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HomeMy WebLinkAboutFIN 16-15 City 00 'a Report to 45 ark-su41 _== = Executive Committee• PICKERING Report Number: FIN 16-15 Date: June 8, 2015 From: Paul Bigioni Director, Corporate Services & City Solicitor Subject: 2014 Year End Recommendation: 1. That Report FIN .16-15 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 2014 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, 2014. Again this year, the auditor has provided an unmodified audit report on the financial statements. This 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 during 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 $18.8 million which means that the City is more than capable of meeting its financial commitments. The increase in the accumulated surplus is attributable to the increase in tangible capital assets from $205.3 million to $214.4 million as well as an increase in the discretionary Reserve and Reserve Funds balance explained further below. 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 215 FIN 16-15 June 8, 2015 Subject: 2014 Year End Page 2 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. Obligatory Reserve Funds which are provided for a specific purpose under legislation and included under deferred revenue remained relatively unchanged. The decrease in deferred revenue by $2.7 million was due to the recognition of the Federal and Provincial funding for the Frenchman's Bay Harbour Entrance project which was substantially completed in 2014. Total discretionary Reserves and Reserve Funds increased by $16.6 million to $46.8 million primarily due to the net proceeds on the sale of land in the Duffin Heights area of approximately $15.3 million being transferred to the Operations Centre Reserve Fund. Although noted as discretionary, almost half of these balances have been set aside for specific purposes by Council. Long term liabilities increased over the prior year as debt financing was received 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, 2014 has been completed. The auditor's Year-end Communication Report is included as Attachment 1. This Report, prepared by Deloitte LLP, summarizes their findings from the December 31, 2014 audit and comments on significant matters regarding the audit. 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. During the course of any audit, auditors may find misstatements that may or may not be adjusted due to materiality. For 2014, 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 216 FIN 16-15 June 8, 2015 Subject: 2014 Year End Page 3 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 issued. The Consolidated Financial Statements include the activities of the City of Pickering Public Library Board. The City's investment in.Veridian Corporation is accounted for on a modified equity basis, which means the City includes its share of Veridian's income or loss in the Consolidated Financial Statements. The Consolidated'Financial Statements are prepared on the full accrual basis in accordance with Canadian Public Sector Accounting Standards (PSAS), 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 City's financial assets increased by approximately $18.8 million. As the increase in liabilities was minimal, this led to an increase in net financial assets of$18.8 million over the prior year. The increase in financial assets is due to both an increase in Cash and Cash Equivalents and Investments. This increase is mainly due to the surplus funds on hand from the sale of land in Duffin Heights that closed in October. These funds were committed in previous budgets as funding sources for a number of capital projects taking place in the Duffin Heights area as well as a source of funds for the purchase of the land for the New Operations Centre and construction of the New Operations Centre. In addition, there was a larger cash balance held at the end of the year to meet_the City's financial needs in January, which included progress payments for Frenchman's Bay Harbour Entrance and the Indoor Soccer Facility projects. Non-financial assets include 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 tangible capital assets. The December 31, 2014 gross book value of assets is $420.2 million and, after adjusting for amortization, the net book value of the assets is $214.4, • million. In other words, the City has consumed a substantial amount of the life of its assets. Future capital budgets have taken into consideration the investment into and the maintenance of the City's infrastructure base as a financial priority. 21 FIN 16-15 June 8, 2015 Subject: 2014 Year End Page 4 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 budget amount includes a grant for ice storm recovery (nothing received in 2014) and Federal Gas Tax funding for the construction of a New Operations Centre that did not proceed in 2014. Therefore, the budget is higher than the actual. Development charges and contributions earned is another example of this timing differential as approximately half($8.7M) of the budget figure was development charge funding for the New Operations Centre. The gain on disposal of tangible capital assets is primarily attributable to the land sale in the Duffin Heights area in October. 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 PSAS compliant. Note 18 of the City's consolidated financial statements reflect the changes made to the 2014 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 not one specific area that stands out as a major contributor to the overall underage. The underage is reflected throughout the various cost centres. Accumulated Surplus The components that make up the Accumulated Surplus are disclosed in Note 11 of the City's consolidated financial statements and are summarized below. An accumulated surplus is the amount by which all assets (financial and physical) exceed all liabilities. 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$323.0 million. An accumulated surplus indicates that the City has net resources (financial and physical) that can be used to provide future services. What primarily contributes to this balance are the tangible capital assets of approximately $214.4 million and the City's equity in Veridian Corporation of approximately $76.4 million. 218 • FIN.16-15 June 8, 2015 Subject: 2014 Year End Page 5 The accumulated surplus is comprised of the following: Operating fund $ 125,219 Capital fund 16,042,591 Reserves and reserve funds 46,772,458 Equity in Veridian Corporation 76,374,399 Tangible capital assets 214,410,833 Post employment benefits liability (4,176,300) WSIB benefit liabilities (1,741,900) Internal loans (4,015,538) Net long-term liabilities (20,475,769) $323,315,993 Attachments: 1. Auditor's Year End Communication Report 2. 2014 Draft Audited Consolidated Financial Statements Prep red By: Approved/Endorsed By: Kristine Senior Stan Karwowski Manager, Accounting Services Division ead, Finance &Treasurer Paul 13'. 1 Direc •r, C•rp. ate Services & City Solicitor Recommended for the consideration of Pickering City Council dPrZa0elei 2S 24/.5 Tony Prevedel, P.Eng. Chief Administrative Officer 219 • • ATTACHMENT# TO REPORT# /14 • • Deloitte, • • The Corporation of the City of Pickering 7f." •p- 11 11 um c ati on• • • • • • For the year ended December 31,2014 I n n „. To be presented to the Executive Committee June 8, 2015 • • • • 2 20 • • Deloitteci Deloitte LLP • 5140 Yonge Street • . Suite 1700 • Toronto ON M2N 6L7 • Canada Tel:416-601-6150 Fax:416-601-6151 www.deloitte.ca May 21,2015 • 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 November 3,2014,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 31,2014,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 January 12,2015. 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, L.L7 Chartered Professional Accountants,Chartered Accountants Licensed Public Accountants 221 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 • • Deloitte LLP and affiliated entities. The Corporation of the City of Pickering—2014 Year-end communication i 222 • 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 • Legal claims update • 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 31,2014 once the outstanding items referred to above are completed satisfactorily and the consolidated financial statements are approved by Council. • • • • ©Deloitte LLP and affiliated entities. • The Corporation of the City of Pickering—2014 Year-end communication 1 223 Audit risks Our audit plan highlighted certain areas that we refer to as significant 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 .�r�5-�.5-�i�'~ € u kr�'•+� r'}�� ���'k����'�"�`4 r� ° a �f .s '�: -.. ,..�r�as €?���{_h"?' s�" Revenue/deferred • Significant revenue streams are a presumed area of audit risk. We have obtained revenue We will test the design and implementation of controls in these sufficient audit evidence Assurance standards revenue streams and perform substantive analytic procedures in this area and are include the presumption and detailed testing in these areas. satisfied with the results of a fraud risk involving • Substantive testing to determine if restricted grants/contributions of audit procedures improper revenue (i.e.,development charges,gas tax,etc.)and government performed. recognition. transfers have been recognized as revenue in the appropriate period Accounting estimates • Obtain documentation on management's controls over the We have obtained Estimates require development of accounting estimates for any significant sufficient audit evidence management judgments management estimates and assess risk in this area and are (i.e.,allowance for • Focused review of calculations and support satisfied with the results significant property tax of audit procedures appeals, contingent • Discussions with management performed. liabilities,estimated • Analytic review of related accounts accrued liabilities,.etc.) • Assess outcome of retrospective review of estimates from prior years Management override • Engage in periodic fraud discussions with certain members of We have obtained of controls senior management and others sufficient audit evidence Management is in a • Consider the potential for bias in judgments and estimates, in this area and are unique position to including performing retrospective analysis of significant satisfied with the results perpetrate fraud accounting estimates of audit procedures because of performed. management's ability to • Evaluate the business rationale for any significant unusual transactions directly or indirectly manipulate accounting • Evaluate the City's fraud risk assessment and consider entity- records and prepare level internal controls and internal controls over the closing and fraudulent financial reporting process statements by • Test journal entries that exhibit characteristics of possible overriding controls that management override of controls,identified using manual otherwise appear to be techniques. operating effectively. ©Deloitte LLP and affiliated entities. The Corporation of the City of Pickering—2014 Year-end communication 2 224 • 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 in internal control 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 the IT