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HomeMy WebLinkAboutFIN 03-22Report to Council Report Number: FIN 03-22 Date: January 24, 2022 From: Stan Karwowski Director, Finance & Treasurer Subject: 2020 Year End Audit and Financial Statements - File: F-3300-001 Recommendation: 1. That the Report on the results of the 2020 Audit as submitted by Deloitte LLP (Deloitte) be received for information; and, 2. That the 2020 draft Audited Consolidated Financial Statements for the City of Pickering be approved. Executive Summary: Attached to this report is the auditor’s Report to Council on the results of the 2020 audit and the draft Audited Consolidated Financial Statements for the year ended December 31, 2020. 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, changes in its net financial assets and its cash flows in accordance with Canadian public sector accounting standards. The auditor did not identify any significant deficiencies during the audit to formally report to Council . Financial Implications: The City’s financial position is healthy and strong and the City is able to meet its current financial commitments and in the future. Discussion: On March 11, 2020, the World Health Organization declared the COVID-19 outbreak as a pandemic. During 2020 and continuing through 2021, in response to various Provincial public health measures, City facilities have been occasionally closed to the public and working from home arrangements were put in place which limited City staff working on site as well as limited access by external consultants in order to reduce the spread of the virus. As a result, the City audit was delayed and Deloitte’s audit team had to work remotely in order to complete the audit. This delayed the 2020 Financial Statements from being presented until now. The audit of the consolidated financial statements for the year ended December 31, 2020 has now been completed. The auditor’s Report on the results of the 2020 Audit is included as Attachment 1. This Report, prepared by Deloitte, summarizes its findings from the December 31, 2020 audit and comments on significant matters regarding the audit. Appendix 1 provides a summary of communication requirements which Deloitte is required to bring to Council’s attention. The independence letter in Appendix 2 confirms that Deloitte is independent from the City. Appendix 3 is the draft management representation letter which is FIN 03-22 January 24, 2022 Subject: 2020 Year End Audit and Financial Statements Page 2 provided by the City to the auditors. This letter indicates that the financial statements are management’s responsibility and that management has provide d and disclosed all necessary information to ensure that the financial statements are not materially misstated. This letter will be signed by the appropriate authorities upon approval of the financial statements. 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. The draft Audited Consolidated Financial Statements, for the year ended December 31, 2020, are included as Attachment 2. These statements are the responsibility of management and have been prepared by City accounting staff under the direction of the Director, 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 which means the auditors have indicated that in their opinion, the consolidated financial statements are fairly presented, in all material respects. In other words the City has a clean report. The Consolidated Financial Statements include the activities of the City of Pickering Public Library Board. The City’s investment in Elexicon Corporation is accounted for on a modified equity basis, which means the City includes its share of Elexicon’s income or loss in the Consolidated Financial Statements. Attachments: 1.Auditor’s Report on the Results of the 2020 Audit 2.2020 Draft Audited Consolidated Financial Statements Prepared By: Approved/Endorsed By: Kristine Senior Stan Karwowski Manager, Accounting Services Director, Finance & Treasurer Recommended for the consideration of Pickering City Council Marisa Carpino, M.A. Chief Administrative Officer Original Signed By Original Signed By Original Signed By 00 The Corporation of the City of Pickering Report on the results of the 2020 audit To be presented on January 24, 2022 DRAFT Attachment #1 to Report #FIN 03-22 Deloitte LLP Bay Adelaide East 8 Adelaide Street West Suite 200 Toronto ON M5H 0A9 Canada Fax: 416-601-6151 www.deloitte.caJanuary 12, 2022 Private and confidential To the Members of Council The Corporation of the City of Pickering 1 The Esplanade Pickering ON L1V 6K7 Report on audited annual consolidated financial statements Dear Council Members: We are pleased to submit this report on the status of our audit of the consolidated financial statements (the “financial statements”) of the Corporation of the City of Pickering (the “City”) and the financial statements of the related City entities for the fiscal year ended December 31, 2020. This report summarizes the scope of our audit, our findings and reviews certain other matters for the consolidated financial statements that we believe to be of interest to you. As agreed in our Master Services Agreement dated October 17, 2019, and confirmation of changes letter dated November 2, 2020, we have performed an audit of the financial statements of the City, the City of Pickering Library Board (the “Library”) and the City of Pickering Trust Funds (the “Trust Funds”), as at, and for the year ended December 31, 2020, in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”) and expect to issue our Independent Auditor’s Report thereon upon completion of outstanding matters highlighted in this report, and upon approval of the financial statements by yourself. This report is intended solely for the information and use of Council, management and others within the City and is not intended to be, and should not be, used by anyone other than these specified parties. Accordingly, we disclaim any responsibility to any other party who may rely on it. We would like to express our appreciation for the cooperation we received from employees of the City with whom we worked to discharge our responsibilities. We look forward to discussing this report summarizing the outcome of our audit with you and answering any questions you may have. Yours truly, Original signed Deloitte LLP Chartered Professional Accountants Licensed Public Accountants i © Deloitte LLP and affiliated entities. 1 3 Table of contents Executive summary Significant audit risks, other audit risks and events Significant accounting policies, judgments and estimates 5 Appendix 1 – Communication requirements and other reportable matters Appendix 2 – Independence letter Appendix 3 – Draft management representations letter 1 © Deloitte LLP and affiliated entities. Executive summary Audit scope and terms of engagement We have been engaged to perform the audits of the City’s, Library’s, and Trust Funds’ financial statements (the “financial statements”) prepared in accordance with Canadian Public Sector Accounting Standards for the City and the Library Board and Canadian Accounting Standards for Not-For-Profit Organizations for the Trust Funds as at and for the year ended December 31, 2020. Our audit was conducted in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). The terms and conditions of our engagement are described in the Master Services Agreement dated October 17, 2019 and Confirmation of Changes Letter dated November 2, 2020. We have developed appropriate safeguards and procedures to eliminate threats to our independence or to reduce them to an acceptable level. Significant audit risks 1 Revenue recognition 2 Management override of controls 3 Implementation of new financial system 4 Management judgements and accounting estimates Uncorrected misstatements (consolidated) Materiality$2.4 Mil Clearly trivial threshold $120K Materiality levels are determined on the basis of total expenses. Our materiality for the year ended December 31, 2020 was $2,400,000 (2019 - $2,500,000). In the current year, management identified tangible capital assets totalling $1.3 million which were assumed by the City in prior years, but not recorded in the financial statements. These have been recorded during fiscal 2020. Refer to Appendix 3 for a summary of the impact of this transaction on the financial statements. 2 © Deloitte LLP and affiliated entities. Outstanding matters & next steps Completion of minor audit documentation items Receipt of signed management representations letter Receipt of legal letters Receipt of component audit response from auditors of Elexicon Corporation Completion of our subsequent events procedures Completion of our Engagement Quality Control review Highlights No changes in the significant risks identified. COVID-19 – impact on City’s operations and disclosure included in Note 20 to the financial statements. Communicated with management throughout the fiscal year. Engaged with the City on various accounting matters. Going concern Management has completed its assessment of the ability of the City to continue as a going concern and in making its assessment did not identify any material uncertainties related to events or conditions that may cast significant doubt upon the City’s ability to continue as a going concern. We agree with management’s assessment. Results We intend to issue an unmodified audit report on the consolidated financial statements of the City, the Library Board and the Trust Funds, for the year ended December 31, 2020 once the outstanding items referred to above are completed satisfactorily and the financial statements are approved. 3 © Deloitte LLP and affiliated entities. Significant audit risks, other audit risks and events The significant audit risks identified as part of our risk assessment, together with our planned responses and conclusions, are described below. Significant audit risks Management override of controls* *These areas were identified as areas of significant risk, as required by Canadian Auditing Standards. Analysis of risk Under Canadian Auditing Standards, it is the responsibility of the management, with the oversight of those charged with governance to place a strong emphasis on fraud prevention and detection. Oversight by those charged with governance includes considering the potential for override of controls or other inappropriate influence over the financial reporting process. Management override of controls is present in all entities. It is a risk of material misstatement resulting from fraud and therefore is considered as a significant risk. Audit response and results We engaged in periodic fraud discussions with certain members of senior management and others. We tested journal entries that exhibit characteristics of possible management override of controls, identified using manual techniques. We evaluated the business rationale for any significant unusual transactions. We considered the potential for bias in judgments and estimates, including performing retrospective analysis of significant accounting estimates. We evaluated the City’s fraud risk assessment and consider entity-level internal controls and internal controls over the closing and reporting process. We obtained sufficient audit evidence to conclude that there were no material misstatements. Revenue recognition* Analysis of risk Under Canadian GAAS, we are required to evaluate the risk of fraud in revenue recognition. For municipalities, there is a risk around the occurrence, completeness, accuracy and cut-off of various revenue streams (taxation, user charges, development charges and other contributions, government grants, contributed tangible capital assets, and earnings from Elexicon), and the associated deferred revenue. We recognize that as a result of COVID-19 there may be certain changes to other revenue streams (i.e. recreation, permits and fees, etc.) which will be captured as part of our audit response. Audit response and results We tested the design and implementation of controls in these revenue streams and perform substantive analytic procedures and/or detailed testing in these areas. We performed substantive testing to determine if restricted grants/contributions (i.e., development charges, gas tax, etc.) and government transfers have been recognized as revenue in the appropriate period. We obtained an understanding of the financial impact to various revenue streams as a result of COVID-19. We performed testing on affected revenue streams as a result, including testing of the funding received for the COVID-19 safe restart program and its appropriate recognition/deferral. We obtained sufficient audit evidence to conclude that there were no material misstatements. 