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HomeMy WebLinkAboutCST 18-12 Ciro, 4 s Report To rw Executive Committee °IJiL� Report CST 18-12 Date: June 11, 2012 2011 Year-End Audit Page 2 02 (under legislation), increased by almost $4 million to $44.3 million primarily due to the receipt of development charges and Federal Gas Tax funds. Total discretionary, at Council's direction, Reserves and Reserve Funds increased by $4 million to $33.6 million almost all of which has been set aside for specific purposes by Council. Long term liabilities increased by $2.5 million with the issuance of debt through the Region of Durham for previously approved capital works. Overall the City's financial position is healthy and continues to strengthen which is a positive reflection of the role of Council and senior staff in managing the financial affairs of the Corporation. A strong balance sheet provides assurances to the City's lenders bankers, ratepayers and businesses that the City is able to meet its financial commitments. Discussion: The audit of the consolidated financial statements for the year ended December 31 , 2011 has been completed. The auditor's Year-end Communication Report is included as Attachment 1. This report, prepared by Deloitte & Touche LLP, summarizes the results of the December 31, 2011 audit and comments on significant matters regarding the audit or other matters they may believe to be of interest to Council. Appendix A of the attachment presents a draft unmodified Independent Auditor's Report which will be issued once the Financial Statements are approved by Council. On an annual basis, the auditor is required to communicate all relationships between the City and the firm that may impact on their independence to the City. The independence letter included in Appendix B confirms that Deloitte & Touche LLP is independent with respect to the City. It is in draft form as it will be dated once the Consolidated Financial Statements are approved by Council. Appendix C illustrates the draft representation letter which is provided by the City to the auditors. This letter indicates that the Financial Statements are management's responsibility and that management has provided and disclosed all necessary information to ensure the Financial Statements are not materially misstated. This letter will be signed by the Chief Administrative Officer and the Treasurer upon approval of the financial statements by Council. During the course of the audit, the auditors may find misstatements that may or may not be adjusted due to materiality. For 2011 there were a few items found. During the 2011 audit an invoice for approximately $310K for capital works completed prior to year end was received after the books were closed. As the amount was material this invoice • was included in payables and expenses for 2011. Two other adjustments were not made as they would not have a material affect on the financial statements. Further explanation of these adjusted and unadjusted amounts is provided on page 4 of the auditor's Year-end Communication Report. Report CST 18-12 Date: June 11, 2012 2011 Year-End Audit Page 3 ' Q ;; The scope of the audit does not include an in-depth evaluation of all systems or internal controls; however, the auditors may report on matters that come to their attention during the course of their review. No matters came to their attention to report in a management letter and as such one has not been issued. The draft Audited Consolidated Financial Statements are included as Attachment 2. These statements are the responsibility of management and have been prepared by City accounting staff under the direction of the Director, Corporate Services & Treasurer. Deloitte & Touche LLP are responsible to express an opinion on these Consolidated Financial Statements based on its audit. An unmodified audit report has been provided. The Consolidated Financial Statements includes the activities of the City of Pickering Public Library Board. The City's investment in Veridian Corporation is accounted for on a modified equity basis, which means the City includes its share of Veridian's income or loss in the Consolidated Financial Statements. This is the second year of reporting on the full accrual basis of accounting as prescribed by the Public Sector Accounting Board (PSAB), which includes reporting tangible capital assets. Tangible capital assets, such as land, building, infrastructure and equipment are now capitalized (recorded) at cost on the Statement of Financial Position (Balance Sheet) and amortized (depreciated except for land), over their estimated useful lives in current operating expenses. Under this method, the Statement of Financial Position now includes tangible capital assets under the non-financial asset section and shows Accumulated Surplus. Statement of Financial Position Financial assets are those assets which could provide resources to discharge existing liabilities or finance future operations. Net financial assets increased over the prior year which was due to an increase in financial assets of approximately $8.1 million offset by an increase in liabilities of approximately $4.9 million. The increase in financial assets is due to an increase in Cash & Cash Equivalents ($6.1 M) and Taxes Receivable ($1.2M). Cash & cash equivalents is comprised of the bank account balances and short-term paper (less then 90 days). Timing of receipt and use of funds, especially when funds are received in the last quarter of the year, will cause these balances to change year over year. The following factors contributed to the increase at the end of the year: debenture proceeds of just over $4.7 million received September 30th, Federal Gas Tax installment of $1.3 million received in mid November, supplementary tax billing of $1.6 million gross due in late November and December and an increase in development charges collected of approximately $4.3 million. The increase in taxes receivable of 7.6% over prior year is consistent with the increase in billing over prior year. Report CST 18-12 