policies and procedures regularly to ensure that they are applicable to the current IT landscape and operating environment. Management response: A new IT Manager was hired in.Q1 2015 and has initiated a review of all IT policies. This review will be completed throughout FY2015 and policies will be approved by senior management before being distributed to all staff. Management will continue to update the policies going forward, as circumstances require. • Deloitte LLP and affiliated entities. . The Corporation of the City of Pickering—2014 Year-end communication 3 225 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 The significant accounting policies are set out in Note 1 to the consolidated financial statements. In our judgment, the significant accounting policies and practices, selected and applied by management are, in all material respects, acceptable under PSAS and are appropriate to the particular circumstances • of the City. We did discuss with management the need to review accounting policies related to new fees in the development services area. With the expected increase in development activity in the City as well as new fee categories, it is important to assess the revenue recognition criteria in relation to the services • performed by the City. Management judgment and accounting estimates In our judgment,the significant accounting estimates made by management(with assistance from the City's actuary as appropriate) 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 $4,355,300 (2013—$4,092,800) WSIB benefits liability $1,741,900 (2013—$991,559) Allowance for doubtful accounts • $385,222 (2013—$505,000) Provision for assessment appeals $326,539 (2013—$536,490) Accrual for retroactive pay $395,000 (2013—$290,000) ©Deloitte LLP and affiliated entities. The Corporation of the City of Pickering—2014 Year-end communication 4 226 • • 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 November 3,2014. 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 31,2014,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. • • ©Deloitte LLP and affiliated entities. The Corporation of the City of Pickering—2014 Year-end communication 5 227 • • 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 31,2014 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—2014 Year-end communication 6 228 Appendix 1 Independence letter • • pp p ©Deloitte LLP and affiliated entities. The Corporation of the City of Pickering—2014 Year-end communication 229 DeIoitte : Deloitte LLP 5140 Yonge Street Suite 1700 Toronto ON M2N 6L7 . Canada Tel: 416-601-6150 Fax: 416-601-6610 www.deloitte.ca May 21,2015 The Members of the Executive Committee The Corporation of the City of Pickering 1 The Esplanade Pickering ON L 1 V 6K7, Dear Executive Committee Members: We have been engaged to audit the consolidated financial statements of the Corporation of the City of Pickering(the"City")for the year ending December 31,2014. 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 15,2014,the date of our last letter. 230 The Corporation of the City of Pickering May 21,2015 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 our independence,that have occurred from May 15,2014 to May 21,2015. We have providedrnon-audit services in relation to assisting the City review its needs for a new Finance system. This included a review of the business and technical requirements as well as developing implementation and operating cost estimates. We hereby confirm that we are independent with respect to the City within the meaning of the Rules of Professional Conduct of the Chartered Professional Accountants of Ontario as of May 21,2015. 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, Loo Chartered Professional Accountants,Chartered Accountants Licensed Public Accountants • 231 Appendix 2 — Draft management representation letter . . ©Deloitte LLP and affiliated entities. The Corporation of the City of Pickering—2014 Year-end communication 232 [Client letterhead] June •,2015 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 31,2014 This representation letter is provided in connection with the audit by Deloitte LLP("Deloitte"or"you") of the consolidated financial statements of The Corporation of the City of Pickering(the"City"or"we" or"us")for the year ended December 31,2014,and a summary of significant accounting policies and other explanatory information(the"Financial Statements")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 November 3,;2014 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 31,2014 and 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 31,2014 that require adjustment to the estimates and disclosures included in the Financial Statements. • 233 Deloitte LLP June 0,2015 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 the date of this letter 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 31,2014 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 been properly recorded in the accounting records and are reflected in the Financial Statements. 9. All transactions and events have been carried out in accordance with law,regulation or other authority. 10. We have disclosed to you the results of our assessment of the risk that the Financial Statements may be materially misstated as a result of fraud. 11. 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. • 234 Deloitte LLP June•,2015 Page 3 12. 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. • 13. 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. 14. We have disclosed to you the identity of the entity's related parties and all the related party relationships and transactions of which we are aware,including guarantees,non-monetary • transactions and transactions for no consideration and participation in a defined benefit plan that shares risks between group entities. 15. We acknowledge our responsibility for the design,implementation and maintenance of internal control to prevent and detect fraud and error. • 16. 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 jtems have been disclosed and accounted for in the Financial Statements in accordance with PSAS. 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 reporting requirements. 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. • 235 Deloitte LLP June e,2015 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. Tax Revenues 29. We have appropriately recorded tax assets and revenues when they meet the definition of an asset in accordance with Section PS 1000,Financial Statement Concepts,when they are authorized and when the taxable event occurs.These amounts have been appropriately measured in accordance with PS 3510,Tax Revenue,and have not been grossed up for any amount of tax concessions 236 Deloitte LLP June•,2015 Page 5 • Tangible capital assets 30.Tangible capital assets have been recorded properly and consistently according to the standards in Section PS 3150,Tangible Capital Assets. 31. Contributed tangible capital assets have been appropriately recorded at fair value,unless fair value is not reasonably determinable,and in such case,have been recorded at an appropriate nominal value. All contributed tangible capital assets have been appropriately disclosed. 32. We have assessed the useful lives of tangible capital assets and have determined all tangible capital assets contribute to the City's ability to provide goods and services and therefore do not require a write down. Environmental liabilities/contingencies 33. 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 34. The City has appropriately classified its investments in Veridian Corporation as a Government Business Enterprise. 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 Karwowsld Division Head,Finance&Treasurer Tony Prevedel Chief Administrative Officer • 237 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. egre cao F x r n 1. Fraud or possible fraud identified through the audit process None noted. 2. Our responsibilities under Canadian GAAS Engagement letter dated November 3, 2014. 3. An overview of the overall audit strategy, addressing: Audit plan presented to the Executive • Timing of the audit Committee on January 12,2015. • Significant risks, including fraud risks • Nature and extent of specialized skill or knowledge needed to perform the planned audit procedures related to significant risk 4. Significant accounting policies,practices, unusual transactions, Refer to page 4 and to Note 1 of the and our related conclusions consolidated financial statements. • Alternative treatments for accounting policies and practices that None. have been discussed with management during the current audit period • 5. Our responsibility for other information in documents containing No other documents containing the audited financial statements,any procedures performed,and the audited financial statements. results 6. Consultation outside the engagement team regarding difficult or None. contentious matters that we believe are relevant to the audit .committee's oversight 7. Matters related to going concern None 8. Management judgments and accounting estimates Refer to page 4. 9. Significant transactions outside of the normal course of business, None noted including related party transactions • 10. Significant difficulties, if any,encountered dealing with None. management related to the performance of the audit, 11. Material written communications between management and us, Engagement letter dated November 3, including management representation letters 2014 and Management Representation letter(see Draft Appendix 2). 12. Other matters that are significant to the oversight of the financial None noted. reporting process 13. All relationships between the City and us that, in our professional Independence letter—Appendix 1. judgment, may reasonably be thought to bear on independence 14. A statement that, in our judgment,the engagement team and Independence letter—Appendix 1. others in our firm 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—2014 Year-end communication 238 • 15. Modifications to our opinion(s) None. 16. Our views,of significant accounting or auditing matters for which None. management consulted with other accountants and about which we have concerns 17. Major issues discussed with management prior to our retention None. 18. Illegal or possibly illegal acts that come to our attention None noted. 19. Significant deficiencies in internal control,if any,identified by us in No significant deficiencies noted. the conduct of the audit of the financial statements 20. Uncorrected misstatements and disclosure items No uncorrected misstatements or significant disclosure deficiencies noted. 21. Breach of independence None.See Independence letter— . Appendix 1. • • • ©Deloitte LLP and affiliated entities. The Corporation of the City of Pickering—2014 Year-end communication 239 • • • • ��Canatla�p '1� 100� Employers 1015 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. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited,a UK private company limited by guarantee,and its network of member firms,each of which is a legally separate and independent entity.Please see www.deloitte.com/about fora detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. ©Deloitte LLP and affiliated entities. 