4 © Deloitte LLP and affiliated entities. Management judgements and accounting estimates Analysis of risk Management judgments and accounting estimates may be subject to estimation uncertainty. Significant judgements and estimates Accounts involving significant estimates include allowance for doubtful accounts, certain accrued liabilities, post-employment benefits liability, WSIB liabilities and estimates relating to the useful lives of tangible capital assets. Audit response and results We obtained an understanding of how management makes the accounting estimates and the underlying data on which those estimates are based. We reviewed the support for significant assumptions made by management. We evaluated the significant assumptions made by management for accounting estimates. We assessed the reasonables of the estimates made at year-end. We assessed the consistency of assumption made by management. We obtained sufficient audit evidence to conclude that there were no material misstatements. Implementation of new financial system Analysis of risk The City is in the process of implementing a new financial system, SAP, which is expected to go live during fiscal 2021. Given the complexity associated with such a significant undertaking and the impact on numerous City departments, proper planning is critical to ensure implementation success and the proper conversion and migration of financial data. Audit response and results We obtained an understanding of the project scope for the systems implementation through discussion with Finance and project management and assessed the implications on our audit strategy for fiscal 2021. We continue to be in discussions with Finance management regarding the City’s data conversion and migration from Vailtech to the new system and will factor these additional procedures into our 2021 audit plan. Our IT specialists will be involved to assist with the testing of migrated data and controls over project governance. Significant event COVID-19 Impact on our 2020 audit On March 11, 2020, the World Health Organization characterized the outbreak of a strain of the novel coronavirus (“COVID-19”) as a pandemic which has resulted in a series of public health and emergency measures that have been put in place to combat the spread of the virus. The duration and impact of COVID-19 is unknown at this time and it is not possible to reliably estimate the impact that the length and severity of these developments will have on the financial results and condition of the City in future periods. As a result of COVID-19, the City experienced service interruptions and intermittent closures throughout 2020. To assess the impact these economic events may have on our audit, we performed the following audit procedures: •Enquiry of management regarding the impact of recent economic conditions on their financial results or future financial results, and •Considered the effect of recent events on our risk assessment and planned audit procedures. Due to COVID-19 social distancing measures, we conducted our audit remotely with audit evidence being provided electronically. 5 © Deloitte LLP and affiliated entities. Significant accounting policies, judgments and estimates The accounting policies of the City, the Library Board and the Trust Funds are set out in Note 1 of their respective financial statements. In the course of our audits of the financial statements, we considered the qualitative aspects of the financial reporting process, including items that have a significant impact on the relevance, reliability, comparability and understandability of the information included in the financial statements. Significant accounting policies There were no other changes to previously adopted accounting policies or their application at the City, the Library Board or the Trust Funds. In our judgment, the significant accounting practices and policies, selected and applied by City management are, in all material respects, acceptable under PSAS for the City and the Library Board, under Accounting Standards for Not-For-Profit Organizations for the Trust Funds and are appropriate to the particular circumstances of the City, the Library Board and the Trust Funds. Accounting estimates Accounting estimates are an integral part of the financial statements 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, 2020, management advised us that there were no significant changes in accounting estimates or in judgments relating to the application of the accounting policies. 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. The Corporation of the City of Pickering | Appendix 1 – Communication requirements and other reportable matters 6 © Deloitte LLP and affiliated entities. Appendix 1 – Communication requirements and other reportable matters Required communication Refer to this report or document described below Audit service plan 1.Our responsibilities under Canadian GAAS, including forming and expressing an opinion on the financial statements Audit service plan dated October 15, 2020. 2.An overview of the overall audit strategy, addressing: a.Timing of the audit b.Significant risks, including fraud risks c.Names, locations, and planned responsibilities of other independent public accounting firms or others that perform audit procedures in the audit Audit service plan dated October 15, 2020. 3.Significant transactions outside of the normal course of business, including related party transactions Audit service plan dated October 15, 2020. Year end communication 4.Fraud or possible fraud identified through the audit process None noted 5.Significant accounting policies, practices, unusual transactions, and our related conclusions Significant accounting practices, judgements and estimates section 6.Alternative treatments for accounting policies and practices that have been discussed with management during the current audit period None noted 7.Matters related to going concern Note noted – refer to Executive summary 8.Consultation with other accountants Management has informed us that the City, the Library Board and the Trust Funds have not consulted with other accountants about auditing or accounting matters. 9.Management judgments and accounting estimates Significant accounting practices, judgements and estimates section 10.Significant difficulties, if any, encountered during the audit None The Corporation of the City of Pickering | Appendix 1 – Communication requirements and other reportable matters 7 © Deloitte LLP and affiliated entities. Required communication Refer to this report or document described below 11.Material written communications between management and us, including management representation letters Master service agreement dated October 17, 2019 and the subsequent letter of confirmation of changes to the Master Services Agreement dated November 2, 2020, Management representation letter – Appendix 3. 12.Circumstances that affect the form and the content of the auditor’s report Master service agreement dated October 17, 2019 and the subsequent letter of confirmation of changes to the Master Services Agreement dated November 2, 2020. 13.Other matters that are significant to the oversight of the financial reporting process No other matters to report. 14.Modifications to our opinion None. 15.Other significant matters discussed with management None. 16.Matters involving non-compliance with laws and regulations that come to our attention, unless prohibited by law or regulation, including Illegal or possibly illegal acts that come to our attention None. 17.Litigation No litigation matters to report. 18.Significant deficiencies in internal control, if any, identified by us in the conduct of the audit of the financial statements No deficiencies to report. 19.Uncorrected misstatements and disclosure items In accordance with Canadian GAAS, we request that all misstatements be corrected. The only uncorrected misstatement relates to the opening balance impact as a result of the assumed tangible capital assets from prior fiscal years which were only recorded in the financial statements during 2020 – refer to Appendix 3. There were no uncorrected disclosure misstatements. Other reportable matters 20.Changes to the audit plan The audit was conducted in accordance with our audit plan dated October 15, 2020 which was presented to the Members of the Executive Committee. We confirm that there have been no significant amendments to the audit scope and approach communicated in the audit plan. 21.Concerns regarding management competence and integrity We have not determined any concerns regarding management competence and integrity. 22.Disagreements with management In the course of our audit, we did not encounter any disagreements with management about matters that individually or in the aggregate could be significant to the financial statements. 23.Post-balance sheet events At the date of finalizing this report, we are not aware of any significant post-balance sheet events. The Corporation of the City of Pickering | Appendix 1 – Communication requirements and other reportable matters 8 © Deloitte LLP and affiliated entities. Required communication Refer to this report or document described below 24.Reliance on service organizations The City makes use of ADP in the processing of payroll transactions. We obtained the CSAE 3416 service organization report on the operating effectiveness of internal controls adopted at ADP, and noted no issues which would impact our audit. 25.Other significant matters arising from the audit None noted. Appendix 2 – Independence letter The Corporation of the City of Pickering | Appendix 2 – Independence letter 9 © Deloitte LLP and affiliated entities. Deloitte LLP 8 Adelaide Street West Suite 200 Toronto ON M5H 0A9 Canada Tel: 416-601-6150 Fax: 416-601-6610 www.deloitte.ca January 12, 2022 Private and confidential The Members of Council The Corporation of the City of Pickering 1 The Esplanade Pickering ON L1V 6K7 Dear Council Members, We have been engaged to audit the consolidated financial statements of The Corporation of the City of Pickering (the “City”) for the year ended December 31, 2020. 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 regulator/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. 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 December 3, 2020, the date of our last letter. Deloitte provided the following non-audit services between December 3, 2020 and January 12, 2022: •Pickering City Centre development advisory and project services •Hospital site proposal We are not aware of any relationships between the Deloitte Entities and the City and its affiliates, or persons in financial reporting oversight roles at the City and its affiliates, that, in our professional judgment, may reasonably be thought to bear on independence, that have occurred from December 3, 2020 to January 12, 2022. The Corporation of the City of Pickering January 12, 2022 Page 2 We hereby confirm that we are independent with respect to the City in accordance with the Rules of Professional Conduct of the Chartered Professional Accountants of Ontario as of January 12, 2022. This letter is intended solely for the information and use of the Council, management, and others within the City and is not intended to be and should not be used for any other purposes. Yours truly, Original signed Deloitte LLP Chartered Professional Accountants Licensed Public Accountants Appendix 3 – Draft management representations letter The Corporation of the City of Pickering | Appendix 3 – Draft management representations letter 10 © Deloitte LLP and affiliated entities. [City letterhead] [Date] Deloitte LLP 8 Adelaide Street West Suite 200 Toronto ON M5H 0A9 Subject: Consolidated financial statements of The Corporation of the City of Pickering for the year ended December 31, 2020 Dear Ms. Lilian Cheung: 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”) as of and for the year ended December 31, 2020, the notes to the consolidated financial statements and a summary of significant accounting policies (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”). Certain representations in this letter are described as being limited to matters that are material. Items are considered to be material if they, individually or in the aggregate, could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. We confirm that, to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves: Financial statements 1.We have fulfilled our responsibilities as set out in the terms of the engagement letter between the City and Deloitte dated October 17, 2019 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, 2020 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 City. No events have occurred subsequent to December 31, 2020 that require adjustment to the estimates and disclosures included in the Financial Statements. Deloitte LLP [Date] Page 2 There are no changes in management’s method of determining significant estimates in the current year. 3.We have determined that the Financial Statements are complete as of the date of this letter as this is the date when there are no changes to the Financial Statements (including disclosures) planned or expected. 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, 2020 and up to the date of this letter. 5.The Financial Statements are free of material errors and omissions. We believe that the effects of any uncorrected Financial Statement misstatements pertaining to the current period presented, are immaterial, both individually and in the aggregate, to the Financial Statements taken as a whole. A list of the uncorrected misstatements aggregated by you is attached in Appendix A. Internal controls 6.We acknowledge our responsibility for the design, implementation and maintenance of internal control to prevent and detect fraud and error. 