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HomeMy WebLinkAboutFIN 15-23 Report to Council Report Number: FIN 15-23 Date: September 25, 2023 From: Stan Karwowski Director, Finance & Treasurer Subject: 2022 Year End Audit and Financial Statements (Final) - File: F-3300-001 Recommendation: 1. That the Report on the results of the 2022 Audit as submitted by Deloitte LLP be received for information; and 2. That the 2022 draft Audited Consolidated Financial Statements for the City of Pickering be approved. Executive Summary: Attached to Report FIN 15-23 is the auditor’s Report on the results of the 2022 Audit and the draft Audited Consolidated Financial Statements for the year ended December 31, 2022. 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: The audit of the consolidated financial statements for the year ended December 31, 2022 has now been completed. The auditor’s Report on the results of the 2022 Audit is included as Attachment 1. This Report, prepared by Deloitte, summarizes its findings from the December 31, 2022 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 t hat Deloitte is independent from the City. Appendix 3 is the draft management representation letter which is provided by the City to the auditors. This letter indicates that the financial statements are management’s responsibility and that management has p rovided 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. FIN 15-23 September 25, 2023 Subject: 2022 Year End Audit and Financial Statements (Final) Page 2 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, 2022 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. Report on the Results of the 2022 Audit 2. 2022 Draft Audited Consolidated Financial Statements Prepared By: Approved/Endorsed By: Original Signed By: Original Signed By: Kristine Senior Stan Karwowski Manager, Accounting Services Director, Finance & Treasurer Recommended for the consideration of Pickering City Council Original Signed By: Marisa Carpino, M.A. Chief Administrative Officer 00 The Corporation of the City of Pickering Report on the results of the 2022 audit To be presented on September 25, 2023 Attachment #1 to Report FIN 15-23 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, 2022. This report summarizes the scope of our audit, our findings and reviews certain other matters that we believe to be of interest to you. As agreed in our Master Services Agreement dated April 16, 2023, , we have performed an audit of the financial statements of the City as at, and for the year ended December 31, 2022, 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, Chartered Professional Accountants Licensed Public Accountants 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 September 25, 2023 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 The Corporation of the City of Pickering | Table of contents i © Deloitte LLP and affiliated entities. Table of contents Executive summary 1 Significant audit risks, other audit risks and events 3 Significant accounting policies, judgments and estimates 5 Appendix 1 Communication requirements and other reportable matters 6 Appendix 2 Independence letter 8 Appendix 3 Draft management representations letter 11 The Corporation of the City of Pickering | Executive summary 1 © Deloitte LLP and affiliated entities. Executive summary Audit scope and terms of engagement We have been engaged to perform the audits of (the ) 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, 2022. 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 April 16, 2023. We have developed appropriate safeguards and procedures to eliminate threats to our independence or to reduce them to an acceptable level. Significant audit risks Uncorrected misstatements 1 Management override of controls 2 Revenue recognition Management judgments and 3 accounting estimates Preparation for new PSAS 4 accounting standards Outstanding matters & next steps Highlights Completion of minor audit documentation items Receipt of legal letters Receipt of signed management representations letter Receipt of component audit response from auditors of Elexicon Corporation Completion of our subsequent events procedures No changes in the significant risks identified. We have provided a few recommendations relating to internal controls over the SAP financial system under separate cover. There were no significant deficiencies identified as part of our audit. $165K $3.3 Mil Materiality Clearly trivial threshold We are required to communicate to those charged with governance any uncorrected misstatements identified during our audit exceeding the clearly trivial threshold. We do not have any uncorrected misstatements to report. The Corporation of the City of Pickering | Executive summary 2 © Deloitte LLP and affiliated entities. Going concern Results 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 s ability to continue as a going concern. We agree with management s assessment. 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, 2022 once the outstanding items referred to above are completed satisfactorily and the financial statements are approved. The Corporation of the City of Pickering | Significant audit risks, other audit risks and events 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 audit responses and conclusions, are described below. Significant audit risks Management override of controls* Analysis of risk Audit response and results 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. 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 Audit response and results 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 and accuracy of revenue, deferred revenue, and classification of recognition related to government transfer/grants. We tested the design and implementation of controls in the significant revenue streams and performed 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 performed testing on casino revenue to ensure its recognition is in line with the contribution agreement between the City and the OLG. We noted this is the first full year in which casino revenue was earned by the City. We obtained sufficient audit evidence to conclude that there were no material misstatements. *These areas were identified as areas of significant risk, as required by Canadian Auditing Standards. The Corporation of the City of Pickering | Significant audit risks, other audit risks and events 4 © Deloitte LLP and affiliated entities. Management judgments and accounting estimates Analysis of risk Audit response and results Management judgments and accounting estimates may be subject to estimation uncertainty. Significant judgments and estimates Accounts involving significant estimates include allowance for doubtful accounts, certain accrued liabilities including payroll-related liabilities, post- employment benefits liability, WSIB liabilities and estimates relating to the useful lives of tangible capital assets. Judgments and estimates also include considerations made with respect to the capitalization of costs incurred for capital assets and assets under construction. Such capitalization should only occur if it is anticipated that these costs will give rise to future benefits. 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 reasonableness of the estimates made at year-end. We assessed the consistency of assumption made by management. We performed lookback testing on significant estimates from prior year to assess the reasonableness of actual outcomes compared to issues. We noted certain costs were written off in the current year relating to capital assets and assets under construction capitalized in prior years. We have assessed the reasonableness of their write-off and consider them to be appropriate given changes to circumstances around their expected future benefits that arose in the current year. We obtained sufficient audit evidence to conclude that there were no material misstatements. Preparation for new PSAS accounting standards Analysis of risk Audit response and results In fiscal 2023, two new significant accounting standards, PS 3280 Asset retirement obligations, and PS 3450 Financial instruments, will come in effect. Both standards will require early preparation by the City, including development of accounting policies, information gathering with various City departments, engagement of external consultants to assist with valuation, and development of go-forward processes for policy maintenance. We have been in early stages of discussion with management regarding their implementation plans for the new standards The Corporation of the City of Pickering | Significant accounting policies, judgments and estimates 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, 2022, management advised us that there were no significant changes in accounting estimates or in judgments relating to the application of the accounting policies. 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 April 13, 2023 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 April 13, 2023 3. Significant transactions outside of the normal course of business, including related party transactions Audit service plan dated April 13, 2023 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, judgments 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, judgments 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 April 16, 2023, Management representation letter Appendix 3. 