Date: June 11, 2012 2011 Year-End Audit Page 4 04 The increase in liabilities primarily resulted from an increase in Deferred Revenue ($3.9M) and Long-term Liabilities($2.5M) offset by a decrease in Accounts Payable ($1 .1M). Debentures were issued in the year causing a net increase in long-term liabilities after principal repayments were made. The deferred revenue balance consists primarily of the Obligatory Reserve Fund amounts such as Development Charges, Parkland Contributions, Federal Gas Tax and Third Party/Developer's Contributions. As mentioned above, the Federal Gas Tax installment received in November and the overall increase in Development Charges collected has contributed to the increase in deferred revenue. Lastly, the decrease of approximately $1.1 million in Accounts Payable balance at year end results from timing of receipt of invoices and processing of payments. Non-financial assets includes tangible capital assets which is the net book value (cost less accumulated amortization) of the City owned assets including land, buildings, roads, bridges & sidewalks infrastructure, storm sewer infrastructure, furniture and fixtures, vehicles and equipment. Non-financial assets are not available to discharge existing liabilities and are held for use in the provision of services. They have useful lives extending beyond the current year and are not intended for sale in the ordinary course of operations. Statement of Operations Revenue reported includes both operating and capital. Therefore, variances between budget to actual may arise due to timing of approval in the capital budget and actual receipt of funds/recognition of revenue. This is clearly illustrated with the Other contributions and donations revenue item. The budget amount includes a $3 million contribution from York Region for roads and parks related projects. Funds will be received upon completion of these related projects but nothing has occurred to date. Therefore, the actual revenue is much lower than the budget. This also applies to the Development charges earned line item. A number of these projects have not commenced or been completed and therefore the revenue is not recognized until the expenses are incurred. The capital budget expenditures do not show on the Statement of Operations as capital expenditures. For those expenditures that meet the definition of a tangible capital asset (TCA), the cost is reported on the Statement of Financial Position (Balance Sheet). Only a portion of the asset's cost is included as an amortization expense each year over the life of the asset in the operating expenses reported on the Statement of Operations. The amortization expense is included in operating expenses for the asset's respective functional category. For example, amortization on a fire truck is included under the Protection to Persons and Property category. Capital budget expenditures that do not meet the TCA definition are included as operating expenses under the appropriate functional category. Report CST 18-12 Date: June 11 , 2012 2011 Year-End Audit Page 5 05 The budget figures reported also need to reflect the change in reporting for capital budget expenditures. Note 17 of the City's consolidated financial statements reflects the changes made to the 2011 Council approved budget to put it on a basis consistent with the full accrual basis of accounting which incorporates tangible capital asset reporting. Of the 2011 budgeted capital expenditures, a total of $140K were not deemed tangible capital assets and were included in the operating expenses. Actual expenses are comparable with budget except for the General Government and Planning functions. General government came in under budget mainly due to the actual expenditures being less then the estimates provided for emergency operational needs and multi year contract settlements. Planning's variance arose due to a number of consulting projects identified in the budget related to Seaton not commencing in 2011. Accumulated Surplus The components that make up the Accumulated Surplus are disclosed in Note 11 of the City's consolidated financial statements and are summarized below. It must be emphasized that these amounts are not surplus funds in the traditional sense. The accumulated surplus balance essentially represents the difference between assets and liabilities of the City. What primarily contributes to this balance are the tangible capital assets of approximately $187.9 million and the City's equity in Veridian Corporation of approximately $70.6 million. The accumulated surplus is comprised of the following: Operating fund $ 125,092 Capital fund 10,062,439 Reserves and reserve funds 33,585,030 Equity in Veridian Corporation 70,585,144 Tangible capital assets 187,940,852 Post employment benefits liability (3,039,600) WSIB benefit liabilities (826,859) Internal loans (806,848) Net long-term liabilities (19,131,687) $278,493,563 Attachments: 1. Auditor's Year-end Communication Report 2. 2011 Draft Audited Consolidated Financial Statements Report CST 18-12 Date: June 11, 2012 2011 Year-End Audit Page 6 • 06 Prepared By: Approved / Endorsed By: Kristine Senior, CA Gillis A. Paterson, CMA Manager, Accounting Services Director, Corporate Services & Treasurer Copy: Chief Administrative Officer Recommended for the consideration of o Pickering Cit Counci /f 28 20/2 Tony Prevedel, P.Eng. tl Chief Administrative Officer ATTACHMENT#_f TO REPORT# C ig-I z 07 Deloitte. The Corporation of the City of Pickering Year-end communication For the year ended December 31, 2011 IOP A -- For presentation to the Executive Committee June 11,2012 08 D e 1 o itte• Deloitte&Touche LLP 5140 Yonge Street Suite 1700 Toronto ON M2N 6L7 Canada Tel:416-601-6150 Fax:416-601-6610 www.deloitte.ca May 18,2012 Private and confidential The Members of the Executive Committee The Corporation of the City of Pickering 1 The Esplanade Pickering ON L1V 6K7 Dear Executive Committee Members: Report on audited annual financial statements As agreed in our engagement letter dated October 27,2011,we have