7.We have disclosed to you all known deficiencies in the design or operation of internal control over financial reporting identified as part of our evaluation, including separately disclosing to you all such deficiencies that we believe to be significant deficiencies in internal control over financial reporting. 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. Information provided 8.We have provided you with: a.Access to all information of which we are aware that is relevant to the preparation of the Financial Statements, such as records, documentation and other matters. b.All relevant information as well as additional information that you have requested from us for the purpose of the audit; c.Unrestricted access to persons within the City from whom you determined it necessary to obtain audit evidence; and, d.Unrestricted access to all minutes of the meetings of Council and committees of Council, or summaries of actions of recent meetings for which minutes have not yet been prepared. All significant Council and committee actions are included in the summaries. 9.We have disclosed to you the results of our assessment of the risk that the Financial Statements may be materially misstated as a result of fraud. 10.We have disclosed to you all information in relation to fraud or suspected fraud that we are aware of and that affects the City and involves: a.Management; b.Employees who have significant roles in internal control; or c.Others where the fraud could have a material effect on the Financial Statements. Deloitte LLP [Date] Page 3 11.We have disclosed to you all information in relation to allegations of actual, suspected or alleged fraud, or illegal or suspected illegal acts affecting the City. 12.There have been no communications with regulatory agencies concerning actual or potential noncompliance with or deficiencies in financial reporting practices. There are also no known or possible instances of non-compliance with the requirements of regulatory or governmental authorities. 13.We have disclosed to you the identities of the City’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. Independence matters For purposes of the following paragraphs, “Deloitte” shall mean Deloitte LLP and Deloitte Touche Tohmatsu Limited, including related member firms and affiliates. 14.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 City Council. 15.We have adhered to all regulatory requirements regarding the provision of non-audit services by Deloitte to the City in accordance with applicable laws, regulations and rules that apply to the City, including pre-approval requirements, as applicable. 16.We have ensured that all services performed by Deloitte with respect to this engagement have been pre-approved by the Executive Committee of City Council in accordance with its established approval policies and procedures including the City’s procurement policies. Other matters 17.We have disclosed to you all the documents that we expect to issue that may comprise other information, in the context of CAS 720, The Auditor's Responsibilities Relating to Other Information in Documents Containing Audited Financial Statements. Immaterial matters less than $120,000 (representing the clearly trivial threshold for audit purposes) collectively are not considered to be exceptions that require disclosure for the purpose of representations #18 to #40. This amount is not necessarily indicative of amounts that would require adjustment to or disclosure in the Financial Statements. 18.Except as listed in Appendix A, all transactions have been properly recorded in the accounting records and are reflected in the Financial Statements. 19.The City has identified all related parties in accordance with Section PS 2200, Related Party Disclosures (“PS 2200”). Management has made the appropriate disclosures with respect to its related party transactions in accordance with PS 2200. This assessment is based on all relevant factors, including those listed in para. 16 of PS2200. 20.There are no instances of identified or suspected noncompliance with laws and regulations. 21.We have disclosed to you all known, actual or possible litigation and claims, whether or not they have been discussed with our lawyers, whose effects should be considered when preparing the Financial Statements. As appropriate, these items have been disclosed and accounted for in the Financial Statements in accordance with PSAS. Deloitte LLP [Date] Page 4 22.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. 23.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. 24.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. 25.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. Communications with taxation and regulatory agencies 26.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. Work of management’s experts 27.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. Loans and receivables 28.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 29.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 30.We have disclosed to you all correspondence relating to government transfers that the City has had with the funding body. Deloitte LLP [Date] Page 5 31.We have assessed the eligibility criteria and determined that the City is an eligible recipient for the government transfers received. 32.We have assessed the stipulations attached with the funding and have recognized the revenue in accordance with meeting the stipulations required. 33.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 34.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. Tangible capital assets 35.Tangible capital assets have been recorded properly and consistently according to the standards in Section PS 3150, Tangible Capital Assets. 36.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. 37.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 38.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 39.The City has appropriately classified its investments in Elexicon as a Government Business Enterprise. With regard to the City’s investment in Elexicon, 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. Deloitte LLP [Date] Page 6 Liabilities for contaminated sites 40.We have evaluated all of our tangible capital assets that we have direct responsibility for or accept responsibility for, and have not identified any sites in which contamination exceeds an environmental standard. Yours truly, The Corporation of the City of Pickering Stan Karwowski Director of Finance and Treasurer Marisa Carpino Chief Administrative Officer Deloitte LLP [Date] Page 7 Appendix A The Corporation of the City of Pickering Summary of uncorrected financial statement misstatements Year ended December 31, 2020 Description Assets DR (CR) Liabilities DR (CR) Accumulated Surplus, Opening DR (CR) Income Statement DR (CR) Assumed Tangible Capital Assets which were assumed in 2016 and 2017 were not recorded in the previous years in which ownership was transferred. The assets were recorded in fiscal 2020. At the end of fiscal 2020, the assets have been properly recorded. ($1,329,003) $1,329,003 Consolidated financial statements of The Corporation of the City of Pickering December 31, 2020 Dr a f t Attachment #2 to Report #FIN 03-22 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 7–30 Dr a f t Deloitte LLP Bay Adelaide East 8 Adelaide Street West Suite 200 Toronto ON M5H 0A9 Canada Tel: 416-601-6150 Fax: 416-601-6151 www.deloitte.ca Independent Auditor’s Report To the Members of Council of The Corporation of the City of Pickering Opinion We have audited the consolidated financial statements of The Corporation of the City of Pickering (the “City”), which comprise the consolidated statement of financial position as at December 31, 2020, and the consolidated statements of operations, change in net financial assets and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”). In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the City as at December 31, 2020, and the results of its operations, changes in net financial assets, and its cash flows for the year then ended in accordance with Canadian public sector accounting standards (“PSAS”). Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). Our responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of the Financial Statements” section of our report. We are independent of the City in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with PSAS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the City’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the City or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the City’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Dr a f t As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the City’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the City to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the City to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Chartered Professional Accountants Licensed Public Accountants January 24, 2022 Dr a f t The Corporation of the City of Pickering Consolidated statement of financial position As at December 31, 2020 Notes 2020 $ 2019 $ Financial assets Cash and cash equivalents 81,028,753 109,398,651 Investments 3 115,753,076 67,962,213 Taxes receivable 26,165,724 20,714,593 Accounts receivable 3,134,923 4,612,282 Note receivable 17 2,973,217 3,255,916 Investment in Elexicon Corporation 4 (b) 68,318,936 68,264,803 Promissory notes receivable 5 25,069,000 25,069,000 322,443,629 299,277,458 Liabilities Accounts payable and accrued liabilities 37,814,573 26,038,475 Other current liabilities 156,871 170,507 Deferred revenue 6 94,209,378 84,272,006 Long-term liabilities 9 29,118,644 30,819,986 Post-employment benefits 8 (a) 7,505,863 6,871,681 WSIB benefit liabilities 8 (b) 2,691,240 1,968,663 171,496,569 150,141,318 Net financial assets 150,947,060 149,136,140 Non-financial assets Tangible capital assets 10 288,596,364 273,099,664 Prepaid expenses 2,019,080 2,033,298 Inventory 478,129 484,538 291,093,573 275,617,500 Accumulated surplus 11 442,040,633 424,753,640 The accompanying notes are an integral part of the consolidated financial statements. Page 3 Dr a f t The Corporation of the City of Pickering Consolidated statement of operations Year ended December 31, 2020 Notes 2020 Budget $ Note 18 2020 Actual $ 2019 Actual $ Revenue Residential and farm taxation 55,595,792 56,949,868 53,264,567 Commercial and industrial taxation 11,607,053 11,667,761 11,322,827 Taxation from other governments 8,082,227 8,144,562 8,272,139 User charges 13,289,989 10,202,955 14,363,170 Government grants and fees 7,029,225 4,303,265 5,005,505 Other contributions and donations 7,099,905 923,088 1,346,399 Development charges and developer contributions earned 111,561,354 7,160,454 4,884,843 Contributed tangible capital assets 10(i) — 4,522,900 359,732 Investment income 665,000 1,164,835 2,084,515 Penalties and interests on taxes 2,265,000 2,694,486 2,907,048 Fines 942,000 771,141 973,255 Interest on promissory notes 5(c) 1,035,350 1,035,350 1,083,797 Gain on sale of land — 101,294 113,001 Equity share of Elexicon Corporation earnings 4(b) — 3,206,200 14,194,675 Other 284,004 389,420 891,874 219,456,899 113,237,579 121,067,347 Expenses 19 General government 21,334,499 21,056,822 20,311,428 Protection to persons and property 29,582,373 27,230,041 26,308,172 Transportation services 13,831,314 14,342,228 14,667,697 Environmental services 4,368,914 2,895,227 2,672,331 Social and family services 1,065,943 746,248 907,917 Recreational and cultural services 31,412,483 26,222,267 29,001,910 Planning and development 3,895,050 3,406,437 3,200,426 Loss on disposal of tangible capital assets — 51,316 2,576,719 105,490,576 95,950,586 99,646,600 Annual surplus 113,966,323 17,286,993 21,420,747 Accumulated surplus, beginning of year 424,753,640 424,753,640 403,332,893 Accumulated surplus, end of year 538,719,963 442,040,633 424,753,640 The accompanying notes are an integral part of the consolidated financial statements. Page 4 Dr a f t The Corporation of the City of Pickering Consolidated statement of change in net financial assets Year ended December 31, 2020 Notes 2020 Budget $ Note 18 2020 Actual $ 2019 Actual $ Annual surplus 113,966,323 17,286,993 21,420,747 Acquisition of tangible capital assets (244,532,005) (29,021,454) (53,394,975) Amortization of tangible capital assets 11,459,462 11,958,685 12,162,640 Loss on disposal of tangible capital assets — 51,316 2,576,719 Proceeds on disposal of tangible capital assets — 223,481 385,334 (119,106,220) 499,021 (16,849,535) Transfer of assets under construction to tangible capital assets — 1,237,667 24,913,528 Assets under construction expensed — 53,605 136,444 — 1,291,272 25,049,972 Acquisition of inventory of supplies — (732,948) (794,130) Use of inventory of supplies — 739,357 681,819 Acquisition of prepaid expenses — (312,406) (2,024,710) Use of prepaid expenses — 326,624 222,874 — 20,627 (1,914,147) Change in net