12. Circumstances that affect the form and the content of the auditor s report Master service agreement dated April 16, 2023. 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. There were no uncorrected misstatements. Other reportable matters 20. Changes to the audit plan The audit was conducted in accordance with our audit plan dated April 13, 2023 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. 24. Reliance on service organizations The City makes use of ADP PayTech 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. The Corporation of the City of Pickering | Appendix 2 Independence letter 8 © Deloitte LLP and affiliated entities. Appendix 2 Independence letter Deloitte LLP 8 Adelaide Street West Suite 200 Toronto ON M5H 0A9 Canada Tel: 416-601-6150 Fax: 416-601-6610 www.deloitte.ca September 7, 2023 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, 2022. 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/order 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 March 22, 2023, the date of our last letter. The Corporation of the City of Pickering September 7, 2023 Page 2 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 March 22, 2023 to September 7, 2023. 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 September 7, 2023. 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, Chartered Professional Accountants Licensed Public Accountants The Corporation of the City of Pickering | Appendix 3 Draft management representations letter 11 © Deloitte LLP and affiliated entities. Appendix 3 Draft management representations letter Dear Ms. Lilian Cheung: the consolidated financial statements of The Corporation of the City of Pickering City as of and for the year ended December 31, 2022, the notes to the consolidated financial statements and a 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 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 and subsequent confirmation of changes letters 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, 2022 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, 2022 that require adjustment to the estimates and disclosures included in the Financial Statements. [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 31,2022 consolidated financial statements of The Corporation of the City of Pickering consolidated financial statements of The Corporation of the City of Pickering CityCity December 31, 2022, the notes to the consolidated financial statements and a December 31, 2022, the notes to the consolidated financial statements and a opinion as to whether the Financial Statements present fairly, in all material respects, the financial position, 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 results of operations, and cash flows of the City in accordance with Public Sector Accounting Standards Certain representations in this letter are described as being limited to matters that are material. Items are 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 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. 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 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: necessary for the purpose of appropriately informing ourselves: Financial statements We have fulfilled our responsibilities as set out in the terms of the engagement letter between the We have fulfilled our responsibilities as set out in the terms of the engagement letter between the City and Deloitte dated October 17, 2019 and subsequent confirmation of changes lettersCity and Deloitte dated October 17, 2019 and subsequent confirmation of changes letters preparation of the Financial Statements in accordance with PSASpreparation of the Financial Statements in accordance with PSAS are fairly presented, in all material respects, and present the financial position of the City as at are fairly presented, in all material respects, and present the financial position of the City as at December 31, 2022 and the results of its operations and cash flows for the yearDecember 31, 2022 and the results of its operations and cash flows for the year Significant assumptions used in making estimates, including those measured at fair value, are reasonable. 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 In preparing the Financial Statements in accordance with PSAS, management makes judgments and Deloitte LLP [Date} Page 2 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, 2022 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 nternal control over financial reporting that occurred 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. We have completed our review of events after December 31, 2022 and up to the date of this letterWe have completed our review of events after December 31, 2022 and up to the date of this letter We believe that the effects of any uncorrected Financial Statement misstatements pertaining to the 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 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 Statements taken as a whole. A list of the uncorrected misstatements aggregated by you is attached in We acknowledge our responsibility for the design, implementation and maintenance of internal control to We acknowledge our responsibility for the design, implementation and maintenance of internal control to We have disclosed to you all known deficiencies in the design or operation of internal control over 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 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 deficiencies that we believe to be significant deficiencies in internal control over financial reporting. We nternal control over financial reporting that occurred nternal control over financial reporting that occurred internal control over financial reporting. internal control over financial reporting. Information provided We have provided you with: We have provided you with: Access to all information of which we are aware that is relevant to the preparation of the Financial 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. Statements, such as records, documentation and other matters. All relevant information as well as additional information that you have requested from us for the All relevant information as well as additional information that you have requested from us for the purpose of the audit; purpose of the audit; Unrestricted access to persons within the City from whom you determined it necessary to obtain Unrestricted access to persons within the City from whom you determined it necessary to obtain audit evidence; and, audit evidence; and, Deloitte LLP [Date} Page 3 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. 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 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 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 . - - 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 $165,000 (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. Others where the fraud could have a material effect on the Financial Statements. Others where the fraud could have a material effect on the Financial Statements. information in relation to allegations of actual, suspected or alleged fraud, or information in relation to allegations of actual, suspected or alleged fraud, or There have been no communications with regulatory agencies concerning actual or potential There have been no communications with regulatory agencies concerning actual or potential noncompliance with or deficiencies in financial reporting practicesnoncompliance with or deficiencies in financial reporting practices. There are also no known or possible There are also no known or possible instances of non-compliance with the requirements of regulatory or governmental authorities. instances of non-compliance with the requirements of regulatory or governmental authorities. and transactions of which we are aware, including guarantees, non-monetary transactions and and transactions of which we are aware, including guarantees, non-monetary transactions and Deloitte LLP and Deloitte Touche Tohmatsu Deloitte LLP and Deloitte Touche Tohmatsu Limited, including related member firms and affiliateLimited, including related member firms and affiliates. s. Prior to the City having any substantive employment conversations with a former or current Deloitte 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 engagement team member, the City has held discussions with Deloitte and obtained approval from the Executive Committee of City Council. Executive Committee of City Council. We have adhered to all regulatory requirements regarding the provision of non-audit services by Deloitte 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 preto the City in accordance with applicable laws, regulations and rules that apply to the City, including pre approval requirements, as applicabapproval requirements, as applicablele. . We have ensured that all services performed by Deloitte with respect to this engagement have been preWe 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 approved by the Executive Committee of City Council in accordance with its established approval policies and procedures and procedures We have disclosed to you all the documents that we expect to issue that may comprise other information, We have disclosed to you all the documents that we expect to issue that may comprise other information, in the context of CAS 720, in the context of CAS 720, The Auditor's Responsibilities Relating to Other Information in Documents The Auditor's Responsibilities Relating to Other Information in Documents Deloitte LLP [Date} Page 4 19. The City has identified all related parties in accordance with Section PS 2200, Related Party Disclosures . 