities -,081 . 6,789 increase in deferred revenue ' 5, 07,760 4,852,046 Increase in post-employment benefit liability 440,200 434,000 Increase in WSIB benefit liabilities 83,800 80,900 Increase in inventory (56,914) (9,761) Decrease in •re•aid ex•enses 311,692 24,662 / 26,289,180 13,053,712 Capital transactions Acquisition of tangible capital assets (net of transfers and contributions) (17,682,464) (12,666,332) Proceeds on disposal of tangible capital as ets \/ 215,553 41,234 / (17,466,911) (12,625,098) Investing transactions Increase in investments (1,993,406) (3,296,182) Dividends received from Veridia Corporation 1,927,000 1,927,000 (66,406) (1,369,182) Financing transactions O Proceeds from debentur s issued • 2,873,000 2,332,000 ' Principal repayment o debentures (2,598,257) (3,688,667) / / 274,743 (1,356,667) Increase (decrees ) in cash and cas equivalents 9,030,606 (2,297,235) Cash and cash quivalents, beginning of year 45,111,221 47,408,456 Cash and casii e. -'valents, end of year 54,141,827 45,111,221 Cash an cash -•. .'v�-ntsonsists of Cash • / 9,041,969 5,260,557 Ca, equivalents 45,099,858 39,850,664 .—L / 54,141,827 45,111,221 / / . / / -IAhe accompanying notes to the consolidated financial statements are an integral part of this financial statement. Page"o 36 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2013 1. Significant accounting policies The consolidated financial statements("the financial statements")of The Corporatio' of the City of Pickering (the"City")are the representations of management prepared in accorda ce with accounting standards established by the Public Sector Accounting Board ("PSAB")of Chart-red Professional Accountants of Canada. Significant accounting policies adopted by the City ar- as follows: (a) Reporting entity (I) Consolidated financial statements The consolidated financial statements reflect the assets, lia."ities, revenues a . expenses of the reporting entity. The reporting entity is comprised of t •- activities of all ce mittees of Council and the City of Pickering Public Library Board w•ich is controlled ID, the City. All material inter-fund transactions and balances are iminated on cons•lidation. (ii) Investment in Veridian Corporation , The City's investment in Veridian Corporation H acc. - for on - modified equity basis, consistent with Canadian public sector acco ting stan `s for nvestments in government business enterprises. Under the modified equity basis,Veridi- Corporation's accounting policies are not adjusted to conform to these of the City and 'nter-organizational transactions and balances are not eliminated.The C' recognizes its -•uity interest in the annual earnings or loss of Veridian Corporation in its .nsolidated state -nt of operations with a corresponding increase or decrease in its investm- t asset account. r ividends that the City may receive from • Veridian Corporation and other c_.ital transactions - e reflected as adjustments in the investment asset account. (iii) Operations of School Board and the ion o I urham The taxation, other reven -s, expenditures, assets and liabilities with respect to the operations . of the school boards ano the Region of Du' am (the"Region") are not reflected in these consolidated financial tatements. (iv) Trust funds Trust funds and e' -fated oper- ons administered by the City are not consolidated, but are reported sep ate ., I- Trust 'unds Statement of Financial Activities and Statement of Financial P ition. • (b) Adoption of n w accounting to dards As at Jan ry 1, 2013,the C' adopted revised PS 3410-Government transfers, and PS 3510- Tax revenue on a prospect e basis.There was no impact on the consolidated financial statements as a result of the adoptio. of these new standards. (c) Ba s of accounting Alis 7�N,.asis • accounting Re,- • a expenses are reported on the accrual basis of accounting.The accrual basis of accou in recognizes revenues as they are earned and measurable; expenses are recognized as they re incurred and measurable as a result of the receipt of goods and services and the creation of a legal obligation to pay. (ii) Cash/and cash equivalents /ash and cash equivalents consist of cash on hand, demand deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash. Cash equivalents have a short-term maturity of three months or less from the date of acquisition. Page 7 37 / FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2013 1. Significant accounting policies (continued) (c) Basis of accounting(continued) (iii) Investments Long-term investments are recorded at cost and any loss in value w 'ch is considered • her than temporary is recorded as appropriate.Any premium or discou't a •urchase of- investment is amortized over the life of the investment. • (iv) Tangible capital assets("TCA") Tangible capital assets are recorded at cost less accumula -d amortization. •st includes all costs directly related to acquisition or construction of the ngible capital as--t including transportation costs, installation costs, design and engi eering fees, legal ees and site preparation costs.Amortization is recorded on a strai t-line basis over e estimated life of the tangible capital asset commencing once the asset i available for use :s follows: Buildings 15 t 454-a Machinery and equipment 2 • 25 ye,' • Vehicles to 15 years Infrastructure- Roads 10 to 50 years • Infrastructure- Storm sewers 25 to 100 year Infrastructure-Sidewalks 20 to 40 year- Information technology hardware 4 to 8 year Infrastructure- Parks 10 to 40 ars Library collection materials 4 to 7 y ars Furniture and fixtures • to 0 years One-half of the annual amo►ization is c `rged n the year of acquisition and in the year of disposal.Assets under co,struction are nit ortized until the asset is available for productive use. Land is not amorti --d. Tangible capital ass- s received as con ibutions are recorded at their fair value at the date contributed, and th•. amount is also r-corded as revenue. (v) Accounting for P op- Tax Cappi-g Provisions resulting from the Ontario Fair Assessment System The net im►-ct in pr.•t- y to -s as a result of the application of the capping provisions does not affec he Consolida -d statement of Operations as the full amounts of the property taxes were le.led. However, the apping adjustments are reported on the consolidated Statement of Fina ial Position as a r-ceivable/payable from/to the Region. (vi) D=erred revenue Deferred revenue-represent user charges and fees which have been collected but for which • t sr- -ted serves have yet to be performed. These amounts will be recognized as revenues at ye,a r the services are performed. In addition, any contributions received with e - - 'estrictions are deferred until the related expenditures are made. (vii) Post-em oyment benefits The pr sent value of the cost of providing employees with future benefit programs is reco nized as employees earn these entitlements through service. Actuarial gains and losses ar, amortized over the average remaining service period ("ARSP"). The actuary determined SP to be 14 years. • (vii• inventory Inventory is valued at the lower of cost and replacement cost. Cost is determined on a weighted-average basis. Page 8 38 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements / December 31, 2013 1. Significant accounting