financial assets (119,106,220) 1,810,920 6,286,290 Net financial assets, beginning of year 149,136,140 149,136,140 142,849,850 Net financial assets, end of year 30,029,920 150,947,060 149,136,140 The accompanying notes are an integral part of the consolidated financial statements. Page 5 Dr a f t The Corporation of the City of Pickering Consolidated statement of cash flows Year ended December 31, 2020 2020 $ 2019 $ Operating transactions Annual surplus 17,286,993 21,420,747 Non-cash items Amortization of tangible capital assets 11,958,685 12,162,640 Loss on disposal of tangible capital assets 51,316 2,576,719 Equity share of Elexicon Corporation earnings (3,206,200) (14,194,675) Contributed tangible capital assets recorded in revenue (4,522,900) (359,732) Change in non-cash operating items Taxes receivable (5,451,131) (1,373,973) Accounts receivable 1,477,359 (419,731) Accounts payable and accrued liabilities 11,776,098 (6,526,161) Other current liabilities (13,636) (1,129,825) Deferred revenue 9,937,372 6,789,078 Post-employment benefit liability 634,182 611,487 WSIB benefit liabilities 722,577 51,484 Inventory 6,409 (112,311) Land held for resale — 4,144,903 Prepaid expenses 14,218 (1,801,836) 40,671,342 21,838,814 Capital transactions Acquisition of tangible capital assets (net of transfers and contributions) (23,207,282) (27,985,271) Proceeds on disposal of tangible capital assets 223,481 385,334 (22,983,801) (27,599,937) Investing transactions (Increase) decrease in investments (47,790,863) 10,418,352 Dividends received from Elexicon Corporation 3,152,067 2,446,708 (44,638,796) 12,865,060 Financing transactions Proceeds from debentures issued 1,856,000 4,531,000 Principal repayment of debentures (3,557,342) (3,129,987) Decrease in note receivable 282,699 274,170 (1,418,643) 1,675,183 (Decrease) increase in cash and cash equivalents (28,369,898) 8,779,120 Cash and cash equivalents, beginning of year 109,398,651 100,619,531 Cash and cash equivalents, end of year 81,028,753 109,398,651 Cash and cash equivalents consists of Cash 33,395,753 11,245,966 Cash equivalents 47,633,000 98,152,685 81,028,753 109,398,651 The accompanying notes are an integral part of the consolidated financial statements. Page 6 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 1. Significant accounting policies The consolidated financial statements (the “financial statements”) of The Corporation of the City of Pickering (the “City”) are the representations of management prepared in accordance with accounting standards established by the Public Sector Accounting Board (“PSAB”) of Chartered Professional Accountants of Canada (CPA Canada). Significant accounting policies adopted by the City are as follows: (a) Reporting entity (i) Consolidated financial statements The consolidated financial statements reflect the assets, liabilities, revenues and expenses of the reporting entity. The reporting entity is comprised of the activities of all committees of Council and the City of Pickering Public Library Board which is controlled by the City. All material inter-fund transactions and balances are eliminated on consolidation. (ii) Investment in government business enterprise The City’s investment in Elexicon Corporation (formerly Veridian Corporation until March 31, 2019) is accounted for on a modified equity basis, consistent with Canadian public sector accounting standards for investments in government business enterprises. Under the modified equity basis, Elexicon Corporation’s accounting policies are not adjusted to conform to those of the City and inter-organizational transactions and balances are not eliminated. The City recognizes its equity interest in the annual earnings or loss of Elexicon Corporation in its Consolidated Statement of Operations with a corresponding increase or decrease in its investment asset account. Dividends that the City may receive from Elexicon Corporation and other capital transactions are reflected as adjustments in the investment asset account. (iii) Operations of School Boards and the Regional Municipality of Durham The taxation, other revenues, expenses, assets and liabilities with respect to the operations of the school boards and the Regional Municipality of Durham (the “Region”) are not reflected in these consolidated financial statements. (iv) Trust funds Trust funds and their related operations administered by the City are not consolidated, but are reported separately on the Trust Funds Statement of Financial Activities and Fund Balance and Statement of Financial Position. (b) Basis of accounting (i) Accrual basis of accounting Revenue and expenses are reported on the accrual basis of accounting. The accrual basis of accounting recognizes revenues as they are earned and measurable; expenses are recognized as they are incurred and measurable as a result of the receipt of goods and services and the creation of a legal obligation to pay. (ii) Cash and cash equivalents Cash and cash equivalents consist of cash on hand, demand deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash. Cash equivalents have a short-term maturity of three months or less from the date of acquisition. Page 7 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 1. Significant accounting policies (continued) (b) Basis of accounting (continued) (iii) Investments Long-term investments are recorded at cost and any loss in value which is considered other than temporary is recorded as incurred. Any premium or discount at the purchase of an investment is amortized over the life of the investment. (iv) Tangible capital assets Tangible capital assets are recorded at cost less accumulated amortization. Cost includes all costs directly related to the acquisition or construction of the tangible capital asset including transportation costs, installation costs, design and engineering fees, legal fees and site preparation costs. Amortization is recorded on the straight- line basis over the estimated useful life of the tangible capital asset commencing once the asset is available for use as follows: Buildings 5 to 50 years Machinery and equipment various Vehicles 7 to 15 years Infrastructure - Roads 10 to 75 years Infrastructure - Storm sewers 50 to 100 years Infrastructure - Sidewalks 15 to 75 years Infrastructure - Parks 10 to 100 years Information technology hardware 4 to 10 years Library collection materials 4 to 7 years Furniture and fixtures various One half of the annual amortization is charged in the year of acquisition and in the year of disposal. Assets under construction are not amortized until the tangible capital asset is available for productive use. Land is not amortized. Tangible capital assets received as contributions are recorded at their fair value at the date contributed, with the corresponding amount recorded as revenue. (v) Accounting for Property Tax Capping Provisions resulting from the Ontario Fair Assessment System The net impact on property taxes as a result of the application of the capping provisions does not affect the Consolidated Statement of Operations as the full amounts of the property taxes were levied. However, the capping adjustments are reported on the Consolidated Statement of Financial Position as a receivable/payable from/to the Region. (vi) Deferred revenue Deferred revenue represents contributions, user charges and fees which have been collected but for which the related services have yet to be performed. These amounts will be recognized as revenue in the fiscal year the services are performed. In addition, any contributions received with external restrictions are deferred until the related expenditures are made. Page 8 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 1. Significant accounting policies (continued) (b) Basis of accounting (continued) (vii) Post-employment benefits The present value of the cost of providing employees with future benefit programs is recognized as employees earn these entitlements through service. Actuarial gains and losses are amortized over the average remaining service period (“ARSP”). The City’s actuary determined the ARSP to be between 11 to 13 years, depending on the employee group. For WSIB benefit obligations that arise from specific events that occur from time to time, the cost is recognized immediately in the period the events occur. Actuarial gains and losses are amortized over the ARSP of 15 years. (viii)Inventory Inventory is valued at the lower of cost and replacement cost. Cost is determined on a weighted-average basis. (ix) Government transfers Government transfers are recognized as revenue by the City in the period in which the transfers are authorized and any eligibility criteria are met, unless they are restricted through stipulations that require specific actions to be carried out in order to keep the transfer or discharge the liability. For such transfers, revenue is recognized when the stipulation has been met. (x) Tax revenue Tax revenue is recognized on all taxable properties within the City that are included in the tax roll provided by the Municipal Property Assessment Corporation, using property tax values included in the tax roll or property tax values that can be reasonably estimated by the City as it relates to supplementary or omitted assessments, at tax rates authorized by Council for the City’s own purposes in the period for which the tax is levied. (xi) Intangible assets Intangible assets are not recognized as assets in the financial statements. (xii) Contaminated sites Contaminated sites are the result of contamination being introduced into air, soil, water or sediment of a chemical, organic, or radioactive material or live organism that exceeds an environmental standard. A liability for remediation of contaminated sites is recognized, net of any expected recoveries, when all of the following criteria are met: (a) an environmental standard exists; (b) contamination exceeds the environmental standard; (c) the City is directly responsible or accepts responsibility for the liability; (d) future economic benefits will be given up; and (e) a reasonable estimate of the liability can be made. Page 9 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 1. Significant accounting policies (continued) (b) Basis of accounting (continued) (xii) Contaminated sites (continued) A liability is recorded only for sites that are not in productive use or if there was an unexpected event that resulted in contamination. Changes in estimates are recorded in the consolidated statement of operations. The City does not have any liability for contaminated sites recorded in the consolidated financial statements. (xiii)Land held for resale Land permanently removed from service that meets the criteria for inventory held for resale are recorded as “land held for resale” on the Consolidated Statement of Financial Position and is recorded at the lower of cost and net realizable value. Those that do not meet these criteria continue to be recorded as part of tangible capital assets on the Consolidated Statement of Financial Position. (xiv)Use of estimates The preparation of consolidated financial statements in conformity with Canadian public sector accounting standards requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Accounts involving significant estimates include allowance for doubtful accounts, certain accrued liabilities, post-employment benefits liability, WSIB liabilities and estimates relating to the useful lives of tangible capital assets. Actual results could differ from these estimates. 