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. 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. Communication 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. 27.-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 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. We have disclosed to you all known, actual or possible litigation and claims, whether or not they have 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 been discussed with our lawyers, whose effects should be considered when preparing the Financial As appropriate, these items have been disclosed and accounted for in the Financial As appropriate, these items have been disclosed and accounted for in the Financial All events subsequent to the date of the Financial Statements and for which PSAS requires adjustment or All events subsequent to the date of the Financial Statements and for which PSAS requires adjustment or Accounting estimates and disclosures included in the Financial Accounting estimates and disclosures included in the Financial Statements that are impacted by subsequent events have been appropriately adjusted. Statements that are impacted by subsequent events have been appropriately adjusted. We have disclosed to you all liabilities, provisions, contingent liabilities and contingent assets, including 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 those associated with guarantees, whether written or oral, and they are appropriately reflected in the We have disclosed to you, and the City has complied with all aspects of contractual agreements that 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 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. covenants, conditions or other requirements of all outstanding debt. The City has satisfactory title to and control over all assets, and there are no liens or encumbrances on The City has satisfactory title to and control over all assets, and there are no liens or encumbrances on We have disclosed to you and in the Financial Statements all assets that have been pledged We have disclosed to you and in the Financial Statements all assets that have been pledged Communication with taxation and regulatory agencies Communication with taxation and regulatory agencies We have disclosed to you all communications from: We have disclosed to you all communications from: Taxation authorities concerning assessments or reassessments that could have a material effect on Taxation authorities concerning assessments or reassessments that could have a material effect on the Financial Statements; and the Financial Statements; and Regulatory agencies concerning noncompliance with or potential deficiencies in, financial reporting Regulatory agencies concerning noncompliance with or potential deficiencies in, financial reporting requirements. requirements. Deloitte LLP [Date} Page 5 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 bodies. 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 38. We have reviewed the assets under construction and believe that these costs recorded represent tangible capital assets of the City that will be completed in the future, and that any costs incurred which will not result in future tangible capital assets, or do not meet capitalization criteria, have been properly expensed. Employee future benefit costs, assets, and obligations have been properly recorded and adequately 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 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 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 defined benefit plan assets, liabilities and costs for financial accounting purposes are appropriate in the We have disclosed to you all correspondence relating to government transfers that the City has had with We have disclosed to you all correspondence relating to government transfers that the City has had with We have assessed the eligibility criteria and determined that the City is an eligible recipient for the We have assessed the eligibility criteria and determined that the City is an eligible recipient for the We have assessed the stipulations attached with the funding and have recognized the revenue in We have assessed the stipulations attached with the funding and have recognized the revenue in accordance with meeting the stipulations required. accordance with meeting the stipulations required. All government transfers that have been recorded as deferred revenue give rise to an obligation that 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 meets the definition of a liability. Those liabilities have been properly recorded and presented in the Financial Statements. We have appropriately recorded tax assets and revenues when they meet the definition of an asset in 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 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 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. Revenue, and have not been grossed up for any amount of tax concessions. Tangible Capital Assets Tangible Capital Assets Tangible capital assets have been recorded properly and consistently according to the standards in Tangible capital assets have been recorded properly and consistently according to the standards in Section PS 3150, Tangible Capital Assets. Deloitte LLP [Date} Page 6 Environmental liabilities/contingencies 39. 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 40. The City has appropriately classified its investments in Elexicon as a Government Business Enterprise. , we have disclosed to you any events that have occurred value as reported in the financial statements. Liabilities for contaminated sites 41. 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 The City has appropriately classified its investments in Elexicon as a Government Business Enterprise. The City has appropriately classified its investments in Elexicon as a Government Business Enterprise. , we have disclosed to you any events that have occurred , we have disclosed to you any events that have occurred We have evaluated all of our tangible capital assets that we have direct responsibility for or accept 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 responsibility for, and have not identified any sites in which contamination exceeds an environmental The Corporation of the City of Pickering The Corporation of the City of Pickering Stan Karwowski Stan Karwowski Director of Finance and Treasurer Director of Finance and Treasurer Appendix A The Corporation of the City of Pickering Summary of uncorrected financial statement misstatements Year ended December 31,2022 Description Assets DR (CR) Liabilities DR (CR) Accumulated Surplus, Opening DR (CR) Income Statement DR (CR) mmuullaatted Surplus, ppeenniing DDRR ((CR)DR Consolidated financial statements of The Corporation of the City of Pickering Consolidated financial statements ofConsolidated financial statements of The Corporation of The Corporation of the City of Pickering the City of Pickering December 31, 2022 Attachment #2 to Report FIN 15-23 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 7–29 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, 2022, and the consolidated statements of operations, change in net financial assets and cash flows for the year then ended, and notes to the consolidated 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, 2022, and the results of its operations, change 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. Deloitte LLP 8 Adelaide Street West Suite 200 Toronto ON M5H 0A9 Canada Tel: 416 601 6150 Fax: 416 601 6151 www.deloitte.ca TheThe CorporationCorporation of ofof financialfinancial positionposition as change in netnet financialfinancial assetsassets andand cashcash statements,statements,includingincluding aa summarysummary the “financial statements”).statements”). statementsstatements presentpresent fairly,fairly,inin allall 2022,and thethe resultsresults ofof itsits operations,operations, year then endedended in accordanceaccordance withwith audit inin accordanceaccordance withwith CanadianCanadian responsibilitiesresponsibilities underunder those forfor thethe Audit ofof thethe Financial accordanceaccordance withwith the andand wewe havehave thatthat thethe 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. 