performed an audit of the consolidated financial statements of the Corporation of the City of Pickering(the"City")as at,and for the year ended,December 31,2011,in accordance with Canadian generally accepted auditing standards ("GAAS")and expect to issue our audit report thereon on the date that the financial statements are approved. This report summarizes our findings from the audit to date. Our audit has been conducted in accordance with the Audit Plan that was presented to the Executive Committee at the meeting on November 14,2011. Use of this report This report is intended solely for the information and use of the Executive Committee,management and others within the City and is not intended to,and should not,be used by anyone other than these specified parties.Accordingly,we disclaim any responsibility to any other party who may rely on it. We would like to express our appreciation for the cooperation we received from the officers and employees of the City with whom we worked to discharge our responsibilities. We look forward to discussing this report with you and to answering any questions which you may have. Yours truly, * i eLc.P Chartered Accountants Licensed Public Accountants Membre de/Member of Deloitte Touche Tohmatsu Limited 09 Table of contents Executive summary 1 Audit scope and findings 3 Audit risks 5 Internal control matters 6 Significant accounting practices 7 Appendicies Appendix 1 -Draft version of our Independent Auditor's Report Appendix 2- Independence letter Appendix 3- Draft management representations letter Appendix 4-Summary of communication requirements ©Deloitte&Touche LLP and affiliated entities. 2011 Year-end communication—The Corporation of the City of Pickering i 1 Executive summary This report summarizes the main findings arising from our audit to date. • A dit scope matters Audit results In accordance with Canadian GAAS,our audit was designed to enable us to express an opinion on the fairness of the presentation of the City's consolidated financial statements prepared in accordance with Canadian public sector accounting standards("GAAP")issued by the Canadian Institute of Chartered Accountants. Our audit scope included the following(together, referred to as the"financial statements"): -Consolidated financial statements for the City of Pickering; -City of Pickering Public Library Board;and -City of Pickering Trust Funds. The December 31,2011 audit was conducted in accordance with our audit plan,which was communicated to the Executive Committee on November 14,2011.We confirm that there have been no significant amendments to the audit scope and approach communicated in the audit plan. Status of our audit We expect to be in a position to render our audit opinion on the financial statements of the City following approval of the financial statements by Council and the completion of the following outstanding procedures: • Receipt of legal letters; • Completion of our subsequent events procedures; • Receipt of signed management representations letter;and • Completion of the Engagement Quality Control review. Audit risks In accordance with our audit plan,our procedures focused on the following areas of audit risk: • Revenue/deferred amounts; • Accounting estimates;and • Tangible capital assets We have summarized the results of our audit procedures for each of these risk areas on page 5 of this report. Use of the work of As planned external experts assisted in the audit to the extent we considered necessary: experts Actuarial experts Assisted with the assessment of the valuation and disclosure of employee future benefits. Internal control We did not identify any significant deficiencies in internal controls over financial reporting during the year ended December 31,2011. Internal control matters are described in further detail on page 6 of this report. Fraud and illegal Based on the procedures we performed as required by CAS 240, The Auditor's Responsibilities acts Relating to Fraud in an Audit of Financial Statements,we are not aware of any illegal acts or fraudulent events with respect to the City during the year which in our judgement should be discussed with the Committee. Based on the results of our audit procedures,we are not aware of any circumstances that indicate any intent to misstate the financial statements. ©Deloitte&Touche LLP and affiliated entities. 2011 Year-end communication—The Corporation of the City of Pickering 1 11 IAudit scope matters Significant We believe management's selection of accounting policies to be appropriate under Canadian accounting GAAP.Our views on the significant quantitative and qualitative aspects of these accounting policies policies are presented on page 7 of this report. The City's significant accounting policies are set forth in Note 1 to the December 31,2011 financial statements. Management Accounting estimates are an integral part of the financial statements prepared by management and judgment and are based on management's current judgments.These judgments are normally based on accounting knowledge and experience about past and current events,assumptions about future events and estimates interpretations of the financial reporting standards. During the year ended December 31,2011,management advised us that there were no significant changes in the types of accounting estimates or in judgments relating to such estimates. Our views on the significant quantitative and qualitative aspects of the judgments and estimates made by the City's management are presented on page 7 of this report. Audit adjustments In accordance with Canadian GAAS,we request that all misstatements be corrected. and uncorrected We aggregate all uncorrected misstatements greater than 5%of materiality,and those that are misstatements quantitatively insignificant but qualitatively significant. Adjusted and uncorrected misstatements are summarized in our audit findings on page 4. Adjusted and In accordance with Canadian GAAS,we request that all disclosure deficiencies be corrected. unadjusted During the course of the audit,we did not identify any