240 ATTACHMENT# TO REP*'T# Consolidated financial statements of The Corporatio of the City of Pickeri g December 31,2014 • FOR DISCUSSION PURPOSES ONLY 241 The Corporation of the City of Pickering December 31, 2014 Table of contents Independent Auditor's Report 1-2 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 7-25 FOR DISCUSSION PURPOSES ONLY 242 Deloitte LLP 5140 Yonge street Suite 1700 Toronto• M2N 6L7 Canad. Tel*416-601-6150 F-x: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 s r to 4. : ••f the •rporation of the City of Pickering,which comprise the consolidated statement of ancial p0 on at December 31,2014,and the consolidated statements of operations,change in ne mancial assets, .. d cash flows for the year then ended,and a summary of significant accounting polic'-s and other exp . atory information. Management's Responsibility for the Consoli• :ted Financial S .tements Management is responsible for the preparati•• an.t'' 'resent. ion of these consolidated financial statements in accordance with Canadian p •lic sec .c . • ing standards,and for such internal control as management determines is necessary • enable the .j ep.•ation of consolidated financial statements that are free from material misstatement,w ether due to frau' or error. Auditor's Responsibility Our responsibility is to expres: . pinion on -se consolidated financial statements based on our audit. We conducted our audit in . co • 'th C. adian generally accepted auditing standards.Those standards require that we .omply • 1 e 'c. requirements and plan and perform the audit to obtain reasonable assurance abut whether ' - olidated financial statements are free from material misstatement. An audit involve •erfoiming proc::ures to obtain audit evidence about the amounts and disclosures in the consolidate, financial statem;•ts.The procedures selected depend on the auditor's judgment, including the . s- • ent of ris: of material misstatement of the consolidated financial statements, whether d to( • .) error • making those risk assessments,the auditor considers internal control relevant • the en'*•s •re.. .tion and fair presentation of the consolidated financial statements in order to desi:n audit procet that are appropriate in the circumstances,but not for the purpose of expressing an o. ion on the effe iveness of the entity's internal control.An audit also includes evaluating the ap• opriateness of a counting policies used and the reasonableness of accounting estimates made by ••anagement,as w-11 as evaluating the overall presentation of the consolidated financial statements. We believe th. the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit o•'.•'on. FOR DISCUSSION PURPOSES ONLY 243 Opinion In our opinion,the consolidated financial statements present fairly,in all material respects,the f I ancial position of the Corporation of the City of Pickering as at December 31,2014 and the results o its operations, change in its net financial assets and its cash flows for the year then ended in ac•ordance with Canadian public sector accounting standards: • Chartered Professional Accountants, Chartered Accountants Licensed Public Accountants ,2014 • Page 2 FOR DISCUSSION PURPOSES ONLY 244 The Corporation of the City of Pickering Consolidated statement of financial position . as at December 31, 2014 2014 2013 $ $ Financial assets Cash and cash equivalents 60,322,0•7 54,141,:27 Investments (Note 3) - 50,02•,674 38,942,562 Taxes receivable 14,•••5 8 16 50,622 Accounts receivable •,47 5 :,786,196 Investment in Veridian Corporation(Note 4(b)) 48,262,3 47,658,449 Promissory notes receivable(Note 5) 25,069,000 25,069,000 204,646,843 185,755,656 Liabilities Accounts payable and accrued liabilities 18,03•,•57 18,730,167 Other current liabilities 28,988 96,129 Deferred revenue(Note 6) 5 ,:49,931 54,587,493 Long-term liabilities(Note 9) 0,475,769 18,049,763 Post-employment benefit liability(Note 8(a)) 4,355,300 4,092,800 WSIB benefit liabilities(Note 8(b)) 1,741,900 991,559 96,561,845 96,547,911 Net financial assets / / 108,084,998 89,207,745 Non-financial assets Tangible capital assets (Note 10) 214,410,833 205,294,283 Prepaid expenses 482,587 281,689 Inventory 337,575 295,933 215,230,995 205,871,905 Accumulated surplus(Note 11) 323,315,993 295,079,650 • • e accompanying notes to the consolidated financial statements are an integral part of this financial statement. • Page 3 FOR DISCUSSION PURPOSES ONLY 245 • The Corporation of the City of Pickering Consolidated statement of operations year ended December 31, 2014 2014 2013 Budget • (Note 18) Actual Actual Revenues Residential and farm taxation 40,059,644 40,1 ,5 1 38,034,035 Commercial and industrial,taxation 10,546,399 10 :20 10 73,366 Taxation from other governments 8,296,500 :,492,109 :,578,659 User charges 8,532,421 9,670,171 8,494,817 Government grants and fees 10,532,991 5,494,095 6,183,653 Other contributions and donations 3,199,111 3,315,095 3,218,128 Development charges and developer contributions earned 16,4.•,077 4,098, 5 2,544,284 Contributed tangible capital assets - 58 ,652 4,916,745 Investment income 27. 1 1 1 • 4,423 506,444 Penalties and interests on taxes 2,485,1:1+ ,349,955 2,509,162 Fines 892,000 895,077 866,162 Interest on promissory notes 1,426,850 1,426,852 1,426,852 Equity share of Veridian Corporation earnings (Note 4(c)) - .2,530,930 4,862,085 Other 171,500 252,978 253,073 Gain on disposal of tangible capital assets - 18,890,968 394 0 ,861,492 109,568,173 92,667,859 Expenses(Note 19) General government 17,058,491 15,470,467 14,109,587 Protection to persons and prope 22,682,158 21,776,908 21,901,042 Transportation services 14,120,431 12,509,036 12,205,455 Environmental services 3,662,758 3,579,628 3,346,577 Social and family services 655,265 745,777 651,004 Recreational and cultur. serve 25,304,106 24,654,870 24,211,894 Planning and develop ent 3,402,519 2,595,144 2,748,656 86,885,728 81,331,830 79,174,215 Annual(deficit) s rplus 15,975,764 28,236,343 13,493,644 Accumulated s rplus,beginning year 295,079,650 295,079,650 281,586,006 Accumulat sur•lus,end of ear 311,055,414 323,315,993 295,079,650 • e accompanying notes to the consolidated financial statements are an integral part of this financial statement. Page 4 FOR DISCUSSION PURPOSES ONLY 246 - i The Corporation of the City of Pickering Consolidated statement of change in net financial assets year ended December 31, 2014 2014 2013 Budget (Note 18) Actual Actual Annual surplus 15,975,764 28,23;,343 13,49 ,644 Acquisition of tangible capital assets (49,857,440) (24, 5 9) (24, 69,658) Amortization of tangible capital assets 9,999,155 � 2 ,728,484 Gain on disposal of tangible capital assets - '88,890,9 �� (394) Proceeds on disposal of tangible capital assets - 20,358,312 215,553 (23,882,521) 15,138,49.0 (932,371) Transfer of assets under construction to tangible capital assets - 3,89 18 1,589,032 Assets under construction expensed - ,285 181,417 81,303 1,770,449 Acquisition of inventory of supplies - (1,128,666) (1,252,086) Use of inventory of supplies - 1,087,024 1,195,172 Acquisition of prepaid expenses, - (477,252) (274,189). Use of prepaid expenses 276,354 585,881 - (242,540) 254,778 Change in net financial assets D w3,• 2,521) 18,877,253 1,092,856 Net financial assets, beginning of year 8 ,207,745 89,207,745 88,114,889 Net financial assets,end of year / /65,325,224 108,084,998 89,207,745 e accompanying notes to the consolidated financial statements are an integral part of this financial statement. Page 5 FOR DISCUSSION PURPOSES ONLY 247 h. • The Corporation of the City of Pickering Consolidated statement of cash flows year ended December 31, 2014 2014 / 2013 $ $ Operating transactions Annual surplus 28,23. 43 13,493,%.44 Non cash items Amortization of tangible capital assets 9,:5j•'•32 9, 28,484 Gain on disposal of tangible capital assets 8,`T∎4'68) (394) Equity share of Veridian Corporation (2, 30,•`i1.4. (4,862,085) Contributed tangible capital assets recorded in revenue (582,652) (4,916,745) Change in non-cash operating items: Decrease in taxes receivable 1,655,57, 897,237 Increase in accounts receivable (2,691 49) (520,111) • . (Decrease) increase in accounts payable and accrued liabilitie (6 ,210) 6,278,531 Increase in other current liabilities 2,859 4,081 (Decrease) increase in deferred revenue r,737,562) 5,407,760 Increase in post-employment benefit liability 262,500 440,200 Increase in WSIB benefit liabilities 750,341 83,800 Increase in inventory (41,642) (56,914) (Increase)decrease in prepaid expenses (200,898) 311,692 12,401,238 26,289,180 Capital transactions D Acquisition of tangible capital assets (net of transfers and contributions) (19,861,174) (17,682,464) Proceeds on disposal of tangible capit. .assets 20,358,312 215,553 497,138 (17,466,911) Investing transactions Increase in investments (11,071,112) (1,993,406) Dividends received from V- idi. iporation 1,927,000 1,927,000 ----- (9,144,112) (66,406) Financing transactio Proceeds from de ntures issued 5,303,000 2,873,000 Principal repay nt of debentures (2,876,994) (2,598,257) / 2,426,006 274,743 Increase In s► :n. -sh eq alents 6,180,270 9,030,606 Cash an ash -•. vale ts, eginning of year 54,141,827 45,111,221 Cash arrfd cash eq ' es,end of year 60,322,097 54,141,827 Ca 'and cash equi alents consists of Cash 10,967,036 9,041,969 . Cash equivale s 49,355,061 45,099,858 60,322,097 54,141,827 ' e accompanying notes to the consolidated financial statements are an integral part of this financial statement. Page 6 FOR DISCUSSION PURPOSES ONLY 248 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2014 1. Significant accounting policies • The consolidated financial statements("the financial statements")of The Corporat•.n of the City of Pickering (the"City") are the representations of management prepared in accor.:nce with account' g standards established by the Public Sector Accounting Board("PSAB")of Ch.