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 [DATE] for one misrepresentations,misrepresentations,oror relevant toto thethe auditaudit inin orderorder to designdesign not for thethe purposepurpose ofof expressingexpressing accounting policiespolicies usedused andand thethe reasonablenessreasonableness made by management.management. appropriateness of management’smanagement’s useuse of thethe goinggoing obtained,obtained,whetherwhether a materialmaterial uncertaintyuncertainty significant doubtdoubt onon the City’sCity’s abiabi material uncertaintyuncertainty exists,exists,wewe are required disclosuresdisclosures inin thethe financialfinancial statementsstatements conclusionsconclusions are basedbased onon the auditaudit futurefuture eventsevents or conditionsconditions may presentation,presentation,structurestructure financialfinancial 2022 $ 2021 $Notes Financial assets Cash and cash equivalents 90,129,235 93,364,602 Investments 3 156,687,900 140,255,810 Taxes receivable 23,372,809 22,688,178 Accounts receivable 11,231,858 7,365,804 Note receivable 17 2,381,011 2,681,988 Investment in Elexicon Corporation 4(b)73,301,808 70,022,403 Promissory notes receivable 5 25,069,000 25,069,000 382,173,621 361,447,785 Liabilities Accounts payable and accrued liabilities 33,721,100 37,473,687 Other current liabilities 227,096 217,958 Deferred revenue 6 110,023,846 105,095,559 Long-term liabilities 9 42,704,260 40,742,259 Post-employment benefit liability 8(a)9,291,345 8,702,252 WSIB benefit liabilities 8(b)3,060,773 2,876,413 199,028,420 195,108,128 Net financial assets 183,145,201 166,339,657 Non-financial assets Tangible capital assets 10 319,085,606 298,638,881 Prepaid expenses and deposits 10(v)7,281,479 1,745,544 Inventory 538,091 544,515 326,905,176 300,928,940 Accumulated surplus 11 510,050,377 467,268,597 The accompanying notes to the consolidated financial statements are an integral part of this consolidated financial statement. Page 3 6 110,023,846 9 42,704,260 8(a)9,291,345 8(b) osits luslus notes to the consolidated financial statements are an inte notes to the consolidated financial statements are an inte this consolidated financial statement.this consolidated financial statement. The Corporation of the City of Pickering Consolidated statement of financial position As at December 31, 2022 Budget $ 2022 Actual $ 2021 Actual $Notes (Note 18) Revenue Residential and farm taxation 62,244,612 61,631,416 59,310,500 Commercial and industrial taxation 11,277,425 13,729,420 11,559,233 Taxation from other governments 8,133,040 8,497,858 8,266,805 User charges 12,857,128 15,743,433 10,418,337 Government grants and fees 10,393,940 9,114,226 7,382,655 Other contributions and donations 2,338,055 4,477,527 5,436,152 Development charges and developer contributions earned 14,723,270 11,350,537 2,915,766 Contributed tangible capital assets 10(i)—348,530 3,047,542 Investment income 525,000 2,722,276 630,296 Penalties and interests on taxes 2,690,000 3,311,796 3,504,311 Fines 1,002,000 1,527,436 661,988 Interest on promissory notes 5(c)1,035,350 1,035,350 1,035,800 Casino revenue 8,250,000 14,678,604 5,575,176 Equity share of Elexicon Corporation earnings 4(b)—5,906,099 4,876,212 Other 286,981 199,549 537,539 Gain on disposal of tangible capital assets — 135,756,801 191,284 154,465,341 - 125,158,312 Expenses 19 General government 26,100,225 26,313,997 23,612,658 Protection to persons and property 31,160,361 30,198,497 27,945,517 Transportation services 18,198,627 16,876,440 14,996,975 Environmental services 2,495,924 2,368,443 2,743,525 Social and family services 1,012,905 758,443 645,439 Recreational and cultural services 33,779,857 31,198,429 26,142,900 Planning and development 6,176,559 3,969,312 3,640,971 Loss on disposal of tangible capital assets — —202,363 118,924,458 111,683,561 99,930,348 Annual surplus 16,832,343 42,781,780 25,227,964 Accumulated surplus, beginning of year 467,268,597 467,268,597 442,040,633 Accumulated surplus, end of year 484,100,940 510,050,377 467,268,597 The accompanying notes to the consolidated financial statements are an integral part of this consolidated financial statement. Page 4 690, 1,002,000 1,035 350 8,250 000 906 286 199 135 756,801 1919 26 100, 160,361 ,198 2,495 1, Recreational and cultural servicesRecreational and cultural services ibleible earear The Corporation of the City of Pickering Consolidated statement of operations Year ended December 31, 2022 2022 Actual $ 2021 Actual $ Budget $ (Note 18) Annual surplus 16,832,343 42,781,780 25,227,964 Acquisition of tangible capital assets (46,120,454) (44,684,796)(32,186,500) Amortization of tangible capital assets 11,682,942 12,092,563 11,710,898 (Gain) loss on disposal of tangible capital assets —(191,284)202,363 Proceeds on disposal of tangible capital assets —2,484,815 109,082 (17,605,169) 12,483,078 5,063,807 Transfer of assets under construction to tangible capital assets —6,506,536 6,460,299 Assets under construction expensed —3,345,441 3,661,341 —9,851,977 10,121,640 Acquisition of inventory of supplies —(1,379,533)(935,105) Use of inventory of supplies —1,385,957 868,719 Acquisition of prepaid expenses and deposits —(7,151,099)(84,198) Use of prepaid expenses and deposits —1,615,164 357,734 —(5,529,511)207,150 Change in net financial assets (17,605,169) 16,805,544 15,392,597 Net financial assets, beginning of year 166,339,657 166,339,657 150,947,060 Net financial assets, end of year 148,734,488 183,145,201 166,339,657 The accompanying notes to the consolidated financial statements are an integral part of this consolidated financial statement. Page 5 (1,379,533) 1,385,957 — — (17,605,169) Net financial assets, beginning of year 166,339,657 Net financial assets, end of year 148,734,488 The accompanying notes to the consolidated financial statements are an integral part of The accompanying notes to the consolidated financial statements are an integral part of — — this consolidated financial statement.this consolidated financial statement. The Corporation of the City of Pickering Consolidated statement of change in net financial assets Year ended December 31, 2022 2022 $ 2021 $ Operating transactions Annual surplus 42,781,780 25,227,964 Non-cash items Amortization of tangible capital assets 12,092,563 11,710,898 (Gain) loss on disposal of tangible capital assets (191,284)202,363 Equity share of Elexicon Corporation earnings (5,906,099)(4,876,212) Contributed tangible capital assets recorded in revenue (348,530)(3,047,542) Change in non-cash operating items Taxes receivable (684,631)3,477,546 Accounts receivable (3,866,054)(4,230,881) Accounts payable and accrued liabilities (3,752,587)(340,886) Other current liabilities 9,138 61,087 Deferred revenue 4,928,287 10,886,181 Post-employment benefit liability 589,093 1,196,389 WSIB benefit liabilities 184,360 185,173 Inventory 6,424 (66,386) Prepaid expenses and deposits (5,535,935)273,536 40,306,525 40,659,230 Capital transactions Acquisition of tangible capital assets (net of transfers and contributions)(34,484,289)(19,017,318) Proceeds on disposal of tangible capital assets 2,484,815 109,082 (31,999,474)(18,908,236) Investing transactions Increase in investments (16,432,090)(24,502,734) Dividends received from Elexicon Corporation 2,626,694 3,172,745 (13,805,396)(21,329,989) Financing transactions Proceeds from debentures issued 5,573,000 15,568,000 Principal repayment of debentures (3,610,999)(3,944,385) Decrease in note receivable 300,977 291,229 2,262,978 11,914,844 (Decrease) increase in cash and cash equivalents (3,235,367)12,335,849 Cash and cash equivalents, beginning of year 93,364,602 81,028,753 Cash and cash equivalents, end of year 90,129,235 93,364,602 Cash and cash equivalents consists of Cash 59,634,018 68,432,602 Cash equivalents 30,495,217 24,932,000 90,129,235 93,364,602 The accompanying notes to the consolidated financial statements are an integral part of this consolidated financial statement. Page 6 (3,752,587) 589,093 184,360 Acquisition of tangible capital assets (net of transfers and contributions) Proceeds on disposal of tangible capital assetsProceeds on disposal of tangible capital assets Investing transactionsInvesting transactions Increase in investmentsIncrease in investments Dividends received from Elexicon CorporationDividends received from Elexicon Corporation The Corporation of the City of Pickering Consolidated statement of cash flows Year ended December 31, 2022 Page 7 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 financial statements. (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, measurable, and collectibility is assured; expenses are recognized as they are incurred and measurable as a result of the receipt of goods and services and the creation of a 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. g entity is comprised of the activities of all committees of Council and the City of Pickering Public Library Board which is All material inter-fund transactions and balances are eliminated on consolidation. All material inter-fund transactions and balances are eliminated on consolidation. Investment in government business enterprise Investment in government business enterprise The City’s investment in Elexicon Corporation (formerly Veridian Corporation until ation (formerly Veridian Corporation until March 31, 2019) is accounted for on a modifiedMarch 31, 2019) is accounted for on a modified equity basis, consistent with Canadian equity basis, consistent with Canadian public sector accounting standards for investments in government business public sector accounting standards for investments in government business enterprises. Under the modified equity basis, Elexicon Corporation’s accounting enterprises. Under the modified equity basis, Elexicon Corporation’s accounting policies are not adjusted to conform to those of the City and inter-organizational 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 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 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. Operations with a corresponding increase or decrease in its investment asset account. Dividends that the City may receive from Elexicon Corporation and other capital Dividends that the City may receive from Elexicon Corporation and other capital transactions are reflected as adjustments in the investment asset account. transactions are reflected as