significant adjusted or unadjusted disclosure disclosure deficiencies. deficiencies Post-balance Management is responsible for assessing subsequent events up to the date of the release of the sheet events financial statements. At the date of finalizing this report,we are not aware of any significant post-balance sheet events. Representations A draft version of the representations letter to be signed by management is included in Appendix 3. letter Independence We have developed appropriate safeguards and procedures to mitigate threats to our independence or to reduce them to an acceptable level. Our annual independence letter is included in Appendix 2. Conclusion No restrictions have been placed on the scope of our audit. In performing the audit,we were given full and complete access to the accounting records,supporting documentation and other information requested. We intend to issue an unmodified Independent Auditor's Report on the financial statements of the City for the year ended December 31,2011 once the outstanding items referred to above are satisfactorily completed and the financial statements are approved. A draft version of our Independent Auditor's Report is included in Appendix 1. ©Deloitte&Touche LLP and affiliated entities. 2011 Year-end communication—The Corporation of the City of Pickering 2 12 Audit scope and findings We have prepared the following comments to assist you in fulfilling your oversight responsibilities of the financial reporting and disclosure process for which management of the City is responsible. In accordance with Canadian GAAS,our audit was designed to enable us to express an opinion on the fairness of the presentation of the City's annual financial statements prepared in accordance with Canadian GAAP. Changes to the audit plan The December 31,2011 audit was conducted in accordance with our audit plan,which was presented to the Executive Committee on November 14, 2011. We confirm that there have been no significant amendments to the audit scope and approach communicated in the audit plan. Use of the work of experts As planned,we used the work of the City's actuary for the valuation and disclosure of Employee Future Benefits.We reviewed the actuarial assumptions and input data used for the valuation to assess their reasonableness, and the results were satisfactory. Disagreements with management In the course of our audit,we did not have any disagreements with management about matters that individually or in the aggregate could be significant to the financial statements. • Related party transactions The City's reporting entity is disclosed in Note 1 to the consolidated financial statements. Inter-entity transactions and balances are eliminated on consolidation with the exception of Veridian Corporation. Information related to Veridian Corporation balances and transactions can be found in Notes 4, 5 and 14. As part of our audit,we did not identify any unusual related party transactions which are not in the normal course of business. Legal and regulatory compliance Management is responsible for ensuring that the City's operations are conducted in accordance with applicable laws and regulations. The responsibility for preventing and detecting non-compliance rests with management. The auditor is not,and cannot be held, responsible for preventing non-compliance with laws and regulations. Our procedures did not identify any areas of material non-compliance with laws and regulations by the City. ©Deloitte&Touche LLP and affiliated entities. 2011 Year-end communication—The Corporation of the City of Pickering 3 Post-balance sheet events Management is responsible for assessing subsequent events up to the date of the release of the financial statements.At the date of finalizing this report, we are not aware of any significant post-balance sheet events. Adjusted and unadjusted misstatements During the course of our audit,the following audit adjustment was identified and has been reflected in the consolidated financial statements: (1) DR Tangible capital assets $310,988 CR Accounts payable $ 310,988 To record invoice from Region of Durham for costs completed prior to year end relating to sidewalks and multi-use path on Altona Road. During the course of the audit, some misstatements were identified and not adjusted. The impact on the financial statements had the adjustments been recorded is as follows: Unadjusted Results if Current Unadjusted factual likely misstatements balance misstatements misstatements are adjusted (1) (2) (1) Financial assets 169,399,984 8,848 104,082 169,512,914 Liabilities 79,694,574 57,977 79,752,551 Net financial assets 89,705,410 8,848 (57,977) 104,082 89,760,363 Non-financial assets 188,788,153 188,788,153 Accumulated surplus 278,493,563 8,848 (57,977) 104,082 278,548,516 Revenues 77,598,047 8,848 104,082 77,710,977 Expenses 74,001,716 57,977 74,059,693 Annual surplus 3,596,331 8,848 (57,977) 104,082 3,651,284 (1) Invalid credits within the programs receivable balance relating to program cancellations of$8,848. If this error was extrapolated over the entire population of programs receivable, a likely error of $104,082 will result. (2) OMERS-related expenses, erroneously recorded to accounts payable. ©Deloitte&Touche LLP and affiliated entities. 2011 Year-end communication—The Corporation of the City of Pickering 4 14 Audit risks Our audit plan identified certain risk areas that we discussed with the Committee when reviewing the audit plan. The results of our audit work on these areas are set out below: Areas CO audit OM CCEV audit response COB conclusion Revenue/Deferred amounts • Substantive testing to determine if restricted Satisfactory contributions(i.e.development charges,federal Risk: Revenue recognition of grants gas tax,etc.)and government transfers have and contributions been recognized in the appropriate period Accounting estimates • Obtain documentation on management's controls Satisfactory over the development of accounting estimates for Risk:Estimates require management any significant management estimates and judgments(i.e.allowance for assess risk significant known property tax • Focused review of calculations and support appeals,contingent liabilities, actuarially determined liabilities,etc.) Discussions with management • Analytical review of related accounts • Assess outcome of retrospective review of estimates from prior years Tangible capital assets • Review assumptions used in determining Satisfactory completeness,valuation,recording and cut-off of Risk:Appropriate accounting and 2011 additions disclosure • Review of calculations of amortization ©Deloitte&Touche LLP and affiliated entities. 