•ered Professiona • Accountants of Canada.Significant accounting policies adopted by the City . e follows: (a) Reporting entity (i) Consolidated financial statements • The consolidated financial statements reflect the assets,Ii-.ilities, revenues - d expenses of the reporting entity.The reporting entity is comprised of t'a activities of all .mmittees of Council and the City of Pickering Public Library Board ich is controlled y the City.. All material inter-fund transactions and balances ar- eliminated on con olidation. (ii) Investment in Veridian Corporation The City's investment in Veridian Corporation accou for o a modified equity basis, consistent with Canadian public sector accounting standar f. investments in government business enterprises.Under the modified :quity.basis,Verdian Corporation's accounting policies are not adjusted to conform tot .se of the City an. inter-organizational transactions and balances are not eliminated.The Pity recognizes its -quity interest in the annual earnings or loss of Veridian Corporation in its onsolidated state, ent of operations with a corresponding increase or decrease in its invest -nt asset account lividends that the City may receive from Veridian Corporation and other .pit. ansactions :re reflected as adjustments in the investment asset account. (iii) Operations of School Boar. and the Revn . Durham • The taxation, other reve es, expenditures assets and liabilities with respect to the operations of the school boards a d the Region of D rham(the"Region")are not reflected in these consolidated financi. statements. (iv) Trust funds Trust funds an• th.se ted operations administered by the City are not consolidated, but are reported sep-rate s Funds Statement of Financial Activities and Statement of Financial Pasition. (b) Basis of acc.unting (i) Acc -I basis of accou ng R: enue and expen -s are reported on the accrual basis of accounting.The accrual•basis of -ccounting recogn• es revenues as they are earned and measurable;expenses are recognized a -: are incu •-d and measurable as a result of the receipt of goods and services and the 'r-atio• .f a legal obligation to pay. (ii). Cas• :•. c. h equivalents Cash an. cash equivalents consist of cash on hand,demand deposits and short-term, highly liquid i estments that are readily convertible to known amounts of cash.Cash equivalents have = short-term maturity of three months or less from the date of acquisition. • • i Page 7 FOR DISCUSSION PURPOSES ONLY 249 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2014 • 1. Significant accounting policies(continued) - (b) 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 a' investment is amortized over the life of the investment. (iv) Tangible capital assets (`TCA") Tangible capital assets are recorded at cost less accumult-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 ht-line basis over e estimated life of the tangible capital asset commencing once the asset i av ilable for use .s follows: Buildings 15 • 4 Machinery and equipment 2 o 25 ye Vehicles • to 15 years Infrastructure-Roads 10 to 50 years Infrastructure-Storm sewers 25 to 100 year: Infrastructure-Sidewalks 20 to 40 yea Information technology hardware 4 to 8 year. Infrastructure-Parks 10 to 40 tears Library collection materials 4 to 7 -ars Furniture and fixtures $ t. 0 years One-half of the annual amo r ization is c v ed'n the year of acquisition and in the year of disposal.Assets under co struction are not - 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 tho amount is also recorded as revenue. (v) Accounting for P op Tax Cappi'g Provisions resulting from the Ontario Fair Assessment System • The net im•.ct in pro. to -s as a result of the application of the capping provisions does not affec he Consolidat-d 'tatement 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 . • referred revenue represent user charges and fees which have been collected but for which t . ed services have yet to be performed.These amounts will be recognized as revenues ��..I ye:r the services are performed. In addition,any contributions received with e - Y7' s -ctions 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 recognized as a ployees earn these entitlements through service.Actuarial gains and losses are a rtized over the average remaining service period ("ARSP").The actuary determined ARSP be 14 years. (v-i)Inventory Inventory is valued at the lower of cost and replacement cost.Cost is determined on a . weighted-average basis. Page 8 FOR DISCUSSION PURPOSES ONLY 250 The Corporation of the City of Pickering • Notes to the consolidated financial statements December 31, 2014 1. Significant accounting policies(continued) (b) Basis of accounting(continued) (ix) Government transfers Government transfers are recognized as revenue by the City in the p-riod in which the ansfers are authorized and any eligibility criteria are met, unless they are r- tri,f d through s'.ulations that require specific actions to be carried out in order to keep the ra e . dischar.a the liability.For such transfers, revenue is recognized when the stie lation has .y-n et. (x) Tax revenue Tax revenue is recognized on all taxable properties withi the City that are i•eluded 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, . to rates authorized by Council for the City's own purposes in the period for which the t. is ie . (xi) Intangible assets . Intangible assets are not recognized as as -ts 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 a assumptions that affect the reported amounts in the financial stateme s and accompany' g notes.Accounts involving significant estimates include allowance for.ou.!' unts certain accrued liabilities,post-employment benefits liability,WSIB liabiliti:s and e .t- r:ating to the useful lives of tangible capital assets.Actual results could differ from t iv e e:timates. 2. Operations of school boards a d the Region of Durham Further to Note 1 (a)(iii)requi tions are made b the Region of Durham and School Boards requiring the City to collect property t. es and payments n lieu of property taxes on their behalf.The amounts collected and remitted are .ummarizes as fol ws: 0 2014 2013 Region School board Region School board $ $ $ $ Taxation 98,330,551 43,945,940 94,868,875 42,950,054 Payments i lieu of taxes 6,331,506 402,463 6,373,083 407,968 104,662,057 44,348,403 101,241,958 43,358,022 3. Inve m• 2014 2013 ' Cost Market value Cost Market value $ $ $ $ Long-term i - tments 50,020,674 50,191,189 38,949,562 39,098,870 Long-te • investments are comprised of deposit notes, bonds,and guaranteed investment certificates. Page 9 FOR DISCUSSION PURPOSES ONLY 251 - Y The Corporation of the City of Pickering • Notes to the consolidated financial statements December 31, 2014 4. Investment in Veridian Corporation • (a) Veridian Corporation is owned by the City of Pickering,Town of Ajax, Municipa' 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 the odified equity basis in these consolidated financial statements.Veridian Corporation serves as e electrical distribution utility for a number of communities including the four noted above and on is non-regul.ted utility service ventures through its subsidiaries. The following table provides condensed supplementary consolidat-d financial in ma ion for the corporation and its subsidiaries for the year ended December 31 The amounts are isclosed in thousands of dollars: 2 14 2013 • ( 0's) (000's) $ $ Financial position 1 Assets . Current 91,350 82,508 Capital and intangibles 209,215 200,901 • Other 11,657 19,344 Total assets / / 312,222 302,753 Liabilities - Current D 72,859 53,089 Long-term debt 106,578 112,197 Other 15,097 21,252 Total liabilities 194,534 186,538 Shareholders'equity Share capital • 67,260 67,260 Contributed capi .1 25 25 Retained earn' gs O 50,403 48,930 Total equity 117,688 116,215 Total liabiliti: and equity 312,222 302,753 Financi.Yactivities Co odity revenue 263,218 246,386 C. modity expens- (263,218) (246,386) 0 i tion reven - 51,987 48,985 . O.•rati . expe es (39,768)- (36,309) Othz c' e 'expense) (6,186) (686) Eamin. (lo.$)from discontinued operations 140 (131) Net earning for the year 6,173 11,859 • • Page 10 FOR DISCUSSION PURPOSES ONLY 252 • The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2014 4. Investment in Veridian Corporation(continued) (b) City of Picketing's investment represented by: 2014 '013 $ $ Promissory notes receivable(Note 5) 5, 9, • 5,069,000 Investments in Veridian Corporation Initial investment in shares of the Corporation 30,496,196 30,496,196 Accumulated earnings 38,880,3.4 36,349,434 Accumulated dividends received (22,223 102) (20,296,002) Increase in value of investments 1,11:,821 1,108,821 Total investment 48, 62,379 47,658,449 • (c) Equity in Veridian Corporation C\\ v 2014 2013 $ $ Balance, beginning of year 75,770,469 72,835,384 Equity share of net earnings for the y-ar 2,530,930 4,862,085 Dividend received from Veridian Co'.or ' (1,927,000) (1,927,000) Balance, end of year(Note 11) 76,374,399 75,770,469 (d) Contingencies and guarantee of Veridian Corp. ation(the"Corporation')as disclosed in their financial statements are as Wows. (i) Insurance claims • The Corporation i-a member of the '1 unicipal Electric Association Reciprocal Insurance Exchange("ME; 'I. rhich was • eated on January 1, 1987.A reciprocal insurance exchange may be defin a.,�'i"•• • of pe ons formed for the purpose of exchanging reciprocal • contracts of demn ' or in er- surance with each other.MEARIE provides general liability insurance o member e .tri tilities. Insure premiums charted 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. Ins rance limits of up • $30,000,000 per occurrence are covered by MEARIE. (ii) ontractual obligaf.n-Hydro One Networks Inc. ("HONI") T,' - &. •oratio subsidiary,Veridian Connections Inc. ("VCI"),is party to a connection and .'f. ery :greement with HONI related to the construction by HONI of a transformer station deg';y d • meet VCI's anticipated electricity load growth. Construction of the project was comple es 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: tion 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 a •sated 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 31,2014(2013-$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 tenth and fifteenth anniversaries of the in-service date. Page 11 FOR DISCUSSION PURPOSES ONLY • 253 • • The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2014 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) General claims From time to time,the Corporation is involved in various lawsuits, ai -*and regulate proceedings in the normal course of business. In the opinion of .n.,.- t,the o, come of such matters will not have a material adverse effect on the Cor•oration's fin:4, ial •osition, results of operations or cash flows. (e) Lease commitments Future minimum lease payment obligations under operatin• eases are as folk s: (000's) 2015 32 2016 24 2017 2 2018 2 2019 2 • Thereafter 64 126 5. Promissory notes receivable 2014 2013 $ $ Promissory note receivab - from Veridian Corporation maturing December 3 , . and bean g interest at the greater of 6% o th- •• Enere Board deemed long to debt r o*` - nual basis to maturity (6% e'•-ctive Nom ',-r , 2012) 7,095,000 7,095,000 Promissory •te receivable fro Veridian Connections Inc. maturing member 1, 2039 and bearing interest at 5.57% •om May 1, 2010 o December 31, 2014 and t en the Ontario E ergy Board deemed Ion:.-te eltr rate • each successke fi - ye t.enolther-after 17,974,000 17,974,000 War 25,069,000 25,069,000 Interest revenu-,earned from these notes receivable totaled$1,426,852(2013-$1,426,852).The promissory no - from Veridian Corporation is convertible into common shares at the rate of one common share for ev- $1,000 of principal amount, at the option of the City.The note from Veridian Connections Inc. is no longer convertible but the City may demand full or partial repayment with six months'notice with ce ''cation that the funds are required for municipal purposes.The City has signed an inter-creditor agree •ent confirming the subordinated ranking of these promissory notes to the senior debt financing issu-. by Veridian. 0- November 20,2014,the Ontario energy Board's deemed long-term rate has been established for the 'we year period commencing January 1,2015 until December 31,2019 at 4.47%.