policies (continued) • (c) Basis of accounting(continued) (ix) Government transfers Government transfers are recognized as revenue by the City in the p-riod in which the transfers are authorized and any eligibility criteria are met, unless 'ey a restricted -rough stipulations that require specific actions to be carried out in order o e transf- . For such transfers, revenue is recognized when the stipulation has been et. • (x) Tax revenue Tax revenue is recognized on all taxable properties withi r the City that are i,cluded in the tax roll provided by the Municipal Property Assessment Co'•oration, using property tax values included in the tax roll or property tax values that can •e reasonably est. ated by the City as it relates to supplementary or omitted assessments, t rates authori ed by Council for the City's own purposes in the period for which the t is ied. (xi) Intangible assets Intangible assets are not recognized as as is in the financial tatements. (xii) Use of estimates The preparation of financial stateme in conformity wi • Canadian public sector accounting standards requires management to ake estimates a . assumptions that affect the reported amounts in the financial stateme s and accompany' ccom an ' notes.Accounts involving significant, P Y 9 9 estimates include allowance for ou.<'i, _ counts certain accrued liabilities, post-employment benefits liability and estimate relating� so ul lives of tangible capital assets.Actual results could differ from the a estimates. • 2. Operations of school boards a the Region of a rham Further to Note 1 (a) (iii) requisi ions are made by e Region of Durham and School Boards requiring the City to collect property taxs and payments' lieu of property taxes on their behalf.The amounts collected and remitted are s mmarizes as folk s: / 7. 2013 2012 / \/ /Region School board Region School board $ $ $ $ Taxation 94,868,875 42,950,054 89,946,477 41;53 ,945 Payments i ieu of taxes . 6,373,083 407,968 6,057,029 446,744 / 101,241,958 43,358,022 96,003,506 41,980,689 3. investor/ / 2013 2012 / / Cost Market value Cost Market value / $ $ $ $ Long-term investments 38,949,562 39,098,870 36,956,156 37,660,143 Long-ter ' investments are comprised of deposit notes, bonds, and guaranteed investment certificates. Page 9 39 / FOR DISCUSSION PURPOSES ONLY 1 / The Corporation of the City of Pickering Notes to the consolidated financial statements / December 31, 2013 4. Investment in Veridian Corporation (a) Veridian Corporation is owned by the City of Pickering, Town of Ajax, Municipa•y of Clarington a • the City of Belleville.The City has a 41 per cent interest in Veridian Corporati n.Veridian Corporation, as a government business enterprise, is accounted for on thejnodified equity balls in these financial statements.Veridian Corporation serves as the electrical distribution utility fo a number of communities including the four noted above and conducts n. -r fated utility -ervice ventures through its subsidiaries. • The following table provides condensed supplementary consolidat-d financial in m ion for the corporation and its subsidiaries for the year ended December 31 The amounts are isclosed in thousands of dollars: 2 13 2012 (, 0's) (000's) Financial position Assets Current 82,508 86,594 Capital and intangibles 200,901 191,528 Other 19,344 21,919 Total assets / / 302,753 300,041 Liabilities Current D 53,089 49,230 Long-term debt 112,197 115,553 Other 21,252 26,202 Total liabilities / / 186,538 190,985 • Shareholders'equity Share capital 67,260 67,260 Contributed capi I / 25 25 Retained eami gs 48,930 41,771 Total equity / / 116,215 109,056 Total liabilities and equity Ni / 302,753 300,041 , Financial activities Co ,revenue 246,386 245,349 C modity expen (246,386) (245,349) lists bution reven 48,985 50,608 O�-ra •. expe ses (36,309) (34,012) O -'inc. expense) (686) (6,140) Loss N, discontinued operations (131) (268) Net earnings/for the year 11,859 10,188 / / Page 10 • 40 / FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2013 4. Investment in Veridian Corporation (continued) (b) City of Pickering's investment represented by: 013. 2.t12 $ $ Promissory notes receivable (Note 5) 4400 2, ,069,000 Investments in Veridian Corporation Initial investment in shares of the Corporation 30,496,196 30,496,196 Accumulated earnings 36,349,43 31,487,349 Accumulated dividends received (20,296, 2) (18,369,002) Increase in value of investments 1,10021 1,108,821 Total investment / n 47,6,58,449 44,723,364 (c) Equity in Veridian Corporation / / 2013 2012 $ $ ' Balance, beginning of year 72,835,384 70,585,144 Equity share of net earnings forr the y ar 4,862,085 4,177,240 Dividend received from Veridian Co oration (1,927,000) (1,927,000) Balance, end of year(Note 11) / \\�� / 75,770,469 72,835,384 • v (d) Contingencies and guarantees .f Veridian Cf,Tor.tion (the "Corporation') as disclosed in their . financial statements are as f.lows: (i) Insurance claims The Corporation i: a member of the ' unicipal Electric Association Reciprocal Insurance Exchange("M 'RIE" which was reated on January 1, 1987.A reciprocal insurance exchange ma- b-Ath ,ed as a • oup of persons formed for the purpose of exchanging reciprocal c.ntra•M a n' or inter-insurance with each other. MEARIE provides general liability in rance to ••4mber electric utilities. Insura e premiums char ed to each member utility consist of a levy per$1,000 of service reve e subject to a cr it or surcharge based on each electric utility's claims experience. Insurance limits of up o$30,000,000 per occurrence are covered by MEARIE. (ii) ontractual obliga ' n- Hydro One Networks Inc. ("HONI") T orporatio s subsidiary,Veridian Connections Inc. ("VCI"), is party to a connection and 'ost overy greement with HONI related to the construction by HONI of a transformer 'ft ionesi ated to meet VCI's anticipated electricity load growth. Construction of the project was• ted during 2007 and VCI connected to the transformer station during 2008. To the xtent that the cost of the project is not recoverable from future transformation conn ction revenues, VCI is obliged to pay a capital contribution equal to the difference be een these revenues and the construction costs allocated to VCI.The construction costs ocated 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, 2013 (2012-$1,212,000), based on management's best estimate of the future transformation connection revenue shortfall. HONI is expected to 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 41 The Corporation of the City of Pickering Notes to the consolidated financial statements / December 31, 2013 . 4. Investment in Veridian Corporation (continued) (d) Contingencies and guarantees of Veridian Corporation (the "Corporation") as d' closed in their financial statements are as follows: (continued) (iii) Environmental matters In 2008, Environment Canada issued its final regulations governi • t 0 anagemen of PCBs. Under the regulations, assets remaining to be disposed • by c Aprimaril consist of pole-mounted distribution line transformers. Costs associated i ith the re ■._l _'d destruction of PCB-contaminated transformers and remedi. on of chemically contaminated lands has been incurred over the past four years.As at D- ember 31, 2013, e Corporation's remaining liability was nil (2012-$206,000)for equipm- t testing and futur remediation. • Replacement of contaminated distribution equipment is expected to be c mpleted by 2025. (e) Lease commitments Future minimum lease payment obligations under op: ati leases are follows: $ (000's) . 