2011 Year-end communication—The Corporation of the City of Pickering 5 � 5 Internal control matters We obtained an understanding of internal control relevant to the audits, however not all controls are relevant to every audit.We evaluated the design of controls relevant to the audits and determined whether they have been implemented.We are not, however, required to determine whether all relevant controls are operating effectively. Canadian GAAS require us to report to the Committee any significant deficiencies that have come to our attention.We did not identify any significant deficiencies in internal control during the audit. ©Deloitte&Touche LLP and affiliated entities. 2011 Year-end communication—The Corporation of the City of Pickering 6 16 Significant accounting practices Significant accounting policies are those that are most important to the portrayal of the City's financial position and financial performance. In the course of our audit of the financial statements,we considered the qualitative aspects of the financial reporting process, including items that have a significant impact on the relevance, reliability, comparability and understandability of the information included in the financial statements. Significant accounting policies During the year ended December 31,2011,there were no significant changes in previously adopted accounting policies or their application. In our judgment,the significant accounting practices,selected and applied by management are, in all material respects,acceptable under GAAP and are appropriate to the particular circumstances of the City. Management judgment and accounting estimates In our judgment, the significant accounting estimates made by management are, in all material respects, free of possible management bias and of material misstatement.The disclosure in the financial statements around estimation uncertainty is in accordance with Canadian GAAP and is appropriate to the particular circumstances of the City. Significant estimates include: Post-employment benefits liability- $3,218,000 (2010 -$2,882,900) WSIB benefits liability- $826,859(2010-$1,672,898) Allowance for doubtful taxes receivable- $367,000 (2010-$367,000) Allowance for doubtful accounts- $621,604(2010-$305,000) Assessment appeals- $882,145 (2010 -$344,705) Payroll related accruals- $1,769,654 (2010 -$1,307,532) ©Deloitte&Touche LLP and affiliated entities. 2011 Year-end communication—The Corporation of the City of Pickering 7 17 Appendix 1 - Draft version of our Independent Auditor 's Report Our independent auditor's report on the consolidated financial statements is expected to be in the form noted on the following pages. However, the final form may need to be adjusted to reflect the final results of our audit. • ©Deloitte&Touche LLP and affiliated entities. 2011 Year-end communication—The Corporation of the City of Pickering 18 Deloitte&Touche LLP 5140 Yonge Street Suite 1700 Toronto ON M2N 6L7 Canada Tel:416-601-6150 Fax:416-601-6151 www.deloitte.ca Independent Auditor's Report To the Members of Council,Inhabitants and Ratepayers of the Corporation of the City of Pickering We have audited the accompanying consolidated financial statements of the Corporation of the City of Pickering,which comprise the consolidated statement of financial position as at December 31,2011,and the consolidated statements of operations,change in net financial assets,and cash flows for the year then ended,and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian public sector accounting standards,and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement,whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards.Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.The procedures selected depend on the auditor's judgment, including the assessment of risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments,the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements 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 entity's internal control.An audit also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 19 Opinion In our opinion,the consolidated financial statements present fairly,in all material respects,the financial position of the Corporation of the City of Pickering as at December 31,2011 and the results of its operations,changes in its net financial assets and its cash flows for the year then ended in accordance with Canadian public sector accounting standards. Chartered Accountants Licensed Public Accountants June 11,2012 Page 2 20 Appendix 2 - Independence letter ©Deloitte&Touche LLP and affiliated entities. 