-This rate will be reset on January 1,2020. Page 12 FOR DISCUSSION PURPOSES ONLY 254 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2014 6. Deferred revenue 21 4 201. $ $ Obligatory Reserve Funds Development charges •9, ,698 3•,412,848 Parkland 1, 9 , 8 1,641,537 Federal gas tax 6,683,2 6,225,560 Third party/Developer's Contributions Reserve Fund 2,611,041 2,765,122 50,015,51 50,045,067 Other unearned revenues 1,83 3417 4,542,426 51, 9,931 54,587,493 Continuity of deferred revenue is as follows: Afar 2014 2013 Balance,beginning of year 54,587,493 49,179,733 Restricted funds received 5,567,239 6,752,288 General funds received D 857,249 3,839,952 Interest earned(restricted funds) 833,856 864,886 • 7,258,344 11',457,126 Earned restricted revenue tran "erred to operation- 6,430,648 5,179,131 Earned revenue transferred to operations 3,565,258 870,235 9,995,906 6,049,366 Balance,end of year � ' 51,849,931 54,587,493 7. Interfund loans As a means of ' nding various ca.tal acquisitions,funds are borrowed by the Capital Fund from Development harges deferred •evenue(obligatory reserve funds).These funds are secured by promissory otes with interest ates ranging from 2.0%to 3.96%and various payment terms ranging from 5 ye..r to 10 years.Th- inancing arrangements and ultimate repayment are approved by Council through e current budge process.Although these notes have payment terms as noted above,they are repay-•I- • land.T•e following is a sumary of the related loans: 2014 2013 $ $ Roads and str-etlights 457,422 510,015 Community cilities, libraries and parks 1,628,877 1,675,255 Protectio services 619,239 831,469 Municip- building - 10,790 Storm• ater system 1,310,000 - 4,015,538 3,027,529 Page 13 FOR DISCUSSION PURPOSES ONLY 255 ' t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2014 • 8. Post-employment benefits liability (a) Post-employment benefits liability The City makes available to qualifying employees who retire before the ag; of 65,the oppott ity to continue their coverage for benefits such as post-retirement extended he.thcare benefits. Coverage ceases at the age of 65.The City also provides full time and .er,t nent part-ti - employees a sick time entitlement and any unused entitlement is acc.muF.— ear to y-ar.This accumulated entitlement is not vested and is forfeited at the time of etirement ohs rm' ation.The • most recent actuarial valuation of the post-employment benefits .s performed at J nuary 1,2014. Information about the City's benefits liability is as follows: 14 2013 $ $ Accrued benefits liability, beginning of year ,092,800 3,652,600 Current service costs 329,400 353,800 Interest on accrued benefits 254,200 244,400 Amortization of actuarial losses 147,200 219,900 Benefits paid during the year (468,300) (377,900) Accrued benefits liability, end of year 4,355,300 4,092,800 • Accrued benefit obligation 6,214,800 6,570,400 Unamortized actuarial losses (1,859,500) (2,477,600) Accrued benefits liability, end of ear 4,355,300 4,092,800 The main actuarial assumptiors employed in the -ctuarial valuations are as follows: (i) Discount rate The present value -. at December 31 014 of the future benefits was determined using a discount rate of 3 .%(2013-3.75% . (ii) Dental costs The dental rest tren. Lte was .75% (2013-4.0%)increase per annum. (iii) Health c. is Healt costs were assu 'ed to increase at 7.0% (2013-7.6%)and decrease by 0.25%(2013 0.2°. increments per ear to an ultimate rate of 4.75% per year in 2023 and thereafter. • O ' Page 14 FOR DISCUSSION PURPOSES ONLY 256 . The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2014 , 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 under th-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 value 'on e WSIB b: efits was . performed at December 31,2014. Information about the City's WSIB liability is as follows: 201• 2013 $ $ Accrued WSIB liability, beginning of year 991,559 907,759 Current service cost 131,600. 127,800 Interest on accrued benefits 39,500 37,300 4(Amortization of estimation adjustment gain 718,141 - Benefits paid during the year (138,900) (81,300) Accrued WSIB liability, end of year 1,741,900 991,559 The main actuarial assumptions employe in the actuarial v- uations are as follows: (i) Discount rate The present value as at Dece er 3 .. 90elz,z, th- future benefits was determined using a discount rate of 3.5%(2013- .75%). (ii) Inflation rate The rate of inflation wa: assumed to be 2 %(2013-2.5%) per annum. I (iii) WSIB Administratio Rate Liabilities for WS : benefits have b: n increased 34.3%to reflect the administration rate charged by W A WSIB Re -rve F•was es :blished in 2001.The Reserve Fund balance at December 31, 2014 was 3,047,737 '6,13 $2,790,875). In addition,the City purchased two insurance policies at protect the Ci , against significant claims to the City.The occupational accident insura ce pays loss clai s up to$500,000 per work related accident.The excess workers coin ensation indemni pi insurance has a$500,000 deductible and will pay for claims up to and in uding$15,000,00e per work related accident. 9. Long-t m liabilities (a) e i. : if 4410 Ions term liabilities is made up of the following: 2014 2013 _ $ $ The muni•ipality is responsible for the payment of principal and interest charges on long-term !lab'sties issued by the Regional Municipality of D rham on the City's behalf. At the end of the year, he outstanding principal amount of this liability is • 20,475,769 18,049,763 Page 15 • FOR DISCUSSION PURPOSES ONLY 257 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2014 9. Long-term liabilities (continued) (b) The above long-term liabilities have maturity dates of July 12,2016,2017,20 and 2022, November 21,2018,July 15,2014, December 23, 2014, October 15,2015 . d 2020, September 29,2016 and 2021 and October 16,2018 and 2023 with vario interest rates ranging. from 1.10%to 5.45%. Principal repayments are summarized as follows: 2015 2,758,239 2016 2,734,716 2017 2,415,834 2018 4,361,382 2019 1,433,903 Thereafter 6,771,695 20,475,769 (c) Long-term liabilities include principal sums of$5 2,000(2013-`.500)which may be refinanced by the issuance of debentures over a further riod not to excee 10 years,and$3,878,000(2013- $1,972,000)which may be refinanced by th issuance of debe ures over a further period not to exceed 5 years. (d) The above long-term liabilities have be approved by Co ncil by-law.The annual principal and interest payments required to service e - liabilities ar ithin the annual debt repayment limit prescribed by the Ministry of A ing. (e) Interest expense recorded in the ear relatino o these long-term liabilities is$686,554(2013- $642,118). 10. Tangible capital assets Information relating to tangib - capital assets is :s follows: (1) Contributed tangible ..pital assets • The City records t. gi;� o'al ass: s contributed by an external party at fair value on the date contributed.Typ• al exa•.i• es . e roads, storm sewers and sidewalks installed by a developer as part of a subdi sion or detpm•nt agreement.Contributions of tangible capital assets in 2014 amounted to .582,652(2013- "4,916,745). (ii) Tangible .apital assets recognized at nominal value Land der roads are as 'gned a nominal value of one Canadian dollar because this land only supports or is intended support road infrastructure and the majority ty of land acquired supporting ro.: all a ances was cquired at no cost. (iii) o o'�off a end h' torical treasures The city NA useum which holds various historical treasures and historical buildings pertaining to the heritag and history of the City of Pickering.These items are not recognized as tangible capital ass- in the financial statements because a reasonable estimate of the future benefits associated with such property cannot be made.Any acquisition or betterment of these assets is recogni -d as an expense in the financial statements. (iv) Othe T net book.value of tangible capital assets not being amortized because they are under . onstruction is$24,496,734(2013-$13,470,090). During the year,there were no write-downs of assets(2013-$Nil)and no interest was capitalized during the year(2013-$Nil). Page 16 • FOR DISCUSSION PURPOSES ONLY 258 LI co b OI to 0 .N. N n n co to 0 O m m co 0 el O 0 N a o N m m e m m e o N aC � N n O CD OD . N N LC- N O n OI b N O N N 7- O m . R t! N N .O! a o n < n a tt ' y d a m ON N n n y a " n _ • y J ` O n P- o Q 7 0 to_ et 0 c 7 CO t0 4. t to • C 7— 7- N N 0 ° a, to y y .2 to • N to V • O H N O O V ° b m O m r m O W so C X to N A O N b 5 w to to r N co LL • ` C 0 y CO N 0 CO CO CO 0 tt to o m 0 N n F m q q tf _ O a O ° m r r. m m M m v 'J — co to • o N o E N N • L.1 0 y� n co 0 N t N 0 0 . •d ` n b tr b to co co [t m N c'! b co ti o q r co (p V- O N M N « a N m c0 o N to 0 O 0 to N b N N N V V- m . O N C • ca m d' c a N b m ee0 c0 r 0 • o v m m e < m n m b m m b .N- 'o-N ,a • . , L q .N- c_ n m o d L c « • y - O tt to to 0 to , to N b d Y m n O b o co T N n t1 N m Co m b n m O1 0 u a n m n a c ` a N o a m N tr m N m m . . 0 . C co w Co m n m b m m ^ n n e a co CC • y b to m mo e n a O 2 E m m � N m v Z m to b Q. C W D Q CD •p•4 O ^ M m V m T n b o m O b m o 7 N K � w q o m co co n C b b n 03 o n n n •O O m m m tT m b 1° ` n .0 m n V a C CA n V N- n N n tt •I,..g F. . T4 F No • m •m r• Ob h e r ^_ N A N an T b m c. m N b m b LI n at • . •N F, r l a m m u o m n n m �/ ^� d C N O t0 tt b m O)rt. Tr C R t0 N O b N _` E t0 N b N O. O (3.) •5( L m_ m •b n b co co R b co m r 7 co d E d m m b N t� at , O °'M C C M n c N 10 M m N O yr O a .0 n N ti n m m m m t- a N O CD Ln LO m O co- H O O Oc• d N n n " m • �K v C N m • m ea N b b p CIr'1 IQ J itj N N N N CIS O n N O+ y T b O o N m Lo- ° b . b b O V r4 _ . 1 m mm .a) M d y o w O -"� $5 - ° °°' m E ° — T ' r O}J E 31 C E_ 3 C T C CO CU c >., 0 d C C to m 0 m al m 01 C f a d m m y • _ m C -. m J o N - .. m ` � 2 m E ° c E m a m gi 0 c c % a m, a j C c , o C C c n o m 4 a L H y v m d m v •ro Q ° m , ` to . U m Q m Q m Q J m 2 259 • • • F¢ CO a m N0) N- a 0) py CO CO N Li, O) -O CO 1- m °N O. CD CO N r) a r co. N P ai a) a) O m n 0 a p)al co r) co N. CO h N r N - N p a N Cr, 0) N T CO d • m N O ' CO 0 CO Cr N dC t9 N CD O ) i ) i O O N a a) O) c In 4 a ° °_ m • a at r- ti 1°- °1.. N a)- r a_ a_ . It" c a R F2 Cn O • - < U co • m i CO a 0 CD co CO CO 07 E 0 CO N co C' . CS CDoj o m CO � 0) oN 0 O r CO N a CO- CD N • C L U N R o a at N CO O) N CV -1 a a co r) m •� ro O a r) U E N CV- • . m Y co_ N o C0 a . m P " C°D m S EA a O C7 ' f` m N CU O co- m m O in N N m CO • m °) 'n m C In C o - '� r, r- o ° m . o m 0 c0 3 m m a 0 CC E L N r) r) N a7 g Ch r N . O U L CH 0 CO m CD m 0 N Y CV� m CO_O) . CO .3- OD" a) N m JL ta 2. Q cn 2 U)'I'5 O m D a) N m ' ! ' C co It CV U N a co a oIy N r m a> O • Z ` N co_ Cn m O m Co O W/J .. E m N N a m ' NO Z = 5 Si .•!�. Cp a r1 N- CO O) • r) m �- N U d �` CV CO CD r m co ti N �!) N m a. Co) m F_ Co r` N a e» 4C ti R R m r- co n m a N. o a r- a o O /-1 ° CO m r•••• `n r) CO CO CO ID LO '4.. ) CI •~` V) v.-4 y c `� 1°n CoD o o m CO a m° 1 Rt d t� a CD_ N m O O CO V ---� E °' rn In r ai m 0i C�l U •a C' m a l!1 [Y a CD m . W •N m m co ID m N 4 o •a 3 C°in m CO CO_0 CO CO m N m to m_ CO G C m m t-• g 0 N co g 1- ••� i- N O • m N o- Co co co O 0 C9 co° 01 N O O • � UY CV r- •p.( TJ CD J °- N N .co +4 .