adjustments in the investment asset account. Operations of School Boards and the Regional Municipality of Durham Operations of School Boards and the Regional Municipality of Durham The taxation, other revenues, expenses, aThe taxation, other revenues, expenses, a operations of the school boards and the Regional Municipality of Durham operations of the school boards and the Regional Municipality of Durham (the “Region”) are not reflected in these consolidated financial statements. (the “Region”) are not reflected in these consolidated financial statements. The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2022 Page 8 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. installation costs, design and engineering fees, legal fees and site preparation costs. Amortization is recorded on the 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 straight-line basis over the estimated useful life of the tangible capital asset commencing once the asset is available for use as follows: commencing once the asset is available for use as follows: 5 to 50 years 5 to 50 years Various Various 7 to 15 years 7 to 15 years 10 to 75 years Infrastructure - Storm sewers 50 to 100 years 50 to 100 years Infrastructure - Sidewalks Infrastructure - Parks Information technology hardware Information technology hardware Library collection materials Library collection materials Furniture and fixtures Furniture and fixtures One half of the annual amortization is charged in the year of acquisition and in the 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 year of disposal. Assets under construction are not amortized until the tangible capital asset is available for productive use. Land is not amortized. asset is available for productive use. Land is not amortized. Tangible capital assets received as contributions are recorded at their fair value at the Tangible capital assets received as contributions are recorded at their fair value at the date contributed, with the correspondate contributed, with the correspon The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2022 Page 9 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) Casino revenue The City is a beneficiary of a contribution agreement with Ontario Lottery and Gaming Corporation (OLG) for hosting a casino within the municipality. Pickering is entitled to receive a share of the gaming revenue on a quarterly basis for hosting the Pickering Casino Resort which opened on July 26, 2021. Casino revenue is recognized as earned in line with the contribution agreement. (xii) Intangible assets Intangible assets are not recognized as assets in the financial statements. and losses are amortized over the ARSP of 15 years. Inventory is valued at the lower of cost and replacement cost. Cost is determined on a Inventory is valued at the lower of cost and replacement cost. Cost is determined on a Government transfers are recognized as revenue by the City in the period in which the 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 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 through stipulations that require specific actions to be carried out in order to keep the transfer or discharge the liability. For such transfer or discharge the liability. For such transfers, revenue is recognized when the transfers, revenue is recognized when the stipulation has been met. Tax revenue is recognized on all taxable properties within the City that are included in Tax revenue is recognized on all taxable properties within the City that are included in the tax roll provided by the Municipal Properthe tax roll provided by the Municipal Proper tax values included in the tax roll or proptax values included in the tax roll or prop estimated by the City as it relates to supplementary or omitted assessments, at tax 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 rates authorized by Council for the City’s own purposes in the period for which the tax The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2022 Page 10 1. Significant accounting policies (continued) (b) Basis of accounting (continued) (xiii)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. 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 City’s statement of operations. The City does not have any liability for contaminated sites recorded in the consolidated financial statements. (xiv)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. (xv) 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 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: 2022 School board $ 2021 School board $ Region $ Region $ Taxation 137,349,789 51,905,608 128,126,225 47,751,880 Payments in lieu of taxes 6,565,748 725,439 6,090,166 346,689 143,915,537 52,631,047 134,216,391 48,098,569 the City is directly responsible or accepts responsibility for the liability; future economic benefits will be given up; and future economic benefits will be given up; and a reasonable estimate of the liability can be made. a reasonable estimate of the liability can be made. A liability is recorded only for sites that are not in productive use or if there was an 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 unexpected event that resulted in contamination. Changes in estimates are recorded in the City’s statement of operations. The City does not have any liability for in the City’s statement of operations. The City does not have any liability for contaminated sites recorded in the consolidated financial statements. contaminated sites recorded in the consolidated financial statements. Land permanently removed from service that meets the criteria for inventory held for Land permanently removed from service that meets the criteria for inventory held for resale are recorded as “land held for reresale are recorded as “land held for resale” on the Consolidated Statement of sale” on the Consolidated Statement of Financial Position and is recorded at the lower of cost and net realizable value. Those Financial Position and is recorded at the lower of cost and net realizable value. Those that do not meet these criteria continue tothat do not meet these criteria continue to be recorded as part of tangible capital be recorded as part of tangible capital assets on the Consolidated Statement of Financial Position. assets on the Consolidated Statement of Financial Position. Use of estimates Use of estimates The preparation of financial statements in conformity with Canadian public sector The preparation of financial statements in conformity with Canadian public sector accounting standards requires management to make estimates and assumptions that accounting standards requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. affect the reported amounts in the financial statements and accompanying notes. Accounts involving significant estimates include allowance for doubtful accounts, Accounts involving significant estimates include allowance for doubtful accounts, certain accrued liabilities, post-employment benefits liability, WSIB liabilities and certain accrued liabilities, post-employment benefits liability, WSIB liabilities and estimates relating to the useful lives of taestimates relating to the useful lives of ta The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2022 Page 11 3. Investments 2022 Market value $ 2021 Market value $ Cost $ Cost $ Investments 156,687,900 156,541,957 140,255,810 140,364,738 Investments are comprised of deposit notes, bonds, and guaranteed investment certificates. 4. Investment in government business enterprise (a) Elexicon Corporation was formed on April 1, 2019, in which 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 and conducts non-regulated utility service ventures through its subsidiaries. (a) Elexicon Corporation was formed on April 1, 2019, in which the City holds a 27.88% siness enterprise, is accounted for on the siness enterprise, is accounted for on the modified equity basis in these financial statements. Elexicon Corporation serves as the modified equity basis in these financial statements. Elexicon Corporation serves as the electrical distribution utility for a number of communities and conducts non-regulated utility electrical distribution utility for a number of communities and conducts non-regulated utility service ventures through its subsidiaries. The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2022 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2022 4. Investment in government business enterprise (continued) (a) Elexicon Corporation was formed on April 1, 2019, in which the City holds a 27.88% interest in Elexicon Corporation.