2014 34 2015 34 2016 27 2017 3 2018 , 3 Thereafter D 66 N • 167 5. Promissory notes receivable y 2013 2012 n $ $ Promissory note rec-ivab=-Q- .? n maturing Decem•er 31, 20 Ind at the greater of•Vo or the Ontario Energy Board deemed Ion• term debt rate o an annual basis to maturity (6o effective Nose •er 1, 2012) 7,095,000 7,095,000 Promiss ry note receivabl- from Veridian Connections Inc. matun• •sember 1, ;039 and bearing interest at 5.3 % ,om : 1, 410 to December 31, 2014 �d then i'- 4i to io Energy Board deemed long-term de: rate for each successive five year period thereafter 17,974,000 17,974,000 / 25,069,000 25,069.000 Interest rev nue earned from these notes receivable totaled $1,426,852 (2012-$1,426,852). The promisso notes from Veridian Corporation are convertible into common shares at the rate of one common share for every$1,000 of principal amount, at the option of the City. The City has signed an inter- reditor agreement confirming the subordinated ranking of these promissory notes to the senior de financing issued by Veridian. Page 12 4 2 / FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2013 6. Deferred revenue 2 3 201 $ $ Obligatory Reserve Funds Development charges .9, ,848 37,486,012 Parkland 1, 4 , 7 1,433,507 Federal gas tax 6,225,5 6,017,337 Third party/Developers Contributions Reserve Fund 2,765,122 2,670,168 50,045,06 47,607,024 Other unearned revenues 4,54 ,426 1,572,709 54, ;7,493 49,179,733 Continuity of deferred revenue is as follows: 2013 2012 $ $ Balance, beginning of year 49,179,733 44,327,687 Restricted funds received 6,752,288 6,668,447 General funds received D 3,839,952 767,617 Interest earned 864,886 928,717 V 11,457,126 8,364,781 Earned revenue transferred t operations 6,049,366 3,512,735 Balance, end of year 54,587,493 49,179,733 7. Interfund loans As a means of fundi g various .vital quisitions,-funds are borrowed by the Capital Fund from Development Cha es deferred r- e•ue(obligatory reserve funds). These funds are secured by promissory note with interest rate ranging from 1.97%to 4.7% and various payment terms ranging from 1 year to 0 years;The finarcing arrangements and ultimate repayment are approved by Council through the current budget pro•-ss.Although these notes have payment terms as noted above, they are repayable n demand. The f• owing is a summary of the related loans: 2013 2012 'oads and st tii is 510,015 572,089 Community facili es, libraries and parks 1,675,255 1,885,809 Protection .ces 831,469 639,809 • Municipal budding 10,790 15,838 3,027,529 3,113,545 Page 13 43 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2013 8. Post-employment benefits liability (a) Post-employment benefits liability The City makes available to qualifying employees who retire before the age •f 65, the opportu 'y to continue their coverage for benefits such as post-retirement extended -althcare benefits. Coverage ceases at the age of 65.The City also provides full time and .cr ..nent part-tim- employees a sick time entitlement and any unused entitlement is accurrf ull -d year to year.This accumulated entitlement is not vested and is forfeited at the time of tire e . termi -tion.The most recent actuarial valuation of the post-employment benefits w s performed - Ja,uary 1, 2011. Information about the City's benefits liability is as follows: 21 3 2012 $ $ Accrued benefits liability, beginning of year 3 .52,600 3,218,600 Current service costs 353,800 341,000 Interest on accrued benefits 244,400 236,100 Amortization of actuarial losses 219,900 219,900 Benefits paid during the year (377,900) (363,000) Accrued benefits liability, end of year / • 4,092,800 3,652,600/ Accrued benefit obligation 6,570,400 6,350,100 Unamortized actuarial losses (2,477,600) (2,697,500) Accrued benefits liability, end of year D / 4,092,800 3,652,600 The main actuarial assumption employed in e .•ctuarial valuations are as follows: (i) Discount rate The present value at December 31 013 of the future benefits was determined using a discount rate of 3 5% (2012-3.75°/ . (ii) Dental costs The dental ost -,• -?s�•a 4.0% increase per annum. (iii) Health cc sts HealtU costs were assu •ed to increase at 7.6% (2012-7.8%) and decrease by 0.2% (2012- 0.2°) increments per ,ear to an ultimate rate of 5.0% per year in 2026 and thereafter. O / . / Page 14 44 1 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2013 8. Post-employment benefits liability(continued) (b) Workplace Safety and Insurance Board(WSIB) benefit liabilities Effective January 1, 2001,the City became a Schedule II employer undert - Workplace Safe►. & Insurance Act and follows a policy of self insurance for the risk associated ith paying benef for workplace injuries for all its employees.The WSIB administers the clai - re-ted to workpl-ce injuries and is reimbursed by the City. The most recent actuarial valua on • the WSIB b- efits was performed at December 31, 2011. Information about the City's WSIB liability is as follows: 201 . 2012 $ $ Accrued WSIB liability, beginning of year 917,759 826,859 Current service cost 127,800 124,100 Interest on accrued benefits 37,300 34,200 Benefits paid during the year (81,300) (77,400) Accrued WSIB liability, end of year 991,559 907,759 The main actuarial assumptions employed• the actuarial val Lions are as follows: (i) Discount rate The present value as at Decem•er 1, 2013 of the uture benefits was determined using a discount rate of 3.75% (2012 .7 v71 p (ii) Inflation rate The rate of inflation was ssumed to be 2. 'to per annum. (iii) WSIB Administration ate Liabilities for WSI benefits have be- increased 25%to reflect the administration rate charged by WSI . ' A WSIB Res e ) was established in 2001. The Reserve Fund balance at December 31, -- 2013 was 791,'�,,• - . - 2,532,549). In addition, the City purchased two insurance policies t t protect ity gainst significant claims to the City. The occupational accident insura e pays loss claim up to$500,000 per work related accident. The excess workers comp-nsation indemnit insurance has a$500,000 deductible and will pay for claims up to an• including $15,000 00 per work related accident. 9. Long-ter labilities (a) Th- balance of long-t rm liabilities is made up of the following: 2013 2012 $ $ The munici ality is responsible for the payment of princip and interest charges on long-term liabilitAs issued by the Regional Municipality of Dur am on the City's behalf. At the end of the year, th4 outstanding principal amount of this liability is 18,049,763 17,775,020 / • Page 15 / FOR DISCUSSION PURPOSES ONLY 45 • / The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2013 9. Long-term liabilities (continued) • (b) The above long-term liabilities have maturity dates of July 12, 2016, 2017, 202 and 2022, November 21, 2018, July 15, 2014, December 23, 2014, October 15, 2015 a.d 2020, September 29, 2016 and 2021 and October 16, 2018 and 2023 with vario interest rates ra sing from 1.10%to 5.45%. Principal repayments are summarized as follows: 2014 $ 2,876,995 2015 2,475,239 2016 2,443,716 2017 2,116,834 2018 4,053,382 Thereafter 4,083,597 Ar _ 18,049,763 (c) Long-term liabilities include principal sums of$5 ,000 which y .