--a N co_ co cn m. O N-4 R m to N G a) O 0 O N `a a //��•�� („) as N B a W I�•1 1--4.' - I U Co C •-, c m ;"4 M d ` D ` o R O 0 m m m E o o m C N T W .C 0. • V C C O N y 7 6 • C V O Cr)LD C Q. F- N O C O G O O U Rm m N L m Q m m N a C° E Y 0,•1 � C] I— -0 i p , m c - 3 m o 44 - a E o c F C)) o c w a y. m.v c c c ' : ?) ° --2, ‹ o m 'a < m < m m H H O r .0 m < J Co Q m < -J Co 2 • 260 . The Corporation of the City of Pickering Notes to the consolidated fmancial statements December 31, 2014 - 11. Accumulated surplus The City's accumulated surplus is comprised of the following: '014 113 $ $ • Capital fund 6,14 1 •,649,524 Operating fund 125,2 % 125,210 , ■ Equity in Verdian Corporation 76,374,399 75,770,469 •Tangible capital assets 214,410,833 205,294,283 Post-employment benefits liability (4,176,30• (3,913,800) Internal loans (4,015, 8) (3,027,529) Net long-term liabilities (20,47 ,769) (18,049,763) WSIB benefit liabilities (1,7,1,900) (991,559) Reserves set aside for special purposes by Council Working capital 400,000 400,000 Self insurance 892,707 892,707 Replacement of capital equipment 1,187;358 1,572,987 Contingencies 1,476,554 1,584,339 Rate stabilization 16,056,925 16,169,680 City's share for development charge 2,176,952 1,127,979 Continuing studies 207,619 427,855 Vehicle replacement 1,193,121 790,159 Easement settlement D 20,390 17,595 • Eastern branch 15,882 55,000 . Move Ontario - 2,723 Land Purchase 99,403 99,403 , Seaton Development Revia 1,075,221 1,470,988 Financial Systems 486,638 454,647 Senior Centre 225,000 150,000 Accessibility Initiati=s 15,032 15,032 Winter Control O 700,000 - Sustainability In' iatives 11,610 - , Reserve funds s- aside for sped- purpose by Council Recreation . ograms and facil' ies 167,867 153,960 Acquisitio• of tangible capit- assets 282,676 1,501,128 Squash ourts - 7,107 WSIB 3,047,737 2,790,875 Ani al . - er 292,967 261,136 M•-n's -tow • h 146,244 143,983 Jperatio-,M tr- 15,463,685 133,532 Roads & bn••e- 768,020 - Stormwater n}anagement 362,850 - 323,315,993 295,079,650 Page 19 FOR DISCUSSION PURPOSES ONLY • 261 I The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2014 12. Pension agreement The City makes contributions to the Ontario Municipal Employees Retirement Fund OMERS),which is a multi-employer plan, on behalf of the members of its staff.The plan is a defined .enefit plan whic • specifies the amount of the retirement benefit to be received by the employees .ased on the lengt• of service and rates of pay. OMERS provide pension services to over450,000 active and retired members f. about 1,0tS f employers. Each year an independent actuary determines the funding st. us . 071--ZS Pr' ary Pension the"Plan")by comparing the actuarial value of the invested ..sets to the es' . ed present ( } y p g p value of all pension benefits that members have earned to-date.The ost recent actua al valuation of the Plan was conducted as at December 31 2014.The results oft • valuation disclo -d total actuarial liabilities as at that date of$77,284 million in respect of benefits . crued for service ith actuarial assets at that date of$70,206 million indicating an actuarial deficit of', ,078 million. Bec. se OMERS is a multi-employer plan,any pension plan surpluses or deficits a - a joint responsib.Ity of Ontario municipal organizations and their employers.As a result,the City do-. n recognize a share of the OMERS pension.surplus or deficit. Contributions made by the City to OMERS on accoun of current ice or 2014 were$3,428,624 (2013-$3,339,622). 13. Trust Funds Trust funds administered by the City amounting to$341,024(20 : -$333,943)have not been included in the Consolidated Statement of Financial Position nor have t -ir operations been included in the Consolidated Statement of Operations. 14. Related party transactions Veridian Corporation The City of Pickering is a princip. shareholder in V- Idian Corporation(Note 4).The City receives electricity and services from Ve dian Corporation .nd its subsidiary. 2014 2013 $ $ Transactions Revenues Interest on pro 'ssory note 1,426,852 1,426,852 Propertytaxe levied 45,116 45,714 Expenses Electrica energy and sen/i 2,503,038 2,127,282 Balances Acco 'ts payable and ac• ed liabilities 467,682 562,535 • Pro is xyajattes recei .ble 25,069,000 25,069,000 • Page 20 FOR DISCUSSION PURPOSES ONLY 262 The Corporation li City of Pickering Notes to the consodated fmancof the ial statements December 31, 2014 15. Guarantees In the normal course of business,the City enters into agreements which contain gu.rantees.The city. primary guarantees are as follows: (i) The City has provided indemnities under lease agreements for the use of arious facilities or and. Under the terms of these agreements the City agrees to indemnify the o un - parties for v. ious items including, but not limited to,all liabilities, loss,suits,and damag- a► .1 during,o' or after ' the term of the agreement.The maximum amount of any potential f re ..y :• can at be reasonably estimated. (ii) The City indemnifies all employees and elected officials includi • Library employe-s and board members for various items including, but not limited to,all co s to settle suits or.ctions due to association with the City,subject to certain restrictions.The ity has purchasea liability insurance to mitigate the cost of any potential future suits or actions.T'a term of the inde' nification is not . explicitly defined,but is limited to the period over which a'ndemnified pa' served as an employee or elected official of the City.The maximu a nt of any po -ntial future payment cannot be reasonably estimated. . (iii) The City has entered into agreements that may itclude indem 'es' favour of third parties, such as purchase and sale agreements,confidentia' agreements,engagement letters with advisors and consultants,outsourcing agreements, le. ing contracts, information technology agreements and service agreements.These indemnific- ion agreements •ay require the City to compensate counterparties for losses incurred by the counterparties as - result of breaches in representation and regulations or as a result of litigati. claims or statuto' sanctions that may be suffered by the counterparty as a consequence of the tr-• action.The -rms of these indemnities are not explicitly defined and the maximum amount . any rei bursement cannot be reasonably estimated. The nature of these indemnification .•reementss.. -11:44,ve s the City from making a reasonable estimate of the maximum exposure due to the ifficulties in as e ing the amount of liability which stems from the unpredictability of future events d the unlimited c• erage offered to counterparties. Historically,the City has not made any signific- t payments uncle,such or similar indemnification agreements and • therefore no amount has bee accrued in the b- ance sheet with respect to these agreements. 16. Contingent liabilities Litigation O The City has been :med as -fend-nt in certain legal actions in which damages have been sought. • The outcome oft -se actions is at t eterminable as at the date of reporting and accordingly,no provision has b--n made in these consolidated financial statements for any liabilities which may result. 17. Contractual .rrangement In November 2014,the City: tered into a provisional license agreement with the Pickering Soccer Club (PSC)f. the PSC to occu• and operate the Pickering Indoor Soccer Facility that was under const .cti.�*ai. ing 2014 •he term of the agreement is 15 years from November 5,2014 to November 4,21 9. 1r.der •: ter s of the agreement,the PSC shall repay 52.25%of the City's total cost of pu•chasing°a: I.td, constructing the facility and the related improvements.This amount shall be revised i the final agr- m: t to adjust for the total project construction costs. During the term of the agreement the PSC will be r:.uired to make instalment payments to the City until the outstanding obligation is paid in full. In the ev-nt of default,the PSC may be required to pay interest on any outstanding amount. PSC has cot menced its soccer program operations and is operating the facility at its own expense including . repairs and maintenance.Once a final form of agreement is executed the total amount of the PSC' obligation will be calculated. Page 21 FOR DISCUSSION PURPOSES ONLY 263 • • • The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2414 18. Budget figures The 2014 Budget adopted by Council on February 25,2014 was not prepared on a sasis consistent w. that used to report actual results.The budget was prepared on a modified accrue .asis while Publi Sector Accounting Standards require a full accrual basis of accounting.The bus set figures treate• all tangible capital asset acquisitions as expenditures and did not include amorti .tion expense on .ngible capital assets or post-employment benefits expenses.As a result,the budg-t flees presentes in the consolidated Statements of Operations and Change in Net Financial Ass- s r:a'—nt the b •get adopted by Council on February 25,2014 with adjustments as follows: 2014 2014 Council Non IC• Post-employm- t Budget approved expenditu -s be -fits/ presented in budget from c..ital amo • ation statements $ $ $ $ Revenue • Taxation 58,902,543 58,902,543 Capital 28,669,687 28,669,687 Other 15,289,,:2 15,289,262 102,86 ,492 - - 102,861,492 Expenditures General government 5,76 y' 51,000 1,038,359 17,058,491 Protection to persons and property 21,956,,r 55,000 670,751 22,682,158 Transportation services 8,673,9 • 1,500,000 3,946,452. 14,120,431 Environmental services 1,480,426 - 2,182,332 3,662,758 Social and family services 655,2. - - 655,265 Recreational and cultural s- 'ces 21,416 '45 1,187,000 2,700,661 25,304,106 Planning and development , 3,3; ,519 20,000 - 3,402,519 AU • 73 34,173 3,013,000 10,538,555 86,885,728 Annual surplus(deft•t) Tilr 29,527,319 (3,013,000) (10,538,555) 15,975,764 Capital expendit •-s (52,870,440) 3,013,000 - (49,857,440) Transfers from -serve and reserve fu .s 8,046,001 Dividend •m Veridian Corpo ation 1,927,000 Princip. repayment of deb (3,645,880) Debt• oc;y� 16,891,000 Pri. yef..era;'g fu • surplus (125,000) Page 22 FOR DISCUSSION PURPOSES ONLY 264 • The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2014 19. Segmented information The City of Pickering is a diversified municipal government that provides a wide ra .e of services to it: residents. Distinguishable functional segments have been separately disclosed i he segmented information.The nature of the segments and the activities they encompass are :s follows: General Government This item relates to revenues and expenses of the City itself and cannot .- di ttribute• to a ' specific segment. Protection to Persons and Property Protection includes fire services,animal control, bylaw services, • ilding inspection d enforcement of the building code to ensure the safety and protection of all citiz- s and their proper . Public Works Services Public works includes construction and maintenance of th- Cis rzadways, ' cluding snow removal, sidewalk repairs,street lighting and maintenance of the .torm� i!r syste • Social and Family Services ` Social services for assistance or services for seni. S. Recreation and Culture Services • Recreation and cultural services include rec•eation programs, r aintenance and rental of facilities and parks, operation of the City's museum an. ibrary services. Planning and Development D. Planning and development provides . number of :rvi es including municipal planning and review of all property development plans. Segmented information has be-n provided in the .flowing pages. • • • • Page 23 FOR DISCUSSION PURPOSES ONLY " 265 CV 'a' 73 Cr)- LO r N LO N O 00 11) CO O r r N CD O CO CD T .