(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, 2022. The amounts are disclosed in thousands of dollars: 2022 (000’s) $ 2021 (000’s) $ Assets Current 106,273 104,266 Capital and intangibles 661,146 584,949 Other 1,505 341 Total assets 768,924 689,556 Regulatory balances 58,573 39,164 Total assets and regulatory balances 827,497 728,720 Liabilities Current 316,892 85,153 Long-term debt 89,209 258,526 Other 148,489 132,520 Total liabilities 554,590 476,199 Shareholders’ equity Share capital 97,692 97,692 Contributed capital 25 25 2019 Contributed Surplus 79,301 79,301 Accumulated other comprehensive loss 3,130 (1,257) Retained earnings 82,730 75,354 Total equity 262,878 251,115 Regulatory balances 10,029 1,406 Total liabilities, equity and regulatory balances 827,497 728,720 2022 (000’s) $ 2021 (000’s) $ Comprehensive income Commodity revenue 430,139 417,285 Commodity expenses (434,592) (426,225) Distribution revenue 84,574 84,070 Operating expenses (75,016) (69,322) Other income (expense) 909 (1,560) Accumulated other comprehensive loss 4,387 558 Net movements in regulatory balances, net of tax 10,783 12,684 Total comprehensive income for the year 21,184 17,490 Page 12 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2022 4. Investment in government business enterprise (continued) (b) Equity in Elexicon Corporation The City’s equity in Elexicon Corporation is as follows at the end of 2022: Balance, beginning of year 98,134,423 96,430,956 Equity share of net earnings from Elexicon Corporation 5,906,099 4,876,212 Dividend received (2,626,694) (3,172,745) Balance, end of year 101,413,828 98,134,423 2022 $ 2021 $ (c) City of Pickering’s investment is represented by: 2022 $ 2021 $ Promissory notes receivable (Note 5) 25,069,000 25,069,000 Investments in Elexicon Corporation Initial investment in shares of the Corporation 30,496,196 30,496,196 Amalgamation adjustments 12,849,416 12,849,416 Accumulated earnings 70,964,164 65,058,065 Accumulated dividends received (41,823,676) (39,196,982) Adjustment to value of investment 815,708 815,708 73,301,808 70,022,403 (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 $40,000,000 per occurrence for liability insurance, $21,000,000 for vehicle insurance and $206,572,000 for property insurance and $12,000,000 for privacy, cyber, and network security insurance. (c) City of Pickering’s investment is represented by: Promissory notes receivable (Note 5) 25,069,000 Investments in Elexicon Corporation Initial investment in shares of the Corporation Initial investment in shares of the Corporation 30,496,196 Amalgamation adjustments Accumulated earnings Accumulated dividends received Accumulated dividends received Adjustment to value of investment Adjustment to value of investment (d) Contingencies and guarantees of Elexicon Corporation (the “Corporation”) as disclosed in (d) Contingencies and guarantees of Elexicon Corporation (the “Corporation”) as disclosed in their consolidated financial statements are as follows: their consolidated financial statements are as follows: Insurance claims Insurance claims The Corporation is a member of the Municipal Electric Association Reciprocal Insurance 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 (“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 exchange may be defined as a group of persons formed for the purpose of exchanging Page 13 (ii) Contractual obligation - Hydro One Networks Inc. (“HONI”) The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2021 4. Investment in government business enterprise (continued) (d) Contingencies and guarantees of Elexicon Corporation (the “Corporation”) as disclosed in their consolidated financial statements are as follows: (continued) 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 is expected to perform another true-up based on actual load at the end of the fifteenth anniversary of the in-service date. (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. (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: $ 2023 177,000 2024 124,000 2025 95,000 2026 71,000 2027 45,000 512,000 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. 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 Hydro One has performed a true-up based on actual load at the end of the tenth anniversary of the in-service date and is expected to perform another true-up based anniversary of the in-service date and is expected to perform another true-up based on actual load at the end of the fifteenth anniversary of the in-service date. on actual load at the end of the fifteenth anniversary of the in-service date. Purchasers of electricity in Ontario, through the Independent Electricity System Purchasers of electricity in Ontario, through the Independent Electricity System Operator (“IESO”), are required to provide security to mitigate the risk of default 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 based on their expected activity in the market. The IESO could draw on this security if the Corporation fails to make the payment rethe Corporation fails to make the payment required on a default notice issued by the quired on a default notice issued by the IESO. The Corporation has provided a $64,000,IESO. The Corporation has provided a $64,000,000 guarantee to the IESO on behalf of (iv) General claims (iv) General claims From time to time, the Corporation is inFrom time to time, the Corporation is in regulatory proceedings in the normal coregulatory proceedings in the normal co management, the outcome of such matters wmanagement, the outcome of such matters w the Corporation’s consolidated financial position and results of operations or cash the Corporation’s consolidated financial position and results of operations or cash Page 14 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2021 5. Promissory notes receivable 2022 $ 2021 $ Elexicon Corporation 7,095,000 7,095,000 Elexicon Energy 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 January 1, 2024. 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 Elexicon Energy Inc. are due on demand. The City has agreed not to demand repayment of (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 ($1,035,800 in 2021). 6. Deferred revenue 2022 $ 2021 $ Obligatory reserve funds Development charges 84,232,840 77,078,827 Parkland 5,850,226 8,631,353 Federal gas tax 10,530,599 10,996,128 Third party/Developer's contributions reserve fund 3,416,197 3,358,782 104,029,862 100,065,090 Other unearned revenues 5,993,984 5,030,469 110,023,846 105,095,559 Page 15 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2021 6. Deferred revenue (continued) Continuity of deferred revenue is as follows: 2022 $ 2021 $ Balance, beginning of year 105,095,559 94,209,378 Restricted funds received 17,139,625 15,916,281 General funds received 3,911,549 3,239,001 Interest earned (restricted funds) 1,793,352 1,045,285 22,844,526 20,200,567 Earned restricted revenue transferred to operations 14,968,205 5,876,718 Earned revenue transferred to operations 2,948,034 3,437,668 17,916,239 9,314,386 Balance, end of year 110,023,846 105,095,559 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 2.50% 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: 2022 $ 2021 $ Roads 1,007,116 486,000 Community facilities, libraries and parks — 80,804 1,007,116 566,804 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, with projections for December 31, 2022. 14,968,205 2,948,034 17,916,239 110,023,846 110,023,846 As a means of funding various capital acquisitionsAs a means of funding various capital acquisitions, funds are borrowed by the Capital Fund from , funds are borrowed by the Capital Fund from Development Charges deferred revenue (obligatorDevelopment Charges deferred revenue (obligatory reserve funds). These funds are secured by y reserve funds). These funds are secured by promissory notes with interest rates ranging promissory notes with interest rates ranging from 0.50% to 2.50% and various payment terms from 0.50% to 2.50% and various payment terms ranging from 2 years to 10 years. The financing arrangements and ultimate repayment are 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 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 terms as noted above, they are repayable on demand. The following is a summary of the related interfund loans: Community facilities, libraries and parks Community facilities, libraries and parks Page 16 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2021 8. Post-employment benefits liability (continued) (a) Post-employment benefits liability (continued) Plan amendment In the prior year, a benefit plan amendment was made to extend coverage for a restricted group of retirees effective January 1, 2021. The impact of the plan addition has been recognized immediately as a plan amendment cost and shown in the table below during 2021. No plan amendments were made in 2022. Information about the City’s benefits liability is as follows: 2022 $ 2021 $ Accrued benefits liability, beginning of year 8,702,252 7,505,863 Current service costs 704,848 670,900 Plan amendment — 593,898 Interest on accrued benefits 355,353 354,203 Amortization of actuarial losses 556,521 557,421 Benefits paid during the year (1,027,629) (980,033) Accrued benefits liability, end of year 9,291,345 8,702,252 Accrued benefit obligation 12,039,039 12,006,466 Unamortized actuarial losses (2,747,694) (3,304,214) Accrued benefits liability, end of year 9,291,345 8,702,252 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, 2022 of the future benefits was determined using a discount rate of 3.00% (3.00% in 2021). (ii) Dental costs The dental cost trend rate was 3.75% (3.75% in 2021) increase per annum. (iii) Health costs Health costs were assumed to increase at 5.42% (5.43% in 2021) and decrease by 0.33% (0.33% in 2021) increments per year to an ultimate rate of 3.75% per year in 2027 and thereafter. 