- refinanced by the issuance of debentures over a further period not to exceed 0 years, and$1,9 2,000 which may be refinanced by the issuance of debentures over a further eriod not to exce 5 years. (d) The above long-term liabilities have been pproved by Coun I by-law. The annual principal and interest payments required to service th a liabilities are w. in the annual debt repayment limit prescribed by the Ministry of Municipa)/Affairs and Housi .. • (e) Interest expense recorded in the year re -. - hes- ong-term liabilities is$642,118 (2012- $744,814). 10. Tangible capital assets Information relating to tangible capital assets is as .11ows: (i) Contributed tangible cap'al assets ' The City records tan...le capital assets ,ontributed by an external party at fair value on the date • contributed.Typica -x- %'-1 s are rows, storm sewers and sidewalks installed by a developer as part of a subdivisi n o(•$ ;r;;en -greement. Contributions of tangible capital assets in 2013 amounted to$4 16,74 -4 V2 • (ii) Tangible cap'al assets recogni ed at nominal value Land and r roads are assig d a nominal value of one Canadian dollar because this land only support or is intended to pport.road infrastructure and the majority of land acquired supporting road aifowances was ac fired at no cost. (iii) W. s .f art and hist ,cal treasures he.,ty ha - mu eum which holds various historical treasures and historical buildings pertaining to the it'- a d history of the City of Pickering. These items are not recognized as tangible capital ass'cts . the financial statements because a reasonable estimate of the future benefits associated ' h such property cannot be made. Any acquisition or betterment of these assets is recognize as an expense in the financial statements. (iv) Other The et book value of tangible capital assets not being amortized because they are under construction is$13,470,090 (2012-$4,242,525). unng the year, there were no write-downs of assets (2012-$Nil) and no interest was capitalized during the year(2012-$Nil). Page 16 4 6 / FOR DISCUSSION PURPOSES ONLY M Ey ct' t0 N ID N Q' CD N h N tO CO O' CD CO N CD O O CO M N t') 7 N C N N '6) M O) CO CD CO t') H 't M t0 N. O m Cl)N O7 t- to M N Cr t0 N N N N t6 N C Cr N T G7 N C d LI CD N O co O M , N C tP M .g O O ) i t i C) . p N <t to Cl O U 0 p O 7 co C.1 p' � � oN n N o) ti ' V N C d r N O < U ea N ' tr co co . co 0) to a' 0 CO CO CO n°_ n 7 O O co to O co C. ' 10 LL') 40 N m U) D L �. C N (p co 7 CO CD M CO M CO O o co O) N Q co N co N D U O 0) o M CD m N sr J U CO N N M O N 1� O O SQ In m CO N Y o O CO CO .r. 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CID N CO O O t0 En ca E O O) t0 M (D co N �-H L j r? co� V' 100 sr V co m cd p O' m m 10 LL) N /�� N O VY rl 2 1 P: C.---c' N ({i `- co O m to t0 m LI 0I to to f0 W to N CO t0 CO C 1� D' CO t` NO O) CO r�+f 7 O N N O N m O O g � j m O N O' M N co= -4-4 C CO to ti ' ' ) 1 eD Q N O N N •O ■ J COO CD N co N rN t—( (C4 tcn p tO0 Lino VD N O Y 2 o m co '`.4 V ttS N N N CO Cl..) Cr) m O >. .0 �- R t'K O O O y r� /jam Qr O) c Ill T . 0 ' ?, 3 i. t C./ .... � C I- N O C C 0 O R V C 1p _ y a) C 0 v 0 O R U �J N N tJ y .... S O Oa-0 > '� � U O N ._. d O - N E O 8 - c o c a •' c ' .j .. m-a c 7 C ° .. D 2 a c 0 CO If. c .:_ to tl) um -6 ,- 0 ,0 t3 �. O D to p Q w cu 0 to U co < co Q m < CO Z • 47 V EP N LU) U) C o 4Q G) r t_ 0 0) rn m o o - CO M • N j c') 0 m O m O m ° r «) 0) CO 0) 9 N N CO 41 ~'m N a) co M `- 9 P d)cc a_ N O y} m L') m L') ' , 1 1 O • CO CO V )n 0 N ` C4 O G) V 0) O N N u0)'-(1)- 0) c N N <Y N O Q e q3 U) ) G) (�Q () 0) m co n O N D) N r co m 7 OD 3 N CO CO (D co 6 ° ° of v M co P N 9 c 0 CL C (O O N (p G)m r O 0) N 0) P) N() V' N O U J N r C V In (n M O O E V O m M m N p N. y fp rQ N N N u) N m O O) Y r N O 0) (') CO 7 CO V CO N (7 V N m U V- CO- r U 0- sr co CD o `4 0 m CO M 2 to O ED N E C O N .. N N C' 0 (n O d' ,- G) p •' to to co co (o m N m co co o C4 Ca L p O U -c C o r g N M 0N c) (O m rn Q 9 7 N V I 0) (y co O r G) r O m '.. E Y m r D) co CO (n D) (n o 5. co n N C') 0) CO N M m OD- (') m 0) (') C) 0 V 2 m n M v Ca CO_ ('- y Y r r-- (O m c ` Cr ) o o m . m g d m N v Q 7 \ O W N U N r \ ` IA V < )n m °O CO vi r V E m Mm N m o D sr N E9 m (n m : G) m m • V E a r) (n rn m m n) r ^y m n rn N m v = ° r in = ti rn ca- t-- CO- •PO C co rn 4 °m a N ° O N fA o O N (Q r 9 r N c') m G) 41 d)� 0 •1� V m n m V ? ti r L (o N 9 (n V P (Q RI Pi-i 4 > m sr M M m r co 1 m 0 (1) O N o Lc) N m m m O ti V O M �° N fh IF m O) O�m M V c� m m ° c� m O r M M N 00 m m co to CID 2 Cd u) (y M i (9 ii m 1n C1 r to CO •Cie a N co =Q O m "- m N co t° C7 m m m M (h M a 00.1 yr` -4--‘ a es. rn to o 0 0 m m M co co co O -' rn c (o m m -11-)) U m �. co vi o or co t••• ,--ti C c) U) es O N Cj O e-1 c6 a) w t R �f O CG N ° p O O r ® O \ V o) p a0 2 a E y a� m C. C C O p m 7 Q Co T W U t4 .2 a 'c c a 0 `'_` U c a Y ° m o o p °in a 1 ® .--t o > w e 1 E 'v 0 a CD �, a) o ai E ai U 7 C - o '�'. O « c % a L N v c 3 c E . ti o c n c 4,5 f'{ C 0 m ° < ,. m 0 m u m a Q ai Q m w :-' CO U m < J (t1 Q 0] Q J 0-.1 Z = -4-J U 48 / The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2013 / 11. Accumulated surplus The City's accumulated surplus is comprised of the following: / 1 X013 a12 $ $ Capital fund ',6 4 ;,645,992 Operating fund 1 5,2 125,170 Equity in Veridian Corporation 75,770,469 72,835,384 Tangible capital assets 205,294,283 192,638,717 Post-employment benefits liability (3,913,801 (3,473,600) Internal loans (3,027,5'9) (3,113,545) Net long-term liabilities (18,04•, 63) (17,775,020) WSIB benefit liabilities (911,559) (907,759) Resenes set aside for special purposes by Council Working capital 400,000 • 400,000 Self insurance 892,707 962,707 Replacement of capital equipment 1,572,987 1,426,012 Contingencies 1,584,339 1,514,339 Rate stabilization 16,169,680 15,793,551 City's share for development charge 1,127,979 3,165,288 Continuing studies 427,855 720,472 Vehicle replacement 790,159 197,215 Easement settlement D 17,595 17,595 Eastern branch 55,000 180,000 Move Ontario 2,723 40,883 Economic stabilization - 830,000 Land Purchase 99,403 99,403 Seaton Development Re ;-w 1,470,988 1,905,948 Financial Systems 454,647 314,647 Senior Centre 150,000 75,000 Accessibility Initia • -s O 15,032 13,713 Reserve funds set -.side for sal p,rpose by Council Recreation programs and facile H. 153,960 151,468 Acquisition ."tangible capital - sets 1,501,128 1,477,697 Squash co its 7,107 2,088 WSIB 2,790,875 2,532,549 Anima shelter 261,136 228,882 Men' sl itch 143,983 141,652 O, ra • ns tre 133,532 419,558 N:)/) / 295,079,650 281,586,006 12. Pension agree ents The City mak s contributions to the Ontario Municipal Employees Retirement Fund (OMERS),which is a multi-emp yer plan, on behalf of the members of its staff.The plan is a defined benefit plan which specifies e amount of the retirement benefit to be received by the employees based on the length of service .nd rates of pay. Cont sutions on account of current service for 2013 were$3,339,622 (2012-$3,122,703). Page 19 49 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2013 13. Trust Funds Trust funds administered by the City amounting to$333,943 (2012-$325,969) hav not been include. in the Consolidated Statement of Financial Position nor have their operations bee included in the Consolidated Statement of Operations. 