2. Operations of school boards and the Regional Municipality of Durham Further to Note 1(a)(iii), requisitions are made by the Regional Municipality of Durham and School Boards requiring the City to collect property taxes and payments in lieu of property taxes on their behalf. The amounts collected and remitted are summarized as follows: Region $ 2020 School board $ Region $ 2019 School board $ Taxation 123,410,198 50,621,485 116,785,587 48,958,047 Payments in lieu of taxes 5,912,908 358,363 6,038,586 369,346 129,323,106 50,979,848 49,122,824,173 327,393 3. Investments Cost $ 2020 Market value $ Cost $ 2019 Market value $ Investments 115,753,076 116,513,133 67,962,213 68,033,818 Investments are comprised of deposit notes, bonds, and guaranteed investment certificates. Page 10 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 4.Investment in government business enterprise (a)Until March 31, 2019, the City held a 41% interest in Veridian Corporation, which was owned by the City of Pickering, Town of Ajax, Municipality of Clarington, and the City of Belleville. Effective April 1, 2019, Veridian Corporation amalgamated with Whitby Hydro Electric Corporation to form Elexicon Corporation. Elexicon Corporation is owned by the legacy owners of Veridian Corporation, and the Town of Whitby. The City holds a 27.88% interest in Elexicon Corporation. Elexicon Corporation, as a government business enterprise, is accounted for on the modified equity basis in these financial statements. Elexicon Corporation serves as the electrical distribution utility for a number of communities including the five noted above and conducts non-regulated utility service ventures through its subsidiaries. Page 11 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 4. Investment in government business enterprise (continued) (a) (continued) The following table provides condensed supplementary consolidated financial information for Elexicon Corporation and its subsidiaries as at and for the year ended December 31, 2020 (nine-month period ended December 31, 2019 in 2019). The amounts are disclosed in thousands of dollars: 2020 (000’s) $ 2019 (000’s) $ Assets Current 98,525 84,933 Capital and intangibles 535,401 506,254 Other 161 256 Total assets 634,087 591,443 Re gulatory balances 26,912 15,145 Total assets and regulatory balances 660,999 606,588 Liabilities Current 88,743 87,413 Long-term debt 214,502 180,360 Other 110,913 91,408 Total liabilities 414,158 359,181 Shareholders’ equity Share capital 97,692 97,692 Contributed capital 25 25 2019 Contributed Surplus 79,301 79,301 Accumulated other comprehensive loss (1,815) (816) Retained earnings 69,802 68,597 Total equity 245,005 244,799 Re gulatory balances 1,836 2,608 Total liabilities, equity and re gulatory balances 660,999 606,588 9 months ended 2020 (000’s) Dec 31, 2019 (000’s) $ Comprehensive income Co mmodity revenue 473,986 305,445 Commodity expenses (480,262) (311,627) Distribution revenue 79,380 58,759 Operating expenses (64,189) (49,195) Other expense (8,955) (5,253) Accumulated other comprehensive loss (999) (500) Net movements in regulatory balances, net of tax 12,539 9,180 Total com prehensive income for the year 11,500 6,809 Page 12 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 4.Investment in government business enterprise (continued) (a) (continued) Comparative financial information for Veridian Corporation for the period January 1 to March 31, 2019 are as follows: January 1 to March 31, 2019 (000’s) $ Comprehensive income Commodity revenue 66,011 Commodity expenses (68,925) Distribution revenue 13,691 Operating expenses (13,259) Other expense (1,507) Accumulated other comprehensive loss (263) Net movements in regulatory balances, net of tax 2,903 Total comprehensive income for the period (1,349) (b)Equity in Elexicon Corporation and amalgamation adjustments In fiscal year 2019, the amalgamation of Veridian Corporation and Whitby Hydro Electric Corporation was accounted for as an acquisition by legacy Veridian Corporation. On amalgamation, the change in the City’s ownership percentage as well as the issuance of additional shares resulted in the following amalgamation adjustments: $ Change in investment valuation due to decrease in ownership percentage on amalgamation (17,744,144) Increase in share valuation on amalgamation 30,593,560 Total amalgamation adjustments 12,849,416 The City’s equity in Elexicon Corporation is as follows at the end of 2020: 2020 $ 2019 $ Balance, beginning of year 96,376,823 84,628,856 Equit y share of net earnings from Elexicon Corporation for the year ended December 31, 2020 3,206,200 — for the period April 1, 2019 to December 31, 2019 — 1,898,349 Equit y share of net loss from Veridian Corporation for the period January 1, 2019 to March 31, 2019 — (553,090) Amalgamation adjustments — 12,849,416 Dividend received (3,152,067) (2,446,708) Balance, end of year 96,430,956 96,376,823 - - - Page 13 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 4. Investment in government business enterprise (continued) (c) City of Pickering’s investment is represented by: 2020 $ 2019 $ Promissory notes receivable (Note 5 ) 25,069,000 25,069,000 Investments in Elexicon Corporation (formerly Veridian) Initial investment in shares of the Corporation 30,496,196 30,496,196 Amalgamation adjustments 12,849,416 12,849,416 Accumulated earnin gs 60,181,853 56,975,653 Accumulated dividends received (36,024,237) (32,872,170) Adjustment to value of investment 815,708 815,708 68,318,936 68,264,803 (d) Contingencies and guarantees of Elexicon Corporation (the “Corporation”) as disclosed in their consolidated financial statements are as follows: (i) Insurance claims The Corporation is a member of the Municipal Electric Association Reciprocal Insurance Exchange (“MEARIE”) which was created on January 1, 1987. A reciprocal insurance exchange may be defined as a group of persons formed for the purpose of exchanging reciprocal contracts of indemnity or inter-insurance with each other. MEARIE provides general liability insurance to member electric utilities. MEARIE also provides vehicle and property insurance to the Corporation. Insurance premiums charged to each member utility consist of a levy per $1,000 of service revenue subject to a credit or surcharge based on each electric utility’s claims experience. The maximum coverage is $30,000,000 per occurrence for liability insurance, $21,000,000 for vehicle insurance and $164,885,000 for property insurance, plus $10,000,000 excess coverage on top of the regular liability and vehicle coverage. (ii) Contractual obligation - Hydro One Networks Inc. (“HONI”) The Corporation’s subsidiary, Elexicon Energy Inc. (“EEI”) (formerly Veridian Connections Inc.), is party to a connection and cost recovery agreement with HONI related to the construction by HONI of a transformer station designated to meet EEI’s anticipated electricity load growth. Construction of the project was completed during 2007 and EEI connected to the transformer station during 2008. To the extent that the cost of the project is not recoverable from future transformation connection revenues, EEI is obligated to pay a capital contribution equal to the difference between these revenues and the construction costs allocated to EEI. The construction costs allocated to EEI for the project are $19,950,000. Hydro One has performed a true-up based on actual load at the end of the tenth anniversary of the in-service date and the Corporation has paid $637,000 to Hydro One and recognized the same as an intangible asset. The Corporation has also recorded a current liability and a corresponding intangible asset for $1,533,000 as at December 31, 2019, based on management’s best estimate of the future transformation connection revenues shortfall. Hydro One is expected to perform another true-up based on actual load at the end of the fifteenth anniversary of the in-service date. Page 14 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 4.Investment in government business enterprise (continued) (d) (continued) (iii) Prudential support Purchasers of electricity in Ontario, through the Independent Electricity System Operator (“IESO”), are required to provide security to mitigate the risk of default based on their expected activity in the market. The IESO could draw on this security if the Corporation fails to make the payment required on a default notice issued by the IESO. The Corporation has provided a $64,000,000 guarantee to the IESO on behalf of EEI. Additionally, the Corporation has provided a $6,900,000 letter of credit to the IESO for prudential support. (iv) General claims From time to time, the Corporation is involved in various lawsuits, claims and regulatory proceedings in the normal course of business. In the opinion of management, the outcome of such matters will not have a material adverse effect on the Corporation’s consolidated financial position and results of operations or cash flows. (e) Lease commitments Future minimum lease payment obligations under operating leases are as follows: $ 2021 940 2022 90,108 2023 1,013 2024 91,051 2025 1,091 Thereafter 31,239 215,442 5.Promissory notes receivable 2020 $ 2019 $ Elexicon Corporation (formerly Veridian Corporation) 7,095,000 7,095,000 Elexicon Energy Inc. (formerly Veridian Connections Inc.) 17,974,000 17,974,000 25,069,000 25,069,000 (a) Maturity The promissory notes were issued by the legacy Veridian Corporation and Veridian Connections Inc. and were assumed by Elexicon Corporation and Elexicon Energy Inc. upon amalgamation on April 1, 2019. The promissory notes under Elexicon Corporation and Elexicon Energy Inc. are due on demand. The City has agreed not to demand repayment of the notes prior to December 31, 2021. Page 15 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 5. Promissory notes receivable (continued) (b) Interest rate Commencing April 1, 2019 for a ten-year period, interest on the notes will be determined based on the deemed long-term interest rate prescribed by the Ontario Energy Board in its most recent cost of capital parameter update (“OEB rate”). As of April 1, 2019, the OEB rate was determined at 4.13%. On the tenth year anniversary of the note, the interest rate will be adjusted to the OEB rate in effect at that time. Thereafter, the interest rate will be adjusted to the OEB rate in effect at the earlier of: (i) The five year anniversary of the most recent interest rate adjustment of these notes, and (ii) The date on which Elexicon Energy Inc. files a cost of service application with the Ontario Energy Board. The City may demand full or partial repayment with sixty days’ notice of the principal and accrued interest. (c) Interest revenue Interest revenue earned from these notes receivable totaled $1,035,350 ($1,083,797 in 2019). 6. Deferred revenue 2020 $ 2019 $ Obligatory reserve funds Develo pment charges 69,376,247 62,598,255 Parkland 8,321,222 7,385,482 Federal gas tax 8,063,995 7,680,187 Third party/Develo per's contributions reserve fund 3,218,778 2,724,805 88,980,242 80,388,729 Other unearned revenues 5,229,136 3,883,277 94,209,378 84,272,006 Continuity of deferred revenue is as follows: 2020 $ 2019 $ Balance, beginning of year 84,272,006 77,482,928 Restricted funds received 16,968,168 13,992,779 General funds received 3,414,767 513,922 Interest earned (restricted funds) 1,385,545 1,559,577 21,768,480 16,066,278 Earned restricted revenue transferred to o perations 9,762,200 8,517,235 Earned revenue transferred to o perations 2,068,908 759,965 11,831,108 9,277,200 Balance, end of year 94,209,378 84,272,006 Page 16 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 7. Interfund loans As a means of funding various capital acquisitions, funds are borrowed by the Capital Fund from Development Charges deferred revenue (obligatory reserve funds). These funds are secured by promissory notes with interest rates ranging from 0.50% to 2.64% and various payment terms ranging from 2 years to 10 years. The financing arrangements and ultimate repayment are approved by Council through the current budget process. Although these notes have payment terms as noted above, they are repayable on demand. The following is a summary of the related interfund loans: 2020 $ 2019 $ Roads 768,398 434,074 Community facilities, libraries and parks 515,265 561,212 Protection services 173,385 254,792 Stormwater system — 261,985 1,457,048 1,512,063 8. Post-employment benefits liability (a) Post-employment benefits liability The City makes available to qualifying employees who retire before the age of 65, the opportunity to continue their coverage for benefits such as post-retirement extended healthcare benefits. Coverage ceases at the age of 65. The City also provides full time and permanent part-time employees a sick time entitlement and any unused entitlement is accumulated year to year. This accumulated entitlement is not vested and is forfeited at the time of retirement or termination. The most recent actuarial valuation of the post-employment benefits was performed at December 31, 2020. Information about the City’s benefits liability is as follows: 2020 $ 2019 $ Accrued benefits liabilit y, beginning of year 6,871,681 6,260,194 Current service costs 599,463 566,466 Interest on accrued benefits 417,634 415,007 Amortization of actuarial losses 564,657 538,257 Benefits paid during the year (947,572) (908,243) Accrued benefits liability, end of year 7,505,863 6,871,681 Accrued benefit obligation 11,367,498 11,310,985 Unamortized actuarial losses (3,861,635) (4,439,304) Accrued benefits liabilit y, end of year 7,505,863 6,871,681 Page 17 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 8.Post-employment benefits liability (continue) (a) Post-employment benefits liability (continued) The main actuarial assumptions employed in the actuarial valuations for the post- employment benefits are as follows: (i)Discount rate The present value as at December 31, 2020 of the future benefits was determined using a discount rate of 3.00% (3.75% in 2019). (ii)Dental costs The dental cost trend rate was 3.75% (3.75% in 2019) increase per annum. (iii)Health costs Health costs were assumed to increase at 5.76% (6.09% in 2019) and decrease by 0.33% (0.33% in 2019) increments per year to an ultimate rate of 3.75% per year in 2027 and thereafter. (b) Workplace Safety and Insurance Board (WSIB) benefit liabilities Effective January 1, 2001, the City became a Schedule II employer under the Workplace Safety & Insurance Act and follows a policy of self-insurance for the risk associated with paying benefits for workplace injuries for all its employees. The WSIB administers the claims related to workplace injuries and is reimbursed by the City. The most recent actuarial valuation of the WSIB benefits was performed at December 31, 2020. Information about the City’s WSIB benefit liability is as follows: 2020 $ 2019 $ Accrued WSIB liabilit y, be ginning of year 1,968,663 1,917,179 Survivor Award 674,288 — Current service cost 136,396 132,391 Interest on accrued benefits 91,793 91,023 Amortization of actuarial losses 30,254 30,254 Benefits paid during the year (210,154) (202,184) 2,691,240 1,968,663 Accrued benefit obligation 3,042,327 2,331,706 Unamortized actuarial losses (351,087) (363,043) Accrued benefits liabilit y, end of year 2,691,240 1,968,663 In the current year, the City awarded firefighter survivor benefits resulting in a one-time increase in current service cost of $674,288. The main actuarial assumptions employed in the actuarial valuations are as follows: (i)Discount rate The present value as at December 31, 2020 of the future benefits was determined using a discount rate of 3.0% (4.0% in 2019). (ii)Inflation rate The rate of inflation was assumed to be 2.50% (1.75% in 2019) per annum. Page 18 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 8. Post-employment benefits liability (continued) (b) Workplace Safety and Insurance Board (WSIB) benefit liabilities (continued) (iii) WSIB Administration Rate Liabilities for WSIB benefits have been increased 27% to reflect the administration rate charged by WSIB. A WSIB Reserve Fund was established in 2001. The Reserve Fund balance as at December 31, 2020 (Note 11) was $4,090,017 ($3,930,110 as at December 31, 2019). In addition, the City purchased two insurance policies that protect the City against significant claims. The occupational accident insurance pays loss claims up to $500,000 per work related accident. The excess workers compensation indemnity insurance has a $500,000 deductible and will pay for claims up to and including $15,000,000 per work related accident. 