8,702,252 355,353 556,521 (1,027,629) Accrued benefits liability, end of year 12,039,039 Unamortized actuarial losses Accrued benefits liability, end of year Accrued benefits liability, end of year The main actuarial assumptions employed in the actuarial valuations for the The main actuarial assumptions employed in the actuarial valuations for the post-employment benefits are as follows: post-employment benefits are as follows: (i) Discount rate (i) Discount rate The present value as at December 31, 2022 of the future benefits was determined The present value as at December 31, 2022 of the future benefits was determined using a discount rate of 3.00% (3.00% in 2021). using a discount rate of 3.00% (3.00% in 2021). The dental cost trend rate was 3.75% (3.75% in 2021) increase per annum. The dental cost trend rate was 3.75% (3.75% in 2021) increase per annum. Page 17 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2021 8. Post-employment benefits liability (continued) (b) Workplace Safety and Insurance Board (WSIB) benefit liabilities Effective January 1, 2001, the City became a Schedule II employer under 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, with projections for December 31, 2022. Information about the City’s WSIB benefit liability is as follows: 2022 $ 2021 $ Accrued WSIB liability, beginning of year 2,876,413 2,691,240 Current service cost 198,224 192,771 Interest on accrued benefits 96,719 92,191 Amortization of actuarial losses 31,561 31,561 Benefits paid during the year (142,144) (131,350) 3,060,773 2,876,413 Accrued benefit obligation 3,348,738 3,195,939 Unamortized actuarial losses (287,965) (319,526) Accrued benefits liability, end of year 3,060,773 2,876,413 The main actuarial assumptions employed in the actuarial valuations are as follows: (i) Discount rate The present value as at December 31, 2022 of the future benefits was determined using a discount rate of 3.0% (3.0% in 2021). (ii) Inflation rate The rate of inflation was assumed to be 2.50% (2.50% in 2021) per annum. (iii) WSIB Administration Rate Liabilities for WSIB benefits have been increased to 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, 2022 (Note 11) was $4,000,000 ($4,000,001 as at December 31, 2021). In 2021, the City established an Excess Indemnity Reserve Fund in lieu of purchasing an insurance policy for this type of coverage. The balance in that Reserve Fund as at December 31, 2022 is $1,336,742 ($722,763 in 2021). In addition, the City purchased an insurance policy to protect the City against significant claims. The occupational accident insurance pays loss claims up to $500,000 per work related accident. 2,876,413 31,561 (142,144) 3,060,773 3,348,738 mortized actuarial losses Accrued benefits liability, end of year Accrued benefits liability, end of year The main actuarial assumptions employed in the actuarial valuations are as follows: The main actuarial assumptions employed in the actuarial valuations are as follows: (i) Discount rate (i) Discount rate The present value as at December 31, 2022 of the future benefits was determined The present value as at December 31, 2022 of the future benefits was determined using a discount rate of 3.0% (3.0% in 2021). using a discount rate of 3.0% (3.0% in 2021). (ii) Inflation rate (ii) Inflation rate The rate of inflation was assumed to be 2.50% (2.50% in 2021) per annum. The rate of inflation was assumed to be 2.50% (2.50% in 2021) per annum. Page 18 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2021 9. Long-term liabilities (a) The balance of long-term liabilities is made up of the following: 2022 $ 2021 $ The City is responsible for the payment of principal and interest charges on long-term liabilities issued by the Regional Municipality of Durham on the City’s behalf. At the end of the year the outstanding principal amount of this liability is 42,704,260 40,742,259 (b) The above long-term liabilities have maturity dates of October 16, 2023, July 2, 2029, October 17, 2026 and 2031, October 13, 2027, 2032 and 2037, September 14, 2023, 2028, 2033 and 2038, November 29, 2024, 2029 and 2039, October 2, 2030 and November 26, 2036 and 2041, July 5, 2033 and 2043 with various interest rates ranging from 0.45% to 4.75%. Principal repayments are summarized as follows: $ 2023 3,707,597 2024 3,237,801 2025 3,233,889 2026 3,308,500 2027 2,966,323 Thereafter 26,250,150 42,704,260 (c) Long-term liabilities include principal sums of $443,000 ($443,000 in 2021) 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 $1,157,439 ($797,289 in 2021). The above long-term liabilities have maturity dates of October 16, 2023, July 2, 2029, The above long-term liabilities have maturity dates of October 16, 2023, July 2, 2029, October 17, 2026 and 2031, October 13, 2027, 2032 and 2037, September 14, 2023, October 17, 2026 and 2031, October 13, 2027, 2032 and 2037, September 14, 2023, 2028, 2033 and 2038, November 29, 2024, 2029 and 2039, October 2, 2030 and 2028, 2033 and 2038, November 29, 2024, 2029 and 2039, October 2, 2030 and November 26, 2036 and 2041, July 5, 2033 and 2043 with various interest rates ranging November 26, 2036 and 2041, July 5, 2033 and 2043 with various interest rates ranging from 0.45% to 4.75%. Principal repayments are summarized as follows: from 0.45% to 4.75%. Principal repayments are summarized as follows: 3,3,707,597 707,597 3,237,801 2026 2027 Thereafter Thereafter Long-term liabilities include principal sums of $443,000 ($443,000 in 2021) which may be Long-term liabilities include principal sums of $443,000 ($443,000 in 2021) which may be refinanced by the issuance of debentures ovrefinanced by the issuance of debentures ov The above long-term liabilities have been aThe above long-term liabilities have been a and interest payments required to service these liabilities are within the annual debt and interest payments required to service these liabilities are within the annual debt repayment limit prescribed by the Ministry of Municipal Affairs and Housing. repayment limit prescribed by the Ministry of Municipal Affairs and Housing. Page 19 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2021 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 2022 amounted to $348,530 ($3,047,542 in 2021). (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 $30,996,098 ($24,218,983 in 2021). During the year, there were nil write-downs of assets (nil in 2021) and nil interest was capitalized during the year (nil in 2021). Certain costs were written off in the current year relating to assets under construction due to changes in circumstances around their expected future use that arose in the current year. (v) Land held for resale As at December 31, 2022, deposits of $7,087,701 ($1,645,965 in 2021) paid towards three (four in 2021) Parcels of land are included within prepaid expenses and deposits. Subsequent to year end, the purchase and subsequent sale of one of the parcels of land for which deposits were made was completed. There is no financial impact on the financial position of the City given the land was purchased and immediately sold. only supports or is intended to support road infrastructure and the majority of land acquired to support road allowances was acquired at no cost. acquired to support road allowances was acquired at no cost. The City has a museum which holds various historical treasures and historical buildings 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 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 recognized as tangible capital assets in the consolidated financial statements because a reasonable estimate of the future benefits areasonable estimate of the future benefits associated with such property cannot be made. ssociated with such property cannot be made. Any acquisition or betterment of these assets is recognized as an expense in the Any acquisition or betterment of these assets is recognized as an expense in the consolidated financial statements. The net book value of tangible capital assetsThe net book value of tangible capital assets not being amortized because they are under not being amortized because they are under construction is $30,996,098 ($24,218,983 in 2021). construction is $30,996,098 ($24,218,983 in 2021). During the year, there were nil write-downs of assets (nil in 2021) and nil interest was During the year, there were nil write-downs of assets (nil in 2021) and nil interest was capitalized during the year (nil in 2021). Certaicapitalized during the year (nil in 2021). Certai relating to assets under construction due to changes in circumstances around their relating to assets under construction due to changes in circumstances around their expected future use that arose in the current year. expected future use that arose in the current year. (v) Land held for resale (v) Land held for resale As at December 31, 2022, deposits of $7,087,701 ($1,645,965 in 2021) paid towards three As at December 31, 2022, deposits of $7,087,701 ($1,645,965 in 2021) paid towards three Page 20 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2021 11. Accumulated surplus The City’s accumulated surplus is comprised of the following: 2022 $ 2021 $ Capital Fund 27,153,889 25,802,619 Operating Fund 125,267 125,259 Equity in Veridian Corporation 101,413,828 98,134,423 Tangible capital assets 319,085,606 298,638,881 Post-employment benefits liability (9,112,345) (8,523,252) Interfund loans (1,007,116) (566,804) Net long-term liabilities (42,704,260) (40,742,259) Note receivable soccer facility 2,381,011 2,681,988 WSIB benefit liabilities (3,060,773) (2,876,413) Reserves set aside for special purposes by Council Working capital 400,000 400,000 Self insurance 292,373 220,031 Replacement of capital equipment 1,245,895 1,453,707 Contingencies 1,793,670 1,903,746 Rate stabilization 24,413,254 22,105,570 City’s share for development charge 