`O.+ 6) N N LC) LO CO CO N N CD CC) 00 CO O CO tt N O r Cl... LA CD 0) CO Cr r r CD C) 'd, O M d ru -a O C co" N C] O co Cr r N a) M r CD C'S) 0- 01 C) 00 CO Cn O CO N d• CO LO O CO co O 'Cf CD N O LC) LO CO LO LC) CO CO CO CO CO, Cl, N N LC) a r .a- N 00 CO CA C)O N M 6) r r co C co r O ..cr r co N O r U +e" !A ' LO N ' ' O r CO CA N r 6) CC) CO N N N N M 00 r- N O CO N M CD CO r • a) a) M 6) vt LO N N N 0) ti M Cr OO C E (D CO O M' r C3) N M co- .4 r O 00 a) C co 6) M M M N co O N N O N O 0 d CO N LC) d; N CD r A C C Cr N N A N CO 6 () r O Cr r CO r N C) .a -, a) N , ' ' c0•) CD CO N d• ' st 0-- Cr CO R E U CO co M co Cn M CD N- Cr_ Ca > CO N O O ac a LO a- N Cr CO .-C) 0 r N r r r N CO 0 CD CA N/j (F), ■ O C) O N N 6) ' LNC) d' 'cF Ci) N N N 1^ O M O r a) O Q N a- M O co O O a) C6C)) = O d_ r LO N r N CO O C N r r N N r C > a •a i6 • E! \ M co N ' ' vi' 00 C, (O O CF O O O 7 C C '' CO CD CO CD LO CO CD CD CO 00 N r Z C CO a- r Cr O ti O CO W r N CO r 0 CO O C) N M N CD O r LC) r Vt N Cn O CO O (O d• 6) O 6) O LO Cr) r LO 'r V) 0) U Cn (.1 0 et r CO r CO Cr CO N CO LO 0 d "a v LC) M V N us M (O N d' C Cr C r r N D re M j N N R Y C) C) CO O N I 6) t co N— 6� CD N CD 1O CDN00003 .31' N.- o N. 6) N N O LO CO CO a- 01... 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'v _ CO Y (V .44 cC3 = co . co 0 Q c U C 'O C _p (n • 'C"' N 00 t6 N CO O p N U o co 0) _a) rn •py 741 7 N - N Q (6 N d N O .� C O . etO — E CO rnaU vN C C p to C6 y .E 3 . • CA O p. • to N 0 C a O S .0 N co w 2 O O C to C 0) O O N rna O a� m v, 'v I1 ^ L a) L W L N a = a) a C 1� (1) M d CD CA U O >, O a a) (6 ` N [1 r.?�I C L O ""' ;...q of C al N x C 3 C m L C O N C p _ 0 0 . r 1 E CA p N O (S (6 d CO O O E ...J — O v O •fl a) TU` DI- 0UWU` O -° •� XfnUQO. - 4 C-' Z La r • • 267 Financial statement of The Corporation f the City of Picked 2 g Trust "unds December 31,2014 • FOR DISCUSSION PURPOSES ONLY 268 The Corporation of the City of Pickering Trust Funds December 31, 2014 Table of contents Independent Auditor's Report 1-2 Statement of financial activities and fund balances 3 Statement of financial position 4 Notes to the financial statements 5 • FOR DISCUSSION PURPOSES ONLY 2 6 9 Deloitte LLP 5140 Yonge eet Suite 1700 Toronto 0 1 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 itafation We have audited the accompanying financial statements of e o`the City of Pickering Trust Funds,which comprise the statement of financial position : at Dec r 3 ,2014,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 an6t. esent. ion of these financial statements in accordance with Canadian accounting stan.. ds for .�►- s -t ofit organizations,and for such internal control as management determines is nee-ssary to enaN e 'e preparation of financial statements that are free from material misstatement,whet -r due to fraud or -rror. Auditor's Responsibility Our responsibility is to expres! . i nion on t -se financial statements based on our audit.We conducted our audit in acco .an' �• . as'an accounting standards for not-for-profit organizations. Those standards require It we co 41, y wit: ethical requirements and plan and perform the audit to obtain reasonable assur., ce about wh- the financial statements are free from material misstatement. An audit involves p-rforming 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 'aterial misstate -nt of the financial statements,whether due to fraud or error.In making those risk ass-ss •-- ,the aud. or considers internal control relevant to the entity's preparation and fair presentatio, of 4.e fin:e cial atements in order to design audit procedures that are appropriate in the circumst., ces,bu *A/.r e purpose of expressing an opinion on the effectiveness of the entity's intern. control.An a di-also includes evaluating the appropriateness of accounting policies used and the reas..ableness of ace. ting estimates made by management,as well as evaluating the overall pr= entation of the ..ancial statements. We believe that ill e audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit op' 'on. FOR DISCUSSION PURPOSES ONLY 270 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 31,2014,and the resu 6. 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 ,2015 Page 2 FOR DISCUSSION PURPOSES ONLY. 271 The Corporation of the • City of Pickering Trust Funds Statement of financial activities and fund balance year ended December 31, 2014 2014 2013 Revenue Interest ,081 ,974 Fund balance, beginning of year 3 •43 5,969 Fund balance,end of year 3• 024 333,943 The accompanying notes to the financial statements are an integral part of this financial statement. Page 3 FOR DISCUSSION PURPOSES ONLY 272 The Corporation of the City of Pickering Trust Funds Statement of financial position as at December 31, 2014 2014 2013 • Assets Cash and investments 3 ,633 32 ,615 Interest receivable 5 91 6,328 3 024 333,943 Trust Fund position 341,024 / 333,943 • • • . O The accompanying notes to the financial statements are an integral part of this financial statement. Page 4 FOR DISCUSSION PURPOSES ONLY 27 3 The Corporation of the City of Pickering Trust Funds Notes to the financial statements December 31, 2014 • 1. Accounting policies The financial statements of The Corporation of the City of Pickering Trust Fun. are the represe -tions of management prepared in accordance with Canadian accounting standard 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 expe•ses 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 $341,024(2013-$333,943) 3. Statement of cash flows A statement of cash flows has no seen presented _: the information is readily determinable from the financial statements presented. • O • • • Page 5 27 4 FOR DISCUSSION PURPOSES ONLY • • • • • • Financial statements of City of Pickerin• • Public Library : oard • December 31,2014 • ■ • • FOR DISCUSSION PURPOSES ONLY 275 City of Pickering Public Library Board December 31, 2014 Table of contents Independent Auditor's Report 1-2 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 FOR DISCUSSION PURPOSES ONLY 2.76 Deloitte LLP 5140 Yonge street Suite 1700 Toronto• M2N 6L7 Canad. Tel 416-601-6150 F.x: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:ickering We have audited the accompanying financial statements of e ii . . ••icker' g Public Library Board, which comprise the statement of financial position as at D•cember 3 01,,and the statements of operations,change in net debt and cash flows for the ye. then ended,an. a summary of significant ' accounting policies and other explanatory informatio.. P Management's Responsibility for the Financia Statements Management is responsible for the preparati. an:•i• .resen .'ion of these financial statements in accordance with Canadian public sector ac•ountin r -d:,and for such internal control as management determines is necessary to - able the prIt. . on of financial statements that are free from material misstatement,whether due to i and or error. Auditor's Responsibility Our responsibility is to express . ioinion on t ,se financial statements based on our audit.We conducted our audit in acco .. 1• ana. an generally accepted auditing standards.Those standards • require that we comply w.f ethic -quire. ents and plan and perform the audit to obtain reasonable assurance about whethe'the fmanci. • a •ments are free from material misstatement. An audit involves p-rforming proced.1 es to obtain evidence about the amounts and disclosures in the financial stateme. .The procedur- selected-depend on the auditor's judgment,including the assessment of the risks of.c aterial misstate .-nt of the financial statements,whether due to fraud or error.In making those risk ass-ss.�e sits,the aud' or considers internal control relevant to the entity's preparation and fair presentatio 5 o :'e Ikh cial tements in order to design audit procedures that are appropriate in the circumst.o ces,b . o %.r e purpose of expressing an opinion on the effectiveness of the entity's intern. control.An .•di also includes evaluating the appropriateness of accounting policies used and the . mass.ableness of ace.a ting estimates made by management,as well as evaluating the overall pr: entation of the f. ancial statements. We believe that of e audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit op'..•n. FOR DISCUSSION PURPOSES ONLY 277 Opinion In our opinion,the financial statements present fairly,in all material respects,the financial po ' on of the City of Pickering Public Library Board as at December 31,2014 and the results of its operaf ens,changes in its net debt and its cash flows for the year then ended in accordance with Canadian pub ' sector accounting standards. • Chartered Professional Accountants,Chartered Accountants Licensed Public Accountants • ,2015 O . Page 2 FOR DISCUSSION PURPOSES ONLY 278 City of Pickering Public Library Board ty g ry Statement of financial position as at December 31, 2014 • 2014 2013 • $ $ Financial assets Cash 50 2, 0 Accounts receivable 8,001 239 Due from the Government of Canada 22 88 14,246 Due from City of Pickering 287,580 392,N. 304,315 Liabilities Accounts payable and accrued liabilities 489,30: 361,598 Post-employment benefits liability(Note 2) 277, 00 240,300 7,408 601,898 Net debt (,3`74,263) (297,583) Non-financial assets Tangible capital assets(Note 4) 1,624,688 1,640,560 Prepaid expense 97,163 57,283 1,721,851 1,697,843 Accumulated surplus(Note 5) / 1,347,588 1,400,260 • O - The accompanying notesito the financial statements are an integral part of this financial statement. Page 3 FOR DISCUSSION PURPOSES ONLY 279 City of Pickering Public Library Board Statement of operations year ended December 31, 2014 2014 2013 Budget (Note 6) $ $ • Revenue City of Pickering grants 5,549,029 ,•1 S,.74 5, 65,987 Federal grants 25,605 65 5,639 Province of Ontario grants 142,599 139, k.. 143,848 . Fines and other receipts 212,600 181,061 173,052 Total revenue • 5,929,83 5,939,046 5,588,526 Expenses Operating Salaries Salaries and wages 3,24• 6:s ,325,895 3,258,479 Fringe benefits 873, 44,, 866,559 857,375 4,145,210 4,192,454 4,115,854 Material,supplies and utilities Books 125 i 00 275,093 157,335 Utilities 1•°,181 189,544 191,912 Other supplies 39,500 49,302 42,179 363,681 513,939 391,426 Services Repairs and maintenance 590,893 427,498 311,229 Insurance 31,472 29,175 34,675 Travel 4,300 3,852 4,675 Consulting and professiona 42,255 54,721 29,421 Advertising 0 20,000 22,362 17,281 Conference 5,700 7,244 7,968 Postage 3,000 5,232 3,392 Telephone 74,601 66,369 74,894 Seminars and es cation 25,034 17,818 22,145 Software/hard are maintenance 88,100 87,108 57,473 Vehicle rep. rs and maintenance 5,287 3,548 4,124 Minor cap'al .urchases 61,000 68,383 65,087 Miscell. e. 16,100 17,893 28,116 967,742 811,203 660,480 ortization of fan.'