14. Related party transactions Veridian Corporation The City of Pickering is a principal shareholder in Veridian Corporation ote 4). The ty 'eceives electricity and services from Veridian Corporation and its subsidiary. • 201: 2012 $ $ Transactions r Revenues • Interest on promissory notes ,426,852 1,426,852 Property taxes levied 45,714 48,329 Expenses Electrical energy and services 2,127,282 1,986,034 Balances Accounts payable and accrued liabilities 562,535 369,049 Promissory notes receivable 25,069,000 25,069,000 15. Guarantees D In the normal course of business,th- ity enters .ko a; eements which contain guarantees. The City's primary guarantees are as follows: (i) The City has provided inde' nities under leas- agreements for the use of various facilities or land. Under the terms of these -greements the C. y agrees to indemnify the counterparties for various items including, but no united to, all liabil. es, loss, suits, and damages arising during, on or after the term of the agree, ent. The maximu, amount of any potential future payment cannot be reasonably estimated. N (ii) The City indem 'ies al ,. o"-es -nd elected officials including Library employees and board members for v rious items .l lu.• g, but not limited to, all costs to settle suits or actions due to association ith the City, subje• to certain restrictions.The City has purchased liability insurance to mitigate e cost of any po -ntial future suits or actions. The term of the indemnification is not explicitly efined, but is limi d to the period over which the indemnified party served as an emplo e or elected offic. I of the City.The maximum amount of any potential future payment can t be reasonably a timated. (iii) T e Civil -s entere into agreements that may include indemnities in favour of third parties, such -s . has -nd s le agreements, confidentiality agreements, engagement letters with advisors • and co- It:,ts, utsourcing agreements, leasing contracts, information technology agreements and servic- ag eements.These indemnification agreements may require the City to compensate counterpartieS for losses incurred by the counterparties as a result of breaches in representation and regulons or as a result of litigation claims or statutory sanctions that may be suffered by the counterparty as a consequence of the transaction. The terms of these indemnities are not explicitly defined/and the maximum amount of any potential reimbursement cannot be reasonably estimated. The natuv'e of these indemnification agreements prevents the City from making a reasonable estimate of the ma/mum exposure due to the difficulties in assessing the amount of liability which stems from the unpctability of future events and the unlimited coverage offered to counterparties. Historically, the . Ci has not made any significant payments under such or similar indemnification agreements and / t refore no amount has been accrued in the balance sheet with respect to these agreements. Page 20 50 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2013 , 16. Contingent liabilities Litigation The City has been named as a defendant in certain legal actions in which dams.-s have been soul! t. , The outcome of these actions is not determinable as at the date of reporting a • accordingly, no provision has been made in these consolidated financial statements for any 1':bil''es which ma result. 17. Budget figures . The 2013 Budget adopted by Council on February 25, 2013 was not prepared on a ba- s 'consistent with that used to report actual results. The budget was prepared on a mo.' ied accrual basis hile Public Sector Accounting Standards require a full accrual basis of accoug.The budget fi• res treated all tangible capital asset acquisitions as expenditures and did not in de amortization - pense on tangible capital assets.As a result,the budget figures presented in the nsolidated State -ents of Operations and Change in Net Financial Assets represent the budget ad ted by Council o February 25, 2013 with adjustments as follows: 2013 2013 Council Non Budget approved expenditures presented in budg, from capita Amortization statements $ $ $ $ Revenue Taxation 5 ,7- 112 - - 55,741,112 Capital 0,86'''443-11%, - - 10,863,082 Other 15,300, - - 15,300,363 81,904,5 • / - - 81,904,557 Expenditures . • General government 14,314 98 213,000 548,759 15,076,057 Protection to persons a d property 21,16 ;567 14,000 739,278 21,915,845 Transportation service: 8, 08,895 50,000 4,231,364 12,490,259 Environmental servi•-s O ,376,025 - 2,349,888 3,725,913 Social and family ervice 625,033 - - 625,033 • Recreational ana cultural se -•es 21,195,189 615,500 2,812,211 24,622,900 Planning and .evelopment 3,630,767 - 3,630,767 / / 70,512,774 892,500 10,681,500 82,086,774 Annual surplus (deficit) 11,391,783 (892,500) (10,681,500) (182,217) • Capital zpenditures (24,189,278) 892,500 - (23,296,778) • Trans rs sere d r e ds / 5,277,291 D' 'dend fro id' n Corporation 1,927,000 /Principal repaym t,of debt (3,341,920) Debt proceeds 8,810,124 Prior year opefating fund surplus (125,000) / , / Page 21 51• FOR DISCUSSION PURPOSES ONLY The Corporation ©f the City of Pickering Notes to the consolidated financial statements / December 31, 2013 18. Segmented information The City of Pickering is a diversified municipal government that P rovides a wide ranee of services to it residents. Distinguishable functional segments have been separately disclosed in • e segmented information. The nature of the segments and the activities they encompass are . follows: General Government This item relates to revenues and expenses of the City itself and cannot b- dir ttribute• o a specific segment. Protection to Persons and Property Protection includes fire services, animal control, bylaw services, b.riding inspection . d enforcement of the building code to ensure the safety and protection of all citize's and their prope . Public Works Services Public works includes construction and maintenance of th- Ci roadways, ' ciuding snow removal, sidewalk repairs, street lighting and maintenance of the orm gcyste . Social and Family Services Social services for assistance or services for seni s. Recreation and Culture Services Recreation and cultural services include recr-ation programs, aintenance and rental of facilities and parks, operation of the City's museum and ibrary services. Planning and Development D Planning and development provides - number of• -rvi •-s including municipal planning and review of all property development plans. Segmented information has been provided in the f• lowing pages. • Page 22 52 FOR DISCUSSION PURPOSES ONLY m (s, C) 7, Eft V) h N '3' 10 LA Ct O) C)) N 1` O CC N 1n Ct a) r CL to r N CO CT co O O 0 r O r CD O r Cl m 0 ++ CO CO N N t- 0 c cD CO 0 CO 0 I' 0) N CD a N d C7 Ct LD CL cis N O t, O r CD ai ti V' ri. CO O CA Ct r CO ti CD O CO et N r h CC N r e' M 0 CA CO N CO O r CO N. 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GO - (1) Q 0 P . 54 • Financial statement of The Corporation i f the City of Pickeri ; g Trust "ands December 31, 2013 55 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Trust Funds • December 31, 2013 Table of contents Independent Auditor's Report 1-2 Statement of financial activities and fund balances 11C14. 