2011 Year-end communication—The Corporation of the City of Pickering 21 Deloitte. Deloitte&Touche LLP 5140 Yonge Street Suite 1700 Toronto ON M2N 6L7 Canada Tel:416-601-6150 Fax:416-601-6610 www.deloitte.ca May 18,2012 Private and confidential The Members of the Executive Committee The Corporation of the City of Pickering 1 The Esplanade Pickering ON L 1 V 6K7 Dear Executive Committee Members: We have been engaged to audit the consolidated financial statements of the Corporation of the City of Pickering(the"City") for the year ended December 31,2011. You have requested that we communicate in writing with you regarding our compliance with relevant ethical requirements regarding independence as well as all relationships and other matters between the City, our Firm and network firms that,in our professional judgment,may reasonably be thought to bear on our independence. In determining which relationships to report,we have considered relevant rules and related interpretations prescribed by the appropriate provincial institute/ordre and applicable legislation,covering such matters as: (a) holding a financial interest,either directly or indirectly,in a client; (b) holding a position,either directly or indirectly,that gives the right or responsibility to exert significant influence over the financial or accounting policies of a client; (c) personal or business relationships of immediate family,close relatives,partners or retired partners,either directly or indirectly,with a client; (d) economic dependence on a client;and (e) provision of services in addition to the audit engagement. We confirm to you that the engagement team and others in the firm as appropriate,the firm and,when applicable,network firms have complied with relevant ethical requirements regarding independence. We have prepared the following comments to facilitate our discussion with you regarding independence matters arising since June 20,2011,the date of our last letter. 22 The Corporation of the City of Pickering May 18,2012 Page 2 We are not aware of any relationships between the City and our Firm,including any network firms that,in our professional judgment,may reasonably be thought to bear on independence,that have occurred from June 20,2011 to May 18,2012. We hereby confirm that we are independent with respect to the City within the meaning of the Rules of Professional Conduct of the Institute of Chartered Accountants of Ontario as of May 18,2012. This report is intended solely for the use of the Executive Committee,Council,Management,and others within the City and should not be used for any other purposes. Yours truly, Chartered Accountants Licensed Public Accountants 23 Appendix 3 - Draft management representations letter ©Deloitte&Touche LLP and affiliated entities. 2011 Year-end communication—The Corporation of the City of Pickering 24 CLIENT LETTERHEAD June 11,2012 Private and confidential Deloitte&Touche LLP 5140 Yonge Street, Suite 1700 Toronto ON M2N 6L7 Dear Ms Jesty: Subject: Consolidated Financial statements for the year ended December 31,2011 This representation letter is provided in connection with the audit by Deloitte&Touche LLP("Deloitte" or"you")of the consolidated financial statements of The Corporation of the City of Pickering(the"City" or"we"or"us") for the year ended December 31,2011 (the"Financial Statements")for the purpose of expressing an opinion as to whether the Financial Statements present fairly,in all material respects,the financial position,results of operations,and cash flows of the City in accordance with Canadian generally accepted accounting principles("GAAP")established by the Public Sector Accounting Board. Certain representations in this letter are described as being limited to matters that are material.An item is considered material,regardless of its monetary value,if it is probable that its omission from or misstatement in the Financial Statements would influence the decision of a reasonable person relying on the Financial Statements. We confirm that: 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 27,2011 for the preparation of the Financial Statements in accordance with GAAP. In particular,the Financial Statements are fairly presented,in all material respects,and present the financial position of the City as at December 31,2011 and the results of its operations and cash flows for the year then ended in accordance with GAAP. 2. In preparing the Financial Statements in accordance with GAAP,management makes judgments and assumptions about the future and uses estimates.The completeness and adequacy of the disclosures related to estimates are in accordance with GAAP.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. Significant assumptions used in making estimates are reasonable and appropriately reflect management's intent and ability to carry out specific courses of action on behalf of the entity. The measurement methods,including the related assumptions and models,used in determining the estimates were appropriate,reasonable and consistently applied in accordance with GAAP and appropriately reflect management's intent and ability to carry out specific courses of action on behalf of the entity. There are no changes in management's method of determining significant estimates in the current year. 25 Deloitte&Touche LLP June 11,2012 Page 2 Financial statements(continued) 3. With regard to the fair value measurements and disclosures of certain assets,liabilities,and specific components of equity,we believe that: a. The measurement methods,including the related assumptions and models,used in determining fair value were appropriate,reasonable and consistently applied in accordance with GAAP. b. The completeness and adequacy of the disclosures related to fair values are in accordance with GAAP. c. No events have occurred subsequent to December 31,2011 that require adjustment to the fair value measurements and disclosures included in the Financial Statements. d. They appropriately reflect management's intent and ability to carry out specific courses of action on behalf of the City when relevant to the use of fair value measurements or disclosures. 4. All related party relationships and transactions(including associated amounts receivable and payable) have been appropriately accounted for and disclosed in the Financial Statements in accordance with the requirements of GAAP. 5. We have completed our review of events after December 31,2011 and up to the date when the Financial Statements were authorized for issue,June 20,2011. All events subsequent to the date of the Financial Statements and for which GAAP 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. 6. The Financial Statements are free of material errors and omissions. 