.le capital assets 474,963 474,122 .423,682 'tat operating exp nses 5,951,596 5,991,718 5,591,442 Annual deficit (21,763) (52,672) (2,916) Accumulated s rplus,beginning of year 1,400,260 1,400,260 1,403,176 Accumulated surplus,end of year 1,378,497 1,347,588 1,400,260 The accompanying notes to the financial statements are an integral part of this financial statement. Page 4 FOR DISCUSSION PURPOSES ONLY 280 City of Pickering Public Library Board Statement of change in net debt year ended December 31, 2014 2014 2013 Budget (Note 6) Annual deficit (21,763) ;2,672) ,916) Acquisition of tangible capital assets (453,200) ( X50) (466,866) Amortization of tangible capital assets 474,963 474, N 423,682 21,763 15,872 (43,184) Change in prepaid expense - (39,8:i) 3,777 Change in net debt • - (76 :80) (42,323) Net debt, beginning of year ( 7,583) (29 ,583) (255,260) Net debt,end of year ,(29 .83) • 4,263) (297,583) • .C) The accompanying notes to the financial statements are an integral part of this financial statement. Page 5 FOR DISCUSSION PURPOSES ONLY 281 City of Pickering Public Library Board Statement of cash flows year ended December 31, 2014 2014 2013 $ $ Operating transactions Annual deficit (5 72) (2,116) Non-cash items Amortization of tangible capital assets 47 122 ; 3,682 • / 50 420,766 Change in non-cash operating items (Increase)decrease in accounts receivable (7,762) 106,573 (Increase) decrease in due from Government of Canada (12,3,/) 4,470 (Increase)decrease in due from City of Pickering (67, 26) (162,549) Increase in accounts payable and accrued liabilities 1 ,710 47,729 Increase in post-employment benefits liability 36,800 46,100 (Increase)decrease in prepaid expense (39,880) 3,777 36,800 46,100 458,250 466,866 Capital transactions Net acquisition of tangible capital assets (458,250) (466,866) Net decrease in cash D - - Cash,beginning of year 2,250 2,250 Cash,end of year / / 2,250 2,250 • The accompanying notes to the financial statements are an integral part of this financial statement. Page 6 FOR DISCUSSION PURPOSES ONLY 282 City of Pickering Public Library Board Notes to the financial statements December 31, 2014 • 1. Significant accounting policies The financial statements of the City of Pickering Public Library Board (the"Library :.ard")are the representations of management prepared in accordance with Canadian public se or accounting • standards established by the Public Sector Accounting Board("PSAB")of Cha -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 accrual basis of accounting recognizes revenues as they are earned and m:asurable;expens: are recognized, as they are incurred and measurable as a result of the receis of goods and se ices and the creation of a legal obligation to pay. (b) Non-financial assets (i) Tangible capital assets k . ■ Tangible capital assets are recorded at co. less accumulate. amortization.Cost includes all amounts that are directly attributable to .cquisition,develo. ent or betterment of the asset. The cost of the tangible capital asset i-amortized on a s 'aight-line basis over the estimated useful life as follows: Machinery and equipment 2 to 25 year. Information technology hardwar- . 8 years • Library collection material D, • -ars Furniture and fixtures 1: •o 5: years One-half of the annual a, ortization is char.-d in the year of acquisition and in the year of disposal. Other major assets' cluding the Libra. buildings are owned by the City and are not reflected in these financial st. ements. (ii) Contribution/d. at:Mean.ible 'a.ital assets■ Tangible capital asst-receiv-: as contributions or donations are recorded at their fair value at • the date o receipt, an. •,.t :it value is also recorded as revenue. (iii) Intan.i.e assets Inta'gible assets are .t recognized as assets in the financial statements., (c) Post--m.lo meet benef s T - p -—-.t value of e cost of providing employees with future benefits programs is recognized as : p ..ees ::rn the e entitlements through service.Any actuarial gains or losses are amortized on a stra:':- lin_ ba s over the average remaining service period(ARSP)of employees.The actuary estimate... SP to be 14 years. (d) Govemmen ransfers Govern nt transfers are recognized as revenue by the Library Board in the period in which the transfe is authorized and any eligibility criteria are met, unless they are restricted through stipul ions that require specific actions to be carried out in order to keep the transfer.For such tra sfers,revenue is recognized as the stipulation has been met. Page 7 FOR DISCUSSION PURPOSES ONLY 283 • • City of Pickering Public Library Board Notes to the financial statements December 31, 2014 • 1. Significant accounting policies(continued) Basis of accounting(continued) (e) Use of estimates The preparation of financial statements in conformity with Canadian pubf sector accountin• standards requires management to make estimates and assumptions trat R ct the repo -d amount of assets,liabilities and the disclosure of contingent assets a,d li.l i it� at the ,ate of the • financial statements and the reported amounts of revenues and ex.-nses durin. e •-Hod.Actual results could differ from those estimates. Balances which require .ignificant estimat- include tangible capital assets,which are based on estimated useful liv-s,and post-empl. ment benefits. 2. Post-employment benefits liability The Library Board makes available to qualifying employees w,o retire before th age of 65,the opportunity to continue their coverage for benefits such as ..st mployment e ended healthcare benefits. Coverage ceases at the age of 65.The Library :•ar Is provide ull time and permanent part-time employees a sick time entitlement and any un ed ment is.ccumulated year to year.• This accumulated entitlement is not vested and theref,re is forfei at t - time of retirement or termination.The post-employment benefits obligatio' at December 1 014 and the changes in the accrued benefit obligation for the 2014 fiscal year as determined b actuarial valuation prepared as at . January 1,2014. Information about the Library Board's post-e ,ployment benefits lability is as follows: 2014 2013 Post-employment benefits liability, •eginning of y r 240,300 194,200 Current service costs 35,400 33,200 Amortization of actuarial losse 15,600 16,600 Interest expense 19,100 15,500 • Benefits paid during the ye:r (33,300) (19,200) Post-employment benefi - Iil)lity 277,100 240,300 2014 2013 $ Accrued post- mployment benef s obligation 472,700 418,100 Unamortize actuarial losses (195,600) (177,800) Post-emp yment benefits lia1Sility 277,100 240,300 • Page 8 FOR DISCUSSION PURPOSES ONLY 284 City of Pickering Public Library Board Notes to the financial statements December 31, 2014 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 31,2014 of the future benefits was d- ermined using a .'scount rate of 3.5% (2013-3.75%). (b) Dental cost The dental cost trend rate was 3.75%(2013-4.0%)per annum. (c) Health costs • Health costs were assumed to increase at 7.0%(2013-7..Vo).and decrease • 0.25% (2013-0.2%)increments per year to an ultimate rate of .. 5%per year in .23 and thereafter. 3. Pension agreement The Library Board makes contributions to the Ontario unicipal loye-s Retirement Fund(OMERS), which is a multi-employer plan, on behalf of eligible embers of its a .The Plan is a defined benefit plan that specifies the amount of the retirement be,efit to be receive. .y the employees based on the length of service and rates of pay. OMERS provide pension services to over 450 100 active and re' ed members and about 1,000 employers. Each year an independent actu. determines the nding status of OMERS Primary Pension ("the Plan")by comparing the ac,arial value of the' vested assets to the estimated present value of all pension benefits that memb- s hai •-d to :ate.The most recent actuarial valuation of the Plan was conducted as at Decem.-r 31 20`►; r- ults of this valuation disclosed total actuarial liabilities as at that date of$77,284 illion in resp:,.t o •enefits accrued for service with actuarial assets at that date of$70,206 million indirating an actuarial .eficit of$7,078 million. Because OMERS is a multi-employer plan,any pensio' plan surpluses or deficits are a joint responsibility of Ontario municipal organizations and their emplo -rs.As a result,t - Library Board does not recognize any share of the OMERS pension surplus or•eficit. • Contributions in the amo t o '.276,592'(20 3-$271,161)were paid to OMERS on behalf of its members during the ye-r. • ' O Page 9 FOR DISCUSSION PURPOSES ONLY 285 City of Pickering Public Library Board Notes to the financial statements December 31, 2014 • 4. Tangible capital assets(TCA) • Machinery Information' Library Fur 'ure and technology collection and equipment hardware materials fixtures • '014 $ $ $ $ $ Cost Balance beginning of year 9,992 255,729 2,317 •96 304,520 2,887,737 Additions during the year • - - 4 4,122 25,1 458,250 • . Disposals/transfers to • TCA during the year - - 189,110 - 189,110 • Balance,end of year 9,992 255,729 2,561,508 29,648 . 3,156,877 Accumulated amortization Balance,beginning of year 4,496 7 , 72 „12 105,883 1,247,177 Amortization 999 '6,261 437, 8 9,384 474,122 Accumulated amortization on disposals - - . 9,110 - 189,110 Balance,end of year 5,495 97,933 ,313,494 115,267 1,532,189 Net book value , 4,49 157,796 1,248,014 214,381 1,624,688 Machine• Info '•• Library Furniture Assets . -nd techno v.y Ilection and under equi• .ent hardware materials fixtures construction 2013 $ $ $ •$ $ Cost Balance beginning of ye- 9,992 3,006 2,040,705 304,520 127,520 2,645,743 Additions during the ye-r - 148,392 445,994 - - 594,386 Disposals/transfers TCA during the y ar 55,669 169,203 - 127,520 352,392 Balance,end of -ar 9,9:2 255,729 2,317,496 304,520 - 2,887,737 Accumulated a• ortization Balance,b-ginning of year 3,497 109,483 837,631 97,756 - 1,048,367 • Amortiza-on 999 17,858 396,698 8,127 - 423,682 Accum lated amortizatio o .is.. als - 55,669 169,203 - - 224,872 B. .n.- - • • year 4,496 71,672 1,065,126 105,883 - 1,247,177 44 )Ne book�= 5,496 184,057 1,252,370 198,637 - 1,640,560 5. Accumulated su •lus Accumulated s∎rplus consists of the following: 2014 2013 $ $ Inve ed in capital assets 1,624,688 1,640,560 Po•t-employment benefits liability (277,100) (240,300) 1,347,588 1,400,260 • Page 10 FOR DISCUSSION PURPOSES ONLY 286 . City of Pickering Public Library Board Notes to the financial statements December 31, 2014 6. Budget figures The 2014 budget was not prepared on a basis consistent with that used to report a ual results.The budget was prepared on a modified accrual basis while public sector accounting andards require . 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 as -ts.The following erovides a reconciliation from the approved budget to the budget numbers presentee n financial st. ements. 2014 Non TCA 21'4 budget Council approved expenditures a resented in budget from capita Amortization statements $ $ $ Revenue City of Pickering 5,549,029 - 5,549,029 Federal and provincial grants 168,204 - 168,204 Fines and other receipts 212,600 - - 212,600 5,929,83. - 5,929,833 Expenditures Salaries and benefits 4, 45,210 - - 4,145,210 Material,supplies . and utilites 36 - - 363,681 Services 635, 332,000 - 967,742 Amortization - - 474,963 474,963 5,144,63 332,000 474,963 5,951,596 Annual surplus 78 00 (332,000) (474,963) (21,763) Capital expenditures/ ./ additions O 85,200) 332,000 - (453,200) Page 11 FOR DISCUSSION PURPOSES ONLY 287 •