3 Statement of financial position 4 Notes to the financial statements 5 56 / / FOR DISCUSSION PURPOSES ONLY i / Deloitte LLP / 5140 Yonae reet Suite 1700 Toronto O M2N 6L7 Canada Tel: 16-601-6150 Fa :416-601-6151 ,/ .deloitte.ca Independent Auditor's Report To the Members of Council, Inhabitants and Ratepayers of L The Corporation of the City of Pickering We have audited the accompanying financial statements of e •..ofation o'the City of Pickering Trust Funds,which comprise the statement of financial position :s at Dece •.-r 3 ,2013,the statement of financial activities and fund balance for the year then e .ed,and a summ.. of significant accounting policies and other explanatory information. Management's Responsibility for the Financia tatements • Management is responsible for the preparatio' an:�.'' .resen . ion of these financial statements in accordance with Canadian accounting stan . ds for - -. ofit organizations,and for such internal control as management determines is nec ssary to ena. e .- preparation of financial statements that are free from material misstatement,whe r due to fraud or -n-or. Auditor's Responsibility Our responsibility is to expres .'pion on these financial statements based on our audit. We conducted our audit in acco an '�':__ .na.'an accounting standards for not-for-profit organizations. Those standards require t we co-4.1 wit' ethical requirements and plan and perform the audit to obtain reasonable assur...ce about wh-4 -. the financial statements are free from material misstatement. An audit involves p-rfonning proced. es 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',aerial misstate nt of the financial statements,whether due to fraud or error. In making those risk ass-ssnthe aud' or considers internal control relevant to the entity's preparation and fair presentatio, of• y cia tements in order to design audit procedures that are appropriate in the circumstafices,bu�. +r yhe purpose of expressing an opinion on the effectiveness of the entity's intern 1/control. An a d /also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the fiuiancial statements. We believe that e audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit op. .on. l , / 57 / FOR DISCUSSION PURPOSES ONLY Opinion In our opinion,the financial statements present fairly, in all material respects,the financial pos. ion of The Corporation of the City of Pickering Trust Funds as at December 31, 2013, and the resu s of its operations for the year then ended in accordance with Canadian accounting standards for t-for-profit organizations. Chartered Professional Accountants, Chartered Accountants Licensed Public Accountants , 2014 • Page 2 5 8 / FOR DISCUSSION PURPOSES ONLY The Corporation of the • City of Pickering Trust Funds Statement of financial activities and fund balance year ended December 31, 2013 2013 / 2012 Revenue Interest ,974 ,800 Fund balance, beginning ofyear 25,969 "8,169 Fund balance, end of year / 3% 943 /325,969 • . k • D • • 0 • C / / The accompanying notes to the financial statements are an integral part of this financial statement. 59 FOR DISCUSSION PURPOSES ONLY Page 3 The Corporation of the City of Pickering Trust Funds / Statement of financial position as at December 31, 2013 2013 / 2012 • Assets Cash and investments 3 ,615 31:,815 Interest receivable 6,,328 6,154 3 943 /325,969 v Trust Fund position / 333,943 / 325,969 • • • The accompanying notes to the financial statements are an integral part of this financial statement. / Page 4 6 0 j FOR DISCUSSION PURPOSES ONLY The Corporation of the • City of Pickering Trust Funds Notes to the financial statements December 31, 2013 1. Accounting policies The financial statements of The Corporation of the City of Pickering Trust Fun.- are the represen -tions of management prepared in accordance with Canadian accounting standards/for ot-for-Profit Organizations. Significant accounting policies adopted include: Basis of accounting Interest revenue is recorded as earned. Expenses are reported on the accrual basis of accounting whic• recognizes expenses as they are incurred and measurable as a result of the receipt of goods o services and the reation of a legal obligation to pay. Investments Investments are recorded at amortized cost.The cos of investmen pl accrued interest approximates their fair value. 2. Dorothy Card Estate The City of Pickering administers a trust fun. for the Dorothy C=rd Estate for the care and upkeep of the destitute elderly. The fund balance is corn• ised of investme s and accumulated interest amounting to $333,943 (2012 -$325,969) 3. Statement of cash flows A statement of cash flows has no •een presented the information is readily determinable from the financial statements presented. • • • i Page 5 61 FOR DISCUSSION PURPOSES ONLY / / / Financial statements of City of Pickerin Public Library : oard December 31,2013 D 0 O . 62 FOR DISCUSSION PURPOSES ONLY City of Pickering Public Library Board December 31, 2013 Table of contents Independent Auditor's Report -2 Statement of financial position 3 Statement of operations 4 Statement of change in net debt 5 Statement of cash flows 6 Notes to the financial statements 7-11 • / E 3 FOR DISCUSSION PURPOSES ONLY 5140 Yonge reet / Suite 1700 Toronto O M2N 6L7 Canada Tel: 16-601-6150 F :416-601-6151 .deloitte.ca Independent Auditor's Report To the Members of . The City of Pickering Public Library Board, Members of Council,Inhabitants and Ratepayers of the City of Pickering We have audited the accompanying financial statements oft'e Cl.i�'icker.'g Public Library Board, which comprise the statement of financial position as at D;cember 013 and the statements of operations, change in net debt and cash flows for the ye.. then ended, and summary of significant accounting policies and other explanatory informatioi Management's Responsibility for the Financia tatements Management is responsible for the preparatio, an•ti aresen . ion of these financial statements in . accordance with Canadian public sector ac .unting a ,and for such internal control as management determines is necessary to e,able the pr:y.ra ••n of financial statements that are free from material misstatement,whether due to •and or error. Auditor's Responsibility Our responsibility is to expres an a•inion on the e financial statements based on our audit.We conducted our audit in acco�n''' i Canad' generally accepted auditing standards.Those standards require that we comply wi ethic. 