7. Management has completed its assessment of the ability of the City to continue as a going concern and in making its assessment did not identify any material uncertainties related to events or conditions that may cast significant doubt upon the City's ability to continue as a going concern,which would require disclosure in the Financial Statements. In assessing whether the going concern assumption is appropriate,management took into account all available information about the future,which is at least,but is not limited to,twelve months from the balance sheet date,their plans for future action and the feasibility of these plans. 8. 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 GAAP. Information provided 9. 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. Additional information that you have requested from us for the purpose of the audit; and, c. Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence. 10. All transactions have been recorded in the accounting records and are reflected in the Financial Statements. 26 Deloitte&Touche LLP June 11,2012 Page 3 Information provided(continued) 11. We acknowledge our responsibility for the design,implementation and maintenance of internal control to prevent and detect fraud. 12. 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. 13. We have disclosed to you all information in relation to fraud or suspected fraud that we are aware of and that affects the entity and involves: a. Management; b. Employees who have significant roles in internal control; or c. Others where the fraud could have a material effect on the Financial Statements. 14. We have disclosed to you all information in relation to allegations of fraud,or suspected fraud, affecting the entity's Financial Statements and all knowledge of concerns or allegations of potential errors in the selection of accounting policies or the recording of transactions affecting the City that have been communicated by employees,former employees,analysts,regulators,or others,whether written or oral. 15. We have disclosed to you all known instances of non-compliance or suspected non-compliance with laws and regulations whose effects should be considered when preparing the Financial Statements. 16. 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.We are unaware of any known or probable instances of non-compliance with the requirements of regulatory or governmental authorities,including their financial reporting requirements. 17. We have disclosed to you any change in the City's internal control over financial reporting that occurred during the current year that has materially affected,or is reasonably likely to materially affect,the City's internal control over financial reporting. 18. We have disclosed to you the identity of the entity's related parties and all the related party relationships and transactions of which we are aware,including guarantees,non-monetary transactions,transactions for no consideration and participation in a defined benefit plan that shares risks between group entities. Work of specialists 19. We agree with the work of specialists in evaluating the valuation of post employment benefits liability and WSIB benefits liability and have adequately considered the qualifications of the specialist in determining amounts and disclosures used in the Financial Statements and underlying accounting records.We did not give any,nor cause any,instructions to be given to specialists with respect to values or amounts derived in an attempt to bias their work,and we are not aware of any matters that have impacted the independence or objectivity of the specialists. Compliance with contractual agreements 20. 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. Title to assets 21. 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. 27 Independence matters For purposes of paragraph 22, "Deloitte"shall mean Deloitte&Touche LLP and Deloitte Touche Tohmatsu Limited,its member firms and the affiliates of Deloitte&Touche LLP,Deloitte Touche Tohmatsu Limited and its member firms. 22. Prior to the City having any substantive employment conversations with a former or current Deloitte engagement team member the City has held discussions with Deloitte and obtained approval from the Executive Committee of the Council. Liabilities and contingencies 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. Loans and receivables 24. The City is responsible for determining and maintaining the adequacy of the allowance for doubtful notes,loans,and accounts receivable,as well as estimates used to determine such amounts. Management believes the allowances are adequate to absorb currently estimated bad debts in the account balances. Employee future benefits 25. Employee future benefit costs,assets,and obligations have been properly recorded and adequately disclosed in the Financial Statements including those arising under defined benefit plans as well as termination arrangements.We believe that the actuarial assumptions and methods used to measure defined benefit plan assets,liabilities and costs for financial accounting purposes are appropriate in the circumstances. Environmental liabilities/contingencies 26. 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. Yours truly, The Corporation of the City of Pickering Name Name Title Title 28 Appendix 4 - Summary of communication requirements In our audit plan,we committed to communicate certain items to the Executive Committee on a regular basis,or as specified events occur. These items are summarized below. • • Comm nication Comments 1. Our responsibilities under Canadian GAAS. See engagement letter dated October 27,2011. 2. Our audit strategy and scope. Audit plan communicated on November 14,2011. 3. Fraud or possible fraud identified through the audit process. None noted. 4. Illegal or possible illegal acts. None noted. 5. Significant transactions inconsistent with the normal course of business, None noted. including related party transactions. 6. Procedures performed on other public documents with which we are None. associated and the results thereof. 7. Management judgment and accounting estimates. Please refer to page 7 of this report. 8. Financial statement adjustments. Please refer to page 4 of this report. 