9. Long-term liabilities (a) The balance of long-term liabilities is made up of the following: 2020 $ 2019 $ The City is res ponsible for the payment of principal and interest charges on long-term liabilities issued b y the Regional Municipalit y of Durham on the City’s behalf. At the end of the year the outstanding principal amount of this liabilit y is 29,118,644 30,819,986 (b) The above long-term liabilities have maturity dates of July 12, 2021 and 2022, September 29, 2021, October 16, 2023, July 2, 2029, October 17, 2021, 2026 and 2031, October 13, 2022, 2027, 2032 and 2037, September 14, 2023, 2028, 2033 and 2038, November 29, 2024, 2029 and 2039 and October 2, 2030 with various interest rates ranging from 0.45% to 5.12%. Principal repayments are summarized as follows: $ 2021 3,944,385 2022 2,986,998 2023 2,795,597 2024 2,307,801 2025 2,284,889 Thereafter 14,798,974 29,118,644 (c) Long-term liabilities include principal sums of $952,000 ($952,000 in 2019) which may be refinanced by the issuance of debentures over a further period not to exceed 5 years. (d) The above long-term liabilities have been approved by Council by-law. The annual principal and interest payments required to service these liabilities are within the annual debt repayment limit prescribed by the Ministry of Municipal Affairs and Housing. (e) Interest expense recorded in the year relating to these long-term liabilities is $840,892 ($820,812 in 2019). Page 19 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 10. Tangible capital assets Information relating to tangible capital assets is as follows: (i) Contributed tangible capital assets The City records tangible capital assets contributed by an external party at fair value on the date contributed. Typical examples are roads, storm sewers and sidewalks installed by a developer as part of a subdivision or development agreement. Contributions of tangible capital assets in 2020 amounted to $4,522,900 ($359,732 in 2019). (ii) Tangible capital assets recognized at nominal value Land under roads are assigned a nominal value of one Canadian dollar because this land only supports or is intended to support road infrastructure and the majority of land acquired to support road allowances was acquired at no cost. (iii) Works of art and historical treasures The City has a museum which holds various historical treasures and historical buildings pertaining to the heritage and history of the City of Pickering. These items are not recognized as tangible capital assets in the consolidated 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 recognized as an expense in the consolidated financial statements. (iv) Other The net book value of tangible capital assets not being amortized because they are under construction is $20,141,455 ($12,912,198 in 2019). During the year, there were nil write-downs of assets (nil in 2019) and nil interest was capitalized during the year (nil in 2019). Page 20 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 10.Tangible capital assets (continued) Land $ Buildings $ Machinery and equipment $ Vehicles $ Infrastructure $ Information technology hardware $ Library collection materials $ Furniture and fixtures $ Assets under construction $ 2020 $ Cost Balance, beginning of year 56,131,344 116,110,819 11,474,029 15,322,005 294,284,392 2,315,390 2,173,665 1,219,298 12,912,198 511,943,140 Add Additions during the year 6,644,029 1,451,112 858,786 1,577,624 9,460,780 190,288 251,132 67,174 8,520,529 29,021,454 Less Disposals/transfers during the year — 1,882,084 484,094 348,673 1,077,784 403,401 413,253 — 1,291,272 5,900,561 Balance, end of year 62,775,373 115,679,847 11,848,721 16,550,956 302,667,388 2,102,277 2,011,544 1,286,472 20,141,455 535,064,033 Accumulated amortization Balance, beginning of year — 49,821,890 5,792,731 7,434,250 172,643,999 1,595,204 1,117,646 437,756 — 238,843,476 Add Amortization — 4,520,314 911,820 1,238,895 4,596,414 256,309 356,688 78,245 — 11,958,685 Less Accumulated amortization on disposals — 1,765,944 477,694 346,056 928,144 403,401 413,253 — — 4,334,492 Balance, end of year — 52,576,260 6,226,857 8,327,089 176,312,269 1,448,112 1,061,081 516,001 — 246,467,669 Net book value of tangible capital assets 62,775,373 63,103,587 5,621,864 8,223,867 126,355,119 654,165 950,463 770,471 20,141,455 288,596,364 Page 21 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 10. Tangible capital assets (continued) Land $ Buildings $ Machinery and equipment $ Vehicles $ Infrastructure $ Information technology hardware $ Library collection materials $ Furniture and fixtures $ Assets under construction $ 2019 $ Cost Balance, beginning of year 55,997,456 83,923,046 10,439,756 13,307,132 292,450,399 2,092,391 2,250,862 884,410 31,236,184 492,581,636 Add Additions during the year 143,759 32,584,403 1,557,732 3,198,795 8,259,343 245,587 344,482 334,888 6,725,986 53,394,975 Less Disposals/transfers during the year 9,871 396,630 523,459 1,183,922 6,425,349 22,588 421,680 — 25,049,972 34,033,471 Balance, end of year 56,131,344 116,110,819 11,474,029 15,322,005 294,284,393 2,315,390 2,173,664 1,219,298 12,912,198 511,943,140 Accumulated amortization Balance, beginning of year —46,014,835 5,427,167 7,594,919 170,764,482 1,374,250 1,155,683 370,946 — 232,702,282 Add Amortization — 4,176,541 849,043 1,016,786 5,426,276 243,542 383,642 66,810 — 12,162,640 Less Accumulated amortization on disposals — 369,486 483,479 1,177,455 3,546,759 22,588 421,679 — — 6,021,446 Balance, end of year — 49,821,890 5,792,731 7,434,250 172,643,999 1,595,204 1,117,646 437,756 — 238,843,476 Net book value of tangible capital assets 56,131,344 66,288,929 5,681,298 7,887,755 121,640,394 720,186 1,056,018 781,542 12,912,198 273,099,664 Page 22 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 11.Accumulated surplus The City’s accumulated surplus is comprised of the following: 2020 $ 2019 $ Capital fund 14,090,956 18,495,702 Operating fund 125,247 125,253 Equity in Elexicon Corporation 96,430,956 96,376,823 Tangible capital assets 288,596,364 273,099,664 Post-employment benefits liability (7,326,863) (6,692,681) Interfund loans (1,457,048) (1,512,063) Net long-term liabilities (29,118,644) (30,819,986) Note receivable soccer facility 2,973,217 3,255,916 WSIB benefit liabilities (2,691,240) (1,968,663) Reserves set aside for special purposes by Council Working capital 400,000 400,000 Self insurance 420,031 677,642 Replacement of capital equipment 1,530,567 1,997,241 Contingencies 1,842,591 1,772,591 Rate stabilization 22,036,265 19,370,349 City’s share for development charge 9,647,683 7,275,413 Continuing studies 295,448 429,451 Vehicle replacement 2,214,904 2,046,341 Easement settlement — 390 Land purchase 14,403 14,403 Seaton development review 1,437,822 1,437,822 Financial systems 398,308 273,308 Senior centre 2,100,000 1,400,000 Accessibility initiatives 62,740 31,944 Winter control 700,000 700,000 Sustainability initiatives 398,576 300,455 Duffin Heights 1,972,765 3,201,585 Facilities 588,401 566,162 Accelerated infrastructure program 519,500 519,500 Fence 420,000 180,000 Minor buildings replacement 1,100,000 700,000 Tennis Courts 688,565 796,325 Major Equipment 1,335,265 275,000 Museum Collection 12,799 2,388 Recreation Complex 75,000 75,000 Library Building 180,000 80,000 Elected Officials Insurance 140,000 — Public Art 71,120 — Reserve funds set aside for special purpose by Council Recreation programs and facilities 391,332 385,178 Acquisition of tangible capital assets 308,706 303,851 WSIB 4,090,017 3,930,110 Animal shelter 914,795 682,863 Men's slow pitch — 1,638 Operations Centre 13,919,376 14,286,624 Roads & bridges 4,398,400 4,422,806 Sto r mwater management 3,425,064 2,944,126 Ontario Community Infrastructure Fund 743,892 1,505,939 Seaton infrastructure 259,854 232,703 Seaton Financial Impact Agreement 1,363,499 1,174,527 442,040,633 424,753,640 Page 23 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 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 benefit plan which specifies the amount of the retirement benefit to be received by the employees based on the length of service and rates of pay. OMERS provide pension services to over 496,000 active and retired members and about 1,000 employers. Each year an independent actuary determines the funding status of OMERS Primary Pension (the “Plan”) by comparing the actuarial value of the invested assets to the estimated present value of all pension benefits that members have earned to-date. The most recent actuarial valuation of the Plan was conducted as at December 31, 2020. The results of this valuation disclosed total actuarial liabilities as at that date of $113,055 million in respect of benefits accrued for service with actuarial assets at that date of $109,844 million indicating an actuarial deficit of $3,211 million. Because OMERS is a multi-employer plan, any pension plan surpluses or deficits are a joint responsibility of Ontario municipal organizations and their employers. As a result, the City does not recognize any share of the OMERS pension surplus or deficit. Contributions made by the City to OMERS on account of current service for 2020 were $4,243,661 ($4,128,799 in 2019). 13. Trust Funds Trust funds administered by the City amounting to $376,695 ($373,033 in 2019) have not been included in the Consolidated Statement of Financial Position nor have their operations been included in the Consolidated Statement of Operations. 14. Related party transactions Elexicon Corporation The City of Pickering is a shareholder in Elexicon Corporation (Note 4). The City receives electricity and services from Elexicon Corporation and its subsidiary. 2020 $ 2019 $ Transactions Revenue Interest on promissory notes 1,035,350 1,083,797 Property taxes levied 34,702 42,020 Expenses Electrical energy and services 1,618,380 1,957,649 Balances Accounts payable and accrued liabilities 328,978 393,589 Promissory notes receivable 25,069,000 25,069,000 Page 24 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 15.Guarantees In the normal course of business, the City enters into agreements which contain guarantees. The City’s primary guarantees are as follows: (i)The City has provided indemnities under lease agreements for the use of various facilities or land. Under the terms of these agreements the City agrees to indemnify the counterparties for various items including, but not limited to, all liabilities, loss, suits, and damages arising during, on or after the term of the agreement. The maximum amount of any potential future payment cannot be reasonably estimated. (ii)The City indemnifies all employees and elected officials including Library employees and board members for various items including, but not limited to, all costs to settle suits or actions due to association with the City, subject to certain restrictions. The City has purchased liability insurance to mitigate the cost of any potential future suits or actions. The term of the indemnification is not explicitly defined, but is limited to the period over which the indemnified party served as an employee or elected official of the City. The maximum amount of any potential future payment cannot be reasonably estimated. (iii)The City has entered into agreements that may include indemnities in favour of third parties, such as purchase and sale agreements, confidentiality agreements, engagement letters with advisors and consultants, outsourcing agreements, leasing contracts, information technology agreements and service agreements. These indemnification agreements may require the City to compensate counterparties for losses incurred by the counterparties as a result of breaches in representation and regulations or as a result of litigation claims or statutory sanctions that may be suffered by the counterparty as a consequence of the transaction. The terms of these indemnities are not explicitly defined and the maximum amount of any potential reimbursement cannot be reasonably estimated. The nature of these indemnification agreements prevents the City from making a reasonable estimate of the maximum exposure due to the difficulties in assessing the amount of liability which stems from the unpredictability of future events and the unlimited coverage offered to counterparties. Historically, the City has not made any significant payments under such or similar indemnification agreements and therefore no amount has been accrued in the balance sheet with respect to these agreements. 