'equine •ents and plan and perform the audit to obtain reasonable assurance about whethe he fmanci. .t: •ents are free from material misstatement. An audit involves p forming proced es to obtain evidence about the amounts and disclosures in the financial statements. The procedure: selected depend on the auditor's judgment, including the assessment of the risks of aterial misstatem; t of the financial statements,whether due to fraud or error. In making those risk ass s -its,the and'•.r considers internal control relevant to the entity's preparation and fair presentation/of •' its, •cial tements in order to design audit procedures that are appropriate in the • circumstances, b •oof�.r t'e purpose of expressing an opinion on the effectiveness of the entity's to a control. An ..di . so includes evaluating the appropriateness of accounting policies used and the m rnI/ evaluating � P reaso, ableness of ac co ting estimates made by management, as well as evaluating the overall pre entation of the f ancial statements. e believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit win'an. 64 . / FOR DISCUSSION PURPOSES ONLY Opinion In our opinion,the financial statements present fairly, in all material respects,the financial pos. ton of the City of Pickering Public Library Board as at December 31, 2013 and the results of its operations and its cash flows for the year then ended in accordance with Canadian public sector accounting s . dards. Chartered Professional Accountants, Chartered Accountants Licensed Public Accountants , 2014 • Page 2 65 FOR DISCUSSION PURPOSES ONLY City of Pickering Public Library Board Statement of financial position as at December 31, 2013 / 2013 / 2012 Financial assets • Cash 2, 0 2,2 Accounts receivable 239 106 12 Due from the Government of Canada 4,246 :,716 Due from City of Pickering 28780 25,031 304115 /252,809 v Liabilities Accounts payable and accrued liabilities 361,598 313,869 Post-employment benefits liability (Note 2) 240,30 194,200 / 601,588 508,069 Net debt / (297!583) (255,260) Non-financial assets • Tangible capital assets(Note 4) 1,640,560 1,597,376 Prepaid expense 57,283 61,060 / 1,697,843 1,658,436 Accumulated surplus (Note 5) / / 1,400,260 1,403,176 O The accompanying notes to the financial statements are an integral part of this financial statement. j Page 3 6 6 / FOR DISCUSSION PURPOSES ONLY City of Pickering Public Library Board. Statement of operations / / year ended December 31, 2013 2013 / 2012 Budget / (Note 6) $ $ Revenue City of Pickering grants 5,390,855 5, 5,987 5,2 :,610 Federal grants 5,639 39 9,043 Province of Ontario grants 135,005 48 148,097 Fines and other receipts 190,765 173,0 173,310 Total revenue 5,722,264 / 5,588,526' / 5,569,060 Expenses Operating Salaries 'Salaries and wages 3 19 78 • 3, 8,479 3,225,100 Fringe benefits 8 ,7 /857,375 788,478 4,06 9 4,115,854 4,013,578 Material, supplies and utilities Books 250,500 • 157,335 102,853 Utilities 195,8 0 191,912 182,174 Other supplies 40 00 42,179 39,878 4:•,340 391,426 324,905 Services D Repairs and maintenance 284,703 311,229 248,979 Insurance 36,643 34,675 40,933 Travel 4,300 4,675 5,166 Consulting and professional 35,255 29,421 39,744 Advertising • 18,500 17,281 17,075 Conference 6,900 7,968 518 Postage 3,300 3,392 3,828 Telephone O 69,146 74,894 71,341 Seminars and educati.n 25,068 22,145 17,756 Software/hardware ' aintenance 93,390 57,473 68,750 Vehicle repairs ar/maintenance 5,792 4,124 3,474 • Minor capital purchases 56,000 65,087 86,772 Miscellaneous/ 23,750 28,116 18,867 �/ / 662,747 660,480 623,203 Capital re.te• / Amo zation . _ .1e/capital assets . 419,861 423,682 376,618 Lo, on disposa , t ,•gible capital assets - - 17,953 Totz(l operating expenses 5,630,657 5,591,442 5,356,257 nual surplus (def it) 91,607 (2,916) 212,803 Accumulated sur, s, beginning of year 1,403,176 1,403,176 1,190,373 Accumulated sdeplus� end of year 1,494,783 1,400,260 1,403,176 / / . The accompanying notes to the financial statements are an integral part of this financial statement. Page 4 67 FOR DISCUSSION PURPOSES ONLY City of Pickering Public Library Board Statement of change in net debt • year ended December 31, 2013 • 2013 / 2012 Budget (Note 6) Annual surplus (deficit) 91,607 0,99116) 212,803 Acquisition of tangible capital assets (511,468) 46 66) 50,774) Amortization of tangible capital assets 419,861 82 376,618 Loss on disposal of tangible capital assets - 17,953 (91,607) (43,184) (256,203) Change in prepaid expense - 3,77 (4,320) Change in net debt - (42, 3) (47,720) Net debt, beginning of year (2, ,260) (25,260) (207,540) Net debt, end of year (i55 .60) (2.37,583) (255,260) • • /The accompanying notes to the financial statements are an integral part of this financial statement. / Page 5 6 8 FOR DISCUSSION PURPOSES ONLY City of Pickering Public Library Board Statement of cash flows year ended December 31, 2013 • 2013 / 2012 Operating transactions Annual (deficit) surplus (2, 6) 212,81 Non-cash items Amortization of tangible capital assets 3,682 37 ,618 Loss on disposal of tangible capital assets 17,953 4/W66 . /607,374 Change in non-cash operating items v Decrease (increase) in accounts receivable 106,573 (105,937) Decrease (increase) in due from Government of Canada 4,47 (7,582) (Increase) decrease in due from City of Pickering (162, 49) 15,193 Increase in accounts payable and accrued liabilities 4 ,729 102,636 Increase in post-employment benefits liability 6,100 43,400 Decrease (increase) in prepaid expense 3,777 (4,320) 46,100 43,390 466,866 650,764 Capital transactions Net acquisition of tangible capital assets (466,866) (650,774) Net decrease in cash - (10) Cash, beginning of year 2,250 2,260 Cash, end of year / \v / 2,250 2,250 • • The accompanying notes to the financial statements are an integral part of this financial statement. Page 6 69 FOR DISCUSSION PURPOSES ONLY City of Pickering Public Library Board Notes to the financial statements / December 31, 2013 • 1. Significant accounting policies The financial statements of the City of Pickering Public Library Board (the"Library Bpard") are the representations of management prepared in accordance with Canadian public sector accounting standards established by the Public Sector Accounting Board ("PSAB") of Chart-red Professional Accountants of Canada. Significant accounting policies adopted by the Library Board are as follows' Basis of accounting (a) Accrual basis of accounting Revenues and expenses are reported on the accrual basis of-ccounting.The a rual basis of accounting recognizes revenues as they are earned and me:surable; expens-- are recognized, as they are incurred and measurable as a result of the receip.of goods and se ces and the creation of a legal obligation to pay. (b) Non-financial assets r (i) Tangible capital assets Tangible capital assets are recorded at co less accumulate. amortization. Cost includes all • amounts that are directly attributable to - quisition, develop ent or betterment of the asset. The cost of the tangible capital asset is -mortized on a str_ight-line basis over the estimated useful life as follows: Machinery and equipment 2 to 25 year Information technology hardwar- o 8 ye_ s Library collection material D • years Furniture and fixtures le .0 50 ears One-half of the annual a •ortization is char.•-d in the year of acquisition and in the year of disposal. Other major assets i'cluding the Libra buildings are owned by the City and are not reflected in these financial sta -ments. (ii) Contribution/do-atii ► . an.ible -•ital assets Tangible ca.