9,437,071 12,143,494 Continuing studies 595,327 461,206 Vehicle replacement 2,189,155 2,187,321 Land purchase 14,403 14,403 Seaton development review 1,437,822 1,437,822 Financial systems 586,808 523,308 Senior centre 3,500,000 2,800,000 Accessibility initiatives 66,840 66,840 Winter control 700,000 700,000 Sustainability initiatives 410,576 404,576 Duffin Heights 1,744,131 1,744,131 Facilities 2,739,786 1,478,976 Accelerated infrastructure program 519,500 519,500 Fence 600,000 510,000 Minor buildings replacement 1,900,000 1,500,000 Tennis Courts 923,565 828,565 Major Equipment 1,497,695 1,030,214 Museum Collection 12,799 12,799 Recreation Complex 225,000 225,000 Library Building 380,000 280,000 Elected Officials Insurance 280,000 210,000 Casino 19,398,231 5,264,652 Public Art 508,539 350,494 Balloon Payment 273,572 — Reserve funds set aside for special purpose by Council Recreation programs and facilities 401,709 395,436 Acquisition of tangible capital assets 316,892 311,943 WSIB 4,002,616 4,000,001 Animal shelter 1,645,589 1,301,099 Operations Centre 11,054,359 13,700,349 Roads & bridges 7,826,734 5,962,031 Stormwater management 4,874,289 4,277,035 Ontario Community Infrastructure Fund 3,073,973 1,088,068 Seaton infrastructure 266,744 262,578 Seaton Financial Impact Agreement 2,892,228 1,796,497 Excess Indemnity 1,334,125 722,763 510,050,377 467,268,597 24,413,254 9,437,071 595,327 Accelerated infrastructure program Accelerated infrastructure program Minor buildings replacement Minor buildings replacement Page 23 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2021 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, 2022. The results of this valuation disclosed total actuarial liabilities as at that date of $130,306 million in respect of benefits accrued for service with actuarial assets at that date of $123,628 million indicating an actuarial deficit of $6,678 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 2022 were $4,849,393 ($4,265,448 in 2021). 13. Trust Funds Trust Funds administered by the City amounting to $386,233 ($383,374 in 2021) 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. 2022 $ 2021 $ Transactions Revenue Interest on promissory notes (Note 5) 1,035,350 1,035,800 Property taxes levied 35,549 35,049 Expenses Electrical energy and services 1,773,610 1,517,686 Balances Accounts payable and accrued liabilities 338,872 275,118 Promissory notes receivable (Note 5) 25,069,000 25,069,000 benefits accrued for service with actuarial assets at that date of $123,628 million indicating an actuarial deficit of $6,678 million. Because OMERS is a multi-employer plan, any pension plan surpluses or deficits are a joint responsibility of Ontario municipal organizations and their surpluses or deficits are a joint responsibility of Ontario municipal organizations and their gnize any share of the OMERS pension surplus or gnize any share of the OMERS pension surplus or Contributions made by the City to OMERS on account of current service for 2022 were Contributions made by the City to OMERS on account of current service for 2022 were Trust Funds administered by the City amounting to $386,233 ($383,374 in 2021) have not been Trust Funds administered by the City amounting to $386,233 ($383,374 in 2021) have not been included in the consolidated statement of finaincluded in the consolidated statement of financial position nor have their operations been ncial position nor have their operations been included in the consolidated statement of operations. included in the consolidated statement of operations. 14. Related party transactions 14. Related party transactions Elexicon Corporation Elexicon Corporation The City of Pickering is a shareholder in Elexicon Corporation (Note 4). The City receives The City of Pickering is a shareholder in Elexicon Corporation (Note 4). The City receives electricity and services from Elexicon Corporation and its subsidiary. electricity and services from Elexicon Corporation and its subsidiary. Page 24 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2021 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 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. purchased liability insurance to mitigate the cost of any potential future suits or actions. defined, but is limited to the period over defined, but is limited to the period over which the indemnified party served as an employee or elected official of the City. The 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. maximum amount of any potential future payment cannot be reasonably estimated. The City has entered into agreements that may include indemnities in favour of third The City has entered into agreements that may include indemnities in favour of third parties, such as purchase and sale agreements, confidentiality agreements, engagement parties, such as purchase and sale agreements, confidentiality agreements, engagement letters with advisors and consultants, outsourcing agreements, leasing contracts, letters with advisors and consultants, outsourcing agreements, leasing contracts, information technology agreements and service agreements. These indemnification rvice agreements. These indemnification agreements may require the City to compensate counterparties for losses incurred by the 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 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 litigation claims or statutory sanctions that may be suffered by the counterparty as a consequence of the transaction. The terms of consequence of the transaction. The terms of these indemnities are not explicitly defined these indemnities are not explicitly defined and the maximum amount of any potential reimbursement cannot be reasonably and the maximum amount of any potential reimbursement cannot be reasonably The nature of these indemnification agreements prevents the City from making a reasonable 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 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 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 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 similar indemnification agreements and therefore no amount has been accrued in the balance sheet with respect to these agreements. sheet with respect to these agreements. Page 25 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2021 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 2022 Budget adopted by Council on March 28, 2022 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 March 28, 2022 with adjustments as follows: 2022 Council approved budget $ Post- employment benefits/ amortization $ 2022 Budget presented in statements $ Non TCA expenditures from capital $ 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 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 of operations and change in net financial assets represent the budget adopted by Council on 2022 Council approved budget budget $ $ employment employment amortization Non TCA expenditures expenditures from capital from capital $$ Revenue Taxation 81,655,077 — — 81,655,077 Capital 20,928,660 — — 20,928,660 Other 33,173,064 — — 33,173,064 135,756,801 — — 135,756,801 Expenditures General government 24,530,709 120,000 1,449,516 26,100,225 Protection to persons and property 29,850,298 95,000 1,215,063 31,160,361 Transportation services 13,408,922 — 4,789,705 18,198,627 Environmental services 1,649,252 — 846,672 2,495,924 Social and family services 1,012,905 — — 1,012,905 Recreational and cultural services 29,326,571 299,000 4,154,286 33,779,857 Planning and development 6,175,406 — 1,153 6,176,559 105,954,063 514,000 12,456,395 118,924,458 Annual surplus (deficit) 29,802,738 (514,000) (12,456,395) 16,832,343 Capital expenditures (46,634,454) 1,387,000 — (45,247,454) Transfers from reserve and reserve funds 8,818,031 Dividend from Elexicon Corporation 2,626,157 Principal repayment of debt (2,312,472) Principal repayment of PSC note — Debt proceeds 7,575,000 Prior year operating fund surplus (125,000) Page 26 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2021 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. Protection includes fire services, animal control, bylaw services, building inspection and Protection includes fire services, animal control, bylaw services, building inspection and fety and protection of all citizens and their fety and protection of all citizens and their Public works includes construction and maintenance of the City’s roadways, including snow 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. removal, sidewalk repairs, street lighting and maintenance of the storm water system. Social services for assistance or services for seniors. Social services for assistance or services for seniors. Recreation and culture services Recreation and cultural services include recreation programs, maintenance and rental of Recreation and cultural services include recreation programs, maintenance and rental of facilities and parks, operation of the City’s museum and library services. facilities and parks, operation of the City’s museum and library services. Planning and development Planning and development Planning and development provides a number ofPlanning and development provides a number of review of all property development plans. review of all property development plans. Segmented information has been provided in the following pages. Segmented information has been provided in the following pages. Page 27