16.Contingent liabilities Litigation The City has been named as a defendant in certain legal actions in which damages have been sought. The outcome of these actions is not determinable as at the date of reporting and accordingly, no provision has been made in these consolidated financial statements for any liabilities which may result. 17.Contractual arrangement The City entered into a provisional license agreement with the Pickering Soccer Club (PSC) for the PSC to occupy and operate the Pickering Indoor Soccer Facility (the “Facility”). The term of the agreement is 15 years from November 5, 2014 to November 4, 2029. Under the terms of the agreement, the PSC will repay 52.25% of the City’s total cost of purchasing the land, constructing the Facility and the related improvements. In 2015, the City recorded a note receivable from PSC in the amount of $4,550,000 based on preliminary project cost figures, with a 15 year repayment term at a variable interest rate ranging from 1.2% to 3.8%. This amount will be adjusted for the total project construction costs, once the agreement is finalized. Page 25 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 17.Contractual arrangement (continued) PSC has commenced its soccer program operations and is operating the Facility at its own expense including all repairs and maintenance. Once a final form of agreement is executed the total amount of the PSC’s obligation will be re-calculated, as agreed, to reflect any adjustments to the total project construction costs. 18.Budget figures The 2020 Budget adopted by Council on February 24, 2020 was not prepared on a basis consistent with that used to report actual results. The budget was prepared on a modified accrual basis while Canadian Public Sector Accounting Standards require a full accrual basis of accounting. The budget figures treated all tangible capital asset acquisitions as expenditures and did not include amortization expense on tangible capital assets or post-employment benefits expenses on a full accrual basis. As a result, the budget figures presented in the Consolidated Statements of Operations and Change in Net Financial Assets represent the budget adopted by Council on February 24, 2020 with adjustments as follows: 2020 Council approved budget $ Non TCA expenditures from capital $ Post- employment benefits/ amortization $ 2020 Budget presented in statements $ Revenue Taxation 75,285,072 — — 75,285,072 Capital 124,257,294 — — 124,257,294 Other 19,914,533 — — 19,914,533 219,456,899 — — 219,456,899 Expenditures General government 19,291,595 857,000 1,185,904 21,334,499 Protection to persons and property 28,084,095 500,000 998,278 29,582,373 Transportation services 10,054,317 — 3,776,997 13,831,314 Environmental services 2,399,605 — 1,969,309 4,368,914 Social and family services 1,065,943 — — 1,065,943 Recreational and cultural services 27,173,205 30,000 4,209,278 31,412,483 Planning and development 3,892,884 — 2,166 3,895,050 91,961,644 1,387,000 12,141,932 105,490,576 Annual surplus 127,495,255 (1,387,000) (12,141,932) 113,966,323 Capital expenditures (245,919,005) 1,387,000 — (244,532,005) Transfers from reserves and reserve funds 9,154,192 Dividend from Elexicon Corporation 3,153,228 Principal repayment of debt (4,830,250) Principal repayment of PSC note 232,000 Debt proceeds 110,589,580 Prior year operating fund deficit (125,000) Page 26 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 19. Segmented information The City of Pickering is a diversified municipal government that provides a wide range of services to its residents. Distinguishable functional segments have been separately disclosed in the segmented information. The nature of the segments and the activities they encompass are as follows: General government This item relates to revenues and expenses of the City itself and cannot be directly attributed to a specific segment. Protection to persons and property Protection includes fire services, animal control, bylaw services, building inspection and enforcement of the building code to ensure the safety and protection of all citizens and their property. Public works services Public works includes construction and maintenance of the City’s roadways, including snow removal, sidewalk repairs, street lighting and maintenance of the storm water system. Social and family services Social services for assistance or services for seniors. Recreation and culture services Recreation and cultural services include recreation programs, maintenance and rental of facilities and parks, operation of the City’s museum and library services. Planning and development Planning and development provides a number of services including municipal planning and review of all property development plans. Segmented information has been provided in the following pages. Page 27 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 19. Segmented information (continued) Protection to persons and property $ Public works services $ Recreational and cultural $ Planning and development $ Social and family services $ General government $ 2020 Consolidated $ Revenue Grants 60,113 2,921,453 1,031,829 — 106,842 183,028 4,303,265 User charges 5,075,820 108,864 2,258,972 2,007,863 41,862 709,574 10,202,955 Tax related revenues — — — — — 79,456,677 79,456,677 Developer revenue 755,543 2,122,472 3,207,850 132,471 6,000 1,859,206 8,083,542 Contributed tangible capital assets — 3,993,726 — — — 529,174 4,522,900 Income from government business enterprise — — — — — 3,206,200 3,206,200 Other revenues 810,550 — 18,356 — — 2,633,134 3,462,040 6,702,026 9,146,515 6,517,007 2,140,334 154,704 88,576,993 113,237,579 Expenses Salaries and wages 23,091,692 5,884,913 15,298,073 2,913,716 290,651 11,924,042 59,403,087 Materials and supplies 2,491,930 3,783,806 5,215,226 192,592 118,546 6,764,494 18,566,594 Contracted services 582,160 1,376,837 695,766 288,802 254,012 1,241,387 4,438,964 Amortization 941,872 5,769,408 4,239,925 1,180 — 1,006,300 11,958,685 Other 122,387 422,491 773,277 10,147 83,039 120,599 1,531,940 Loss (gain) on disposal of tang ible capital assets (8,518) 123,094 16,495 — — (79,755) 51,316 27,221,523 17,360,549 26,238,762 3,406,437 746,248 20,977,067 95,950,586 Annual (deficit) surplus (20,519,497) (8,214,034) (19,721,755)(1,266,103) (591,544) 67,599,926 17,286,993 Page 28 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 19. Segmented information (continued) Protection to persons and property $ Public works s ervices $ Recreational and cultural $ Planning and d evelopment $ Social and family services $ General government $ 2019 Consolidated $ Revenue Grants 255,970 2,948,471 1,159,068 — 135,612 506,384 5,005,505 User charges 5,380,226 57,852 6,584,649 1,409,635 67,247 863,561 14,363,170 Tax related revenues — — — — — 75,766,581 75,766,581 Developer revenue 1,475,077 1,731,969 1,141,931 147,731 7,700 1,726,834 6,231,242 Contributed tangible capital assets — 235,826 109,009 — — 14,897 359,732 Income from government business enterprise — — — — — 1,345,259 1,345,259 Change in valuation of interest in government business enterprise on amalgamation — — — — — 12,849,416 12,849,416 Other revenues 978,841 — 64,408 — — 4,103,193 5,146,442 8,090,114 4,974,118 9,059,065 1,557,366 210,559 97,176,125 121,067,347 Expenses Salaries and wages 21,782,707 5,675,823 17,182,003 2,726,454 335,965 10,239,791 57,942,743 Materials and supplies 2,508,884 4,203,023 6,240,451 206,532 147,177 5,037,529 18,343,596 Contracted services 1,027,378 1,101,831 621,912 255,236 341,838 3,524,714 6,872,909 Amortization 860,474 5,897,131 4,159,102 2,359 — 1,243,574 12,162,640 Other 128,729 462,220 798,442 9,845 82,937 265,820 1,747,993 (Gain) loss on disposal of tangible capital assets (158,613) 2,764,458 (22,424) — — (6,702) 2,576,719 26,149,559 20,104,486 28,979,486 3,200,426 907,917 20,304,726 99,646,600 Annual (deficit) surplus (18,059,445) (15,130,368) (19,920,421) (1,643,060)(697,358) 76,871,399 21,420,747 Page 29 Dr a f t The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2020 Page 30 20. Significant event On March 11, 2020, the World Health Organization characterized the outbreak of a strain of the novel coronavirus (“COVID-19”) as a pandemic which has resulted in a series of public health and emergency measures that have been put in place to combat the spread of the virus. The duration and impact of COVID-19 is unknown at this time and it is not possible to reliably estimate the impact that the length and severity of these developments will have on the consolidated financial position, results of operations and cash flows of the City in future periods. Dr a f t Financial statements of City of Pickering Public Library Board December 31, 2020 Dr a f t 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 Dr a f t Deloitte LLP Bay Adelaide East 8 Adelaide Street West Suite 200 Toronto ON M5H 0A9 Canada Tel: 416-601-6150 Fax: 416-601-6151 www.deloitte.ca Independent Auditor’s Report To the Board of Directors of The City of Pickering Public Library Board, and Members of Council of the Corporation of the City of Pickering Opinion We have audited the financial statements of City of Pickering Public Library Board (the “Library Board”), which comprise the statement of financial position as at December 31, 2020, and the statements of operations, change in net debt and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”). In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Library Board as at December 31, 2020, and the results of its operations, changes in net debt, and its cash flows for the year then ended in accordance with Canadian public sector accounting standards (“PSAS”). Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). Our responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of the Financial Statements” section of our report. We are independent of the Library Board in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with PSAS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Library Board’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Library Board or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Library Board’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Dr a f t As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: ● Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. ● Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Library Board’s internal control. ● Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. ● Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Library Board’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Library Board to cease to continue as a going concern. ● Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Chartered Professional Accountants Licensed Public Accountants , 2021_________Dr a f t City of Pickering Public Library Board Page 3 Statement of financial position As at December 31, 2020 Notes 2020 $ 2019 $ Financial assets Cash 1,225 1,225 Accounts receivable 228 874 Due from the Government of Canada 14,184 12,934 Due from City of Pickering 249,607 221,888 265,244 236,921 Liabilities Accounts payable and accrued liabilities 289,323 285,661 Deferred revenue 6,686 — Post-employment benefits liability 2 483,025 471,282 779,034 756,943 Net debt (513,790)( 520,022) Non-financial assets Tangible capital assets 4 1,242,118 1,420,297 Prepaid expense 30,765 48,740 1,272,883 1,469,037 Accumulated surplus 5 759,093 949,015 The accompanying notes are an integral part of the financial statements. Dr a f t City of Pickering Public Library Board Page 4 Statement of operations Year ended December 31, 2020 Budget $ (Note 6) 2020 $ 2019 $ Revenue City of Pickering grants 6,040,179 5,290,261 5,930,982 Federal grants —27,136 6,728 Province of Ontario grants 106,425 136,689 135,345 Fines and other receipts 164,500 40,817 130,761 6,311,104 5,494,903 6,203,816 Expenses Operating Salaries Salaries and wages 3,461,809 3,154,965 3,582,595 Fringe benefits 931,479 877,923 939,763 4,393,288 4,032,888 4,522,358 Material, supplies and utilities Books 273,290 288,246 