-al ass ve as contributions or donations are recorded at their fair value at the date o eceipt, an• itr:t f r value is also recorded as revenue. (iii) Intangi a assets Inta ible assets are n recognized as assets in the financial statements. (c) Post- olovment benefit Th pr- -it value of e cost of providing employees with future benefits programs is recognized as pig:ees c:rn th e entitlements through service.Any actuarial gains or losses are amortized on a strain Alin- •as' over the average remaining service period (ARSP) of employees. The actuary estimate• - A SP to be 14 years. (d) Government ransfers Government transfers are recognized as revenue by the Library Board in the period in which the transfer authorized and any eligibility criteria are met, unless they are restricted through stipulations that require specific actions to be carried out in order to keep the transfer. For such tran Hers, revenue is recognized as the stipulation has been met. i / . / / Page 7 7 0 FOR DISCUSSION PURPOSES ONLY City of Pickering Public Library Board Notes to the financial statements December 31, 2013 1. Significant accounting policies(continued) Basis of accounting(continued) (e) Use of estimates • The preparation of financial statements in conformity with Canadian publi•sector accountin• standards requires management to make estimates and assumptions t -t#ct the repo •-d amount of assets, liabilities and the disclosure of contingent assets a • li s at the da4te of the financial statements and the reported amounts of revenues and exp-nses durin e p--riod.Actual results could differ from those estimates. Balances which require significant estimate. include tangible capital assets which are based on estimated useful live /and post-employ• ent benefits. (t) Adoption of new accountiriq standards As at January 1, 2013, the Library Board adopted the revi d Canadian Pub' Sector Accounting Handbook PS 3410 "Government Transfers" on a prose cti a basis.Ther- as no impact on the financial statements as a result of the adoption of this vi standard. 2. Post-employment benefits liability ' The Library Board makes available to qualifying em oyees who retire •-fore the age of 65,the opportunity to continue their coverage for benefits uch as post-empl• ment extended healthcare benefits. Coverage ceases at the age of 65.The ibrary Board also •rovides full time and permanent part-time employees a sick time entitlement an any unused entit-ment is accumulated year to year. This accumulated entitlement is not vested d therefore is forf-ited at the time of retirement or termination.The post-employment benefits bligation at Dec- ber 31, 2013 and the changes in the accrued benefit obligation for the 2013 fi al - as deter fined by actuarial valuation prepared as at January 1, 2011. ■ Information about the Library Board' post-emplo i71benefits liability is as follows: 2013 2012 Post-employment benefits lability, beginnin' f year 194,200 150,800 Current service costs 33,200 32,000 Amortization of actual' I I• - 16,600 16,600 Interest expense 15,500 14,400 Benefits paid duri g the year (19,200) (19,600) Post-employmerft benefits liability/ - 240,300 194,200 / / 2013 2012 Accr ed ••st •loym t benefits obligation 418,100 388,600 U mortiz •• _ct aria asses (177,800) (194,400) lost-employ){b,'nefits liability 240,300 194,200 • / Page 8 / 7 1 FOR DISCUSSION PURPOSES ONLY City of Pickering Public Library Board • ' Notes to the financial statements / December 31, 2013 2. Post-employment benefits liability (continued) The main actuarial assumptions employed in the actuarial valuation are as follows: (a) Discount rate The present value as at December 31, 2013 of the future benefits was de -rmined using a d' count rate of 3.75% (2012-3.75%). (b) Dental cost The dental cost trend rate was 4.0% increase per annum. (c) Health costs • Health costs were assumed to increase at 7.6% (2012 -7.8°% and decrease b 0.2% increments per year to an ultimate rate of 5% per year in 2026 and there- er. 3. Pension agreements The Library Board makes contributions to the Ontario nicipal loye- Retirement Fund (OMERS), which is a multi-employer plan, on behalf of eligible mbers of its staff e Plan is a defined benefit plan that specifies the amount of the retirement be fit to be received •y the employees based on the length of service and rates of pay. Contributions in the amount of$271,161 (201 -$241,707) were .aid to OMERS on behalf of its members during the year. 4. Tangible capital assets (TCA) • D Machin ry Inform= on Library Furniture Assets and technol.. collection and under equipment hardwar• materials fixtures construction 2013 $ $ $ $ $ $ Cost Balance beginning of ye r 9,992 163,006 2,040,705 304,520 127,520 2,645,743 Additions during the far O - 148,392 445,994 - - 594,386 Disposals/transfers to TCA during the ear - 55,669 169,203 - 127,520 352,392 Balance,end of/Year 9,2(92 255,729 2,317,496 304,520 - 2,887,737 Accumulated mortization Balance, eginning of year 3,497 109,483 837,631 97,756 - 1,048,367 Amorti ton 999 17,858 396,698 8,127 - 423,682 Accu ulated am ortizatio o duos - 55,669 169,203 - - 224,872 B,alancs nd d)ryear 4,496 71,672 , 1,065,126 105,883 - 1,247,177 N, tbookval N.// / 5,496 184,057 1,252,370 198,637 - 1,640,560 / / / i Page 9 72 FOR DISCUSSION PURPOSES ONLY City of Pickering Public Library Board / , Notes to the financial statements December 31, 2013 / 4. Tangible capital assets (TCA) (continued) Machinery Information Library Furniture ssets and technology collection and under equipment hardware materials fixtures nstruction 112 Cost Balance beginning of year 9,992 379,495 1,771,949 292, 2 - 2,453,518 Additions during the year - 55,765 442,027 2t;462 127,52 650,774 Disposals during the year - 272,254 173,271 /3,024 /- 458,549 . Balance,end of year 9,992 163,006 2,040,705 /304,520 127,520 2,645,743 Accumulated amortization / Balance,beginning of year 2,498 355,015 65829 96,503 - 1,112,345 Amortization 999 16,192 3 ,57. 6,854 - 376,618 Accumulated amortization on disposals - 261,724 173,271 5,6, 1 - 440,596 Balance,end of year 3,497 109,483 837,631 9 7/756 - 1,048,367 Net book value 6,495 53,52 1,203,074 256,764 127,520 1,597,376 5. Accumulated surplus Accumulated surplus consists of the foliowi g: / 2013 2012 \.,>--/ $ $ Invested in capital assets 1,640,560 1,597,376 Post-employment benefits liabil. (240,300) (194,200) / / 1,400,260 1,403,176 O • / . . / // • . Page 10 . FOR DISCUSSION PURPOSES ONLY City of Pickering Public Library Board Notes to the financial statements / December 31, 2013 6. Budget figures The 2013 budget was not prepared on a basis consistent with that used to report ac al results. The budget was prepared on a modified accrual basis while public sector accounting standards require a ull accrual basis of accounting.The budget figures treated all tangible capital asse TCA) acquisition as expenditures and did not include amortization expense on tangible capital ass s. The following provides a reconciliation from the approved budget to the budget numbers presented ' t 'financial statements. 2013 TCA adjustment Non TCA 2043 budget Council approved for City expenditure resented in budget owned assets from capi l Amortization statements Revenue City of Pickering 5,805,855 (415,000) - - 5,390,855 Federal and provincial grants 140,644 - - 140,644 Fines and other receipt: 190,765 - - 190,765 6,137,264 (415, 0) v -/ - 5,722,264 Expenditures Salaries and benefits 4,061,709 - - 4,061,709 Material,supplies and utilites 331,340 - 155,000 - 486,340 Services 662,747 - 662,747 Amortization �- 419,861 .419,861 5,055,79E \'‹ -/ 155,000 419,861 5,630,657 • Annual surplus 1,08 ,468 (415 100) (155,000) (419,861) 91,607 Capital expenditures/ additions ( ,081,468) ,15,000 155,000 - (511,468) • / Page 11 7 4 / FOR DISCUSSION PURPOSES ONLY