262,455 Utilities 241,401 194,842 217,186 Other supplies 59,750 33,681 59,186 574,441 516,769 538,827 Services Repairs and maintenance 578,399 273,136 333,060 Insurance 26,345 24,345 23,918 Travel 6,000 1,413 6,341 Consulting and professional 31,850 27,151 28,535 Advertising 23,000 15,231 29,093 Conference 6,500 4,971 8,694 Postage 3,800 1,170 3,505 Telephone 68,276 59,591 60,263 Seminars and education 16,900 29,316 22,475 Software/hardware maintenance 187,841 191,559 172,902 Vehicle repairs and maintenance 4,132 3,347 2,324 Minor capital purchases 51,075 59,620 56,589 Miscellaneous 21,000 15,007 18,161 1,025,118 705,857 765,860 Amortization of tangible capital assets 439,946 429,311 457,741 6,432,793 5,684,825 6,284,786 Annual deficit (121,689)(189,922)(80,970) Accumulated surplus, beginning of year 949,015 949,015 1,029,985 Accumulated surplus, end of year 827,326 759,093 949,015 The accompanying notes are an integral part of the financial statements. Dr a f t City of Pickering Public Library Board Page 5 Statement of change in net debt Year ended December 31, 2020 Budget $ (Note 6) 2020 $ 2019 $ Annual deficit (121,689) (189,922) (80,970) Acquisition of tangible capital assets (330,000) (251,132) (383,975) Amortization of tangible capital assets 439,946 429,311 457,741 109,946 178,179 73,766 Acquisition of prepaid expenses — (30,765) (48,740) Usage of prepaid expenses — 48,740 45,688 Change in prepaid expense — 17,975 (3,052) Change in net debt (11,743) 6,232 (10,256) Net debt, beginning of year (520,022) (520,022) (509,766) Net debt, end of year (531,765) (513,790) (520,022) The accompanying notes are an integral part of the financial statements. Dr a f t City of Pickering Public Library Board Statement of cash flows Year ended December 31, 2020 2020 $ 2019 $ Operating transactions Annual deficit (189,922) (80,970) Non-cash items Amortization of tangible capital assets 429,311 457,741 239,389 376,771 Change in non-cash operating items Decrease in accounts receivable 646 1,420 Increase in due from Government of Canada (1,250) (1,599) Increase in due from City of Pickering (27,719) (74,129) Increase in accounts payable and accrued liabilities 3,662 77,360 Increase in deferred revenue 6,686 — Increase in post-employment benefits liability 11,743 7,204 Decrease (increase) in prepaid expense 17,975 (3,052) 11,743 7,204 251,132 383,975 Capital transaction Acquisition of tangible capital assets (251,132) (383,975) Net change in cash — — Cash, beginning of year 1,225 1,225 Cash, end of year 1,225 1,225 The accompanying notes are an integral part of the financial statements. Page 6 Dr a f t City of Pickering Public Library Board Notes to the financial statements December 31, 2020 1. Significant accounting policies The financial statements of the City of Pickering Public Library Board (the “Library Board”) are the representations of management prepared in accordance with Canadian public sector accounting standards established by the Public Sector Accounting Board (“PSAB”) of Chartered 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 accounting. The accrual basis of accounting recognizes revenues as they are earned and measurable; expenses are recognized, as they are incurred and measurable as a result of the receipt of goods and services and the creation of a legal obligation to pay. (b) Non-financial assets (i) Tangible capital assets Tangible capital assets are recorded at cost less accumulated amortization. Cost includes all amounts that are directly attributable to acquisition, development or betterment of the asset. The cost of the tangible capital asset is amortized on a straight-line basis over the estimated useful life as follows: Machinery and equipment 2 to 25 years Information technology hardware 4 to 8 years Library collection materials 4 to 7 years Furniture and fixtures 10 to 50 years One-half of the annual amortization is charged in the year of acquisition and in the year of disposal. Other major assets including the Library buildings are owned by the City and are not reflected in these financial statements. (ii) Contribution/donation of tangible capital assets Tangible capital assets received as contributions or donations are recorded at their fair value at the date of receipt, and that fair value is also recorded as revenue. (iii) Intangible assets Intangible assets are not recognized as assets in the financial statements. (c) Post-employment benefits The present value of the cost of providing employees with future benefits programs is recognized as employees earn these entitlements through service. Any actuarial gains or losses are amortized on a straight-line basis over the average remaining service period (ARSP) of employees. The actuary estimated the ARSP to be 14 years for retirement and 13 years for sick leave benefits. (d) Government transfers Government transfers are recognized as revenue by the Library Board in the period in which the transfer is authorized and any eligibility criteria are met, unless they are restricted through stipulations that require specific actions to be carried out in order to keep the transfer. For such transfers, revenue is recognized as the stipulation has been met. Page 7 Dr a f t 1 City of Pickering Public Library Board Notes to the financial statements December 31, 2020 Significant accounting policies (continued) Basis of accounting (continued) (e) Use of estimates The preparation of financial statements in conformity with Canadian public sector accounting standards requires management to make estimates and assumptions that affect the reported amount of assets, liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Balances which require estimates include amortization expense of tangible capital assets, which are based on estimated useful lives, accrued liabilities and post-employment benefits. 2. Post-employment benefits liability The Library Board makes available to qualifying employees who retire before the age of 65 the opportunity to continue their coverage for benefits such as post-employment extended healthcare benefits. Coverage ceases at the age of 65. The Library Board also provides full-time and permanent part-time employees a sick time entitlement, with any unused entitlement accumulated year to year. This accumulated entitlement is not vested and therefore is forfeited at the time of retirement or termination. The post-employment benefits obligation at December 31, 2020 and the changes in the accrued benefit obligation for the 2020 fiscal year was determined by actuarial valuation prepared as at December 31, 2020. Information about the Library Board’s post-employment benefits liability is as follows: 2020 $ 2019 $ Post-employment benefits liability, beginning of year 471,282 464,078 Current service costs 33,667 31,813 Amortization of actuarial (gains) losses (963) (363) Interest expense 13,885 13,512 Benefits paid during the year (34,846) (37,758) Post-employment benefits liability 483,025 471,282 2020 $ 2019 $ Accrued post-employment benefits obligation 383,578 370,872 Unamortized actuarial gains 99,447 100,410 Post-employment benefits liability 483,025 471,282 The main actuarial assumptions employed in the actuarial valuation are as follows: (a) Discount rate The present value as at December 31, 2020 of the future benefits was determined using a discount rate of 3.00% (3.75% in 2019). (b) Dental cost The dental cost trend rate was 3.75% (3.75% in 2019) per annum. Page 8 Dr a f t City of Pickering Public Library Board Notes to the financial statements December 31, 2020 Page 9 2.Post-employment benefits liability (continued) (c)Health costs Health costs were assumed to increase at 5.76% (6.09% in 2019) and decrease by 0.33% (0.33% in 2019) increments per year to an ultimate rate of 3.75% per year in 2027 and thereafter. 3.Pension agreement The Library Board makes contributions to the Ontario Municipal Employees Retirement Fund (“OMERS”), which is a multi-employer plan, on behalf of eligible members of its staff. The Plan is a defined benefit plan that specifies the amount of the retirement benefit to be received by the employees based on the length of service and rates of pay. OMERS provide pension services to over 496,000 active and retired members and about 1,000 employers. Each year an independent actuary determines the funding status of OMERS Primary Pension (“the Plan”) by comparing the actuarial value of the invested assets to the estimated present value of all pension benefits that members have earned to-date. The most recent actuarial valuation of the Plan was conducted as at December 31, 2020. The results of this valuation disclosed total actuarial liabilities as at that date of $113,055 million in respect of benefits accrued for service with actuarial assets at that date of $109,844 million indicating an actuarial deficit of $3,211 million. Because OMERS is a multi-employer plan, any pension plan surpluses or deficits are a joint responsibility of Ontario municipal organizations and their employers. As a result, the Library Board does not recognize any share of the OMERS pension surplus or deficit. The Library Board accounts for their participation in OMERS as a defined contribution plan since they do not have sufficient information to apply defined benefit plan accounting. Contributions to OMERS are expensed on an accrual basis. Contributions in the amount of $268,791 ($300,971 in 2019) were paid to OMERS on behalf of its members during the year.Dr a f t City of Pickering Public Library Board Notes to the financial statements December 31, 2020 Page 10 4. Tangible capital assets (“TCA”) Machinery and equipment $ Information technology hardware $ Library collection materials $ Furniture and fixtures $ Assets under construction $ 2020 $ Cost Balance, beginning of year 23,681 314,861 2,173,665 450,171 — 2,962,378 Additions during the year — — 251,132 — — 251,132 Disposals/transfers to TCA during the year — — 413,253 — — 413,253 Balance, end of year 23,681 314,861 2,011,544 450,171 — 2,800,257 Accumulated amortization Balance, beginning of year 14,783 220,899 1,117,646 188,753 — 1,542,081 Amortization 1,369 47,321 356,688 23,933 — 429,311 Accumulated amortization on disposals — — 413,253 — — 413,253 Balance, end of year 16,152 268,220 1,061,081 212,686 — 1,558,139 Net book value 7,529 46,641 950,463 237,485 — 1,242,118 Machinery and equipment $ Information technology hardware $ Library collection materials $ Furniture and fixtures $ Assets under construction $ 2019 $ Cost Balance, beginning of year 23,681 301,848 2,250,862 423,691 — 3,000,082 Additions during the year — 13,013 344,482 26,480 — 383,975 Disposals/transfers to TCA during the year — — 421,679 — — 421,679 Balance, end of year 23,681 314,861 2,173,665 450,171 — 2,962,378 Accumulated amortization Balance, beginning of year 12,914 171,719 1,155,683 165,703 — 1,506,019 Amortization 1,869 49,180 383,642 23,050 — 457,741 Accumulated amortization on disposals — — 421,679 — — 421,679 Balance, end of year 14,783 220,899 1,117,646 188,753 — 1,542,081 Net book value 8,898 93,962 1,056,019 261,418 — 1,420,297 Dr a f t City of Pickering Public Library Board Notes to the financial statements December 31, 2020 Page 11 5. Accumulated surplus Accumulated surplus consists of the following: 2020 $ 2019 $ Invested in tangible capital assets 1,242,118 1,420,297 Post-employment benefits liability (483,025) (471,282) 759,093 949,015 6. Budget figures The 2020 budget was not prepared on a basis consistent with that used to report actual results. The budget was prepared on a modified accrual basis while Canadian public sector accounting standards require a full accrual basis of accounting. The budget figures treated all TCA acquisitions as expenditures and did not include amortization expense on tangible capital assets or post-employment benefits expenses on a full accrual basis. The following provides a reconciliation from the approved budget to the budget numbers presented in the financial statements. 2020 Council approved budget $ Post-employment benefits/ Amortization/ City Assets $ 2020 budget presented in statements $ Revenue City of Pickering 6,085,179 (45,000) 6,040,179 Province of Ontario grants 106,425 — 106,425 Fines and other receipts 164,500 — 164,500 6,356,104 (45,000) 6,311,104 Expenditures Salaries and benefits 4,381,545 11,743 4,393,288 Material, supplies and utilities 574,441 — 574,441 Services 1,025,118 — 1,025,118 Amortization — 439,946 439,946 5,981,104 451,689 6,432,793 Annual surplus (deficit) 375,000 (496,689) (121,689) Capital expenditures/ additions 375,000 (45,000) 330,000 7.Significant event On March 11, 2020, the World Health Organization characterized the outbreak of a strain of the novel coronavirus (“COVID-19”) as a pandemic which has resulted in a series of public health and emergency measures that have been put in place to combat the spread of the virus. The duration and impact of COVID-19 is unknown at this time and it is not possible to reliably estimate the impact that the length and severity of these developments will have on the financial position, results of operations and cash flows of the Library Board in future periods. Dr a f t