9. Uncorrected misstatements and disclosure deficiencies determined by Please refer to page 4 of this report. management to be immaterial. 10. Significant accounting policies. Please refer to page 7 of this report. 11. Alternative treatments for accounting policies and practices that have Please refer to page 7 of this report. been discussed with management during the current audit period. 12. Our views about significant qualitative aspects of the City's accounting Please refer to page 7 of this report. practices,including accounting policies,accounting estimates and financial statement disclosures. 13. Disagreements with management. None. 14. Our views about significant matters that were the subject of consultation None noted. with other accountants. 15. Major issues discussed with management prior to our retention. None. 16. Significant difficulties,if any,encountered during the audit. None. 17. Significant deficiencies in internal control,if any, identified in the conduct Please refer to page 6 of this report. of the audit of the financial statements. 18. Material written communications between management and us. Engagement letter dated October 27,2011 and management representation letter—Appendix 3 of this report. 19. All relationships between the City and us that, in our professional Independence letter-Appendix 2. judgment,may reasonably be thought to bear on independence. 20. A statement that in our judgment,the engagement team and others in Independence letter-Appendix 2. our firm and,when applicable,network firms have complied with relevant ethical requirements regarding independence. 21. Non-compliance with laws and regulations that come to the auditor's None noted. attention. 22. Limitations placed on our scope. None. 23. Written representations the auditor is requesting. Draft management's representations letter—Appendix 3. ©Deloitte&Touche LLP and affiliated entities. 2011 Year-end communication—The Corporation of the City of Pickering 29 www.deloitte.ca Deloitte,one of Canada's leading professional services firms,provides audit,tax,consulting,and financial advisory services through more than 8,000 people in 56 offices.Deloitte operates in Quebec as Samson Belair/Deloitte&Touche s.e.n.c.r.l. Deloitte&Touche LLP,an Ontario Limited Liability Partnership,is the Canadian member firm of Deloitte Touche Tohmatsu Limited. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited,a UK private company limited by guarantee,and its network of member firms,each of which is a legally separate and independent entity.Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. ©Deloitte&Touche LLP and affiliated entities. 3 ATTACHMENT#,c2_TO REPORT# C T S Consolidated financial statements of The Corporation of the City of Pickeri • g December 31,2011 FOR DISCUSSION PURPOSES ONLY 31 The Corporation of the City of Pickering December 31, 2011 Table of contents Independent Auditor's Report -2 Consolidated statement of financial position 3 Consolidated statement of operations 4 Consolidated statement of change in net financial assets 5 Consolidated statement of cash flows 6 Notes to the consolidated financial statements 7-25 FOR DISCUSSION PURPOSES ONLY 32 Deloitte&Touc,e LLP 5140 Yonge reet Suite 1700 Toronto 0 M2N 6L7 Canada Tel: ,16-601-6150 F. :416-601-6151 .deloitte.ca Independent Auditor's Report di To the Members of Council,Inhabitants and Ratepayers of the Corporation of the City of Pickering We have audited the accompanying consolidated financial st. e is .f the Co ',oration of the City of Pickering,which comprise the consolidated statement of fi••ncial •.:ition a at December 31,2011,and the consolidated statements of operations,change in net ancial asse a • cash flows for the year then ended,and a summary of significant accounting polici-: and other expla•.tory information. Management's Responsibility for the Consolida •d Financial St. ements Management is responsible for the preparation .n. fair presenta on of these consolidated financial statements in accordance with Canadian pub c se .14:, nt' g standards,and for such internal control lial as management determines is necessary to -nable th- :repar•tion of consolidated financial statements that are free from material misstatement,wh: her due to fr%d .r error. Auditor's Responsibility Our responsibility is to express .n opinion on the - consolidated financial statements based on our audit. We conducted our audit in ac•or.. with Ca.•dian generally accepted auditing standards.Those standards require that we c• pl''V•om••.. a equirements and plan and perform the audit to obtain reasonable assurance abo.t whethe i,*co olidated financial statements are free from material misstatement. An audit involves ■-rforming proce••res to obtain audit evidence about the amounts and disclosures in the consolidated 'nancial stateme s.The procedures selected depend on the auditor's judgment, including the .:sessment of risk of material misstatement of the consolidated financial statements, whether due o iT' error. making those risk assessments,the auditor considers internal control relevant to he -444, 1 ep. ation and fair presentation of the consolidated financial statements in order to desi.• audit pro -Ves hat are appropriate in the circumstances,but not for the purpose of expressing an opi'ion on the effect' eness of the entity's internal control.An audit also included evaluating the app •priateness of ac •unting policies used and the reasonableness of accounting estimates made by m,. agement,as we as evaluating the overall presentation of the consolidated financial statements. We believe tha e audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opi 'on. FOR DISCUSSION PURPOSES ONLY 33 Opinion In our opinion,the consolidated financial statements present fairly,in all material respects,the f ancial position of the Corporation of the City of Pickering as at December 31,2011 and the results o is operations,changes in its net financial assets and its cash flows for the year then ended in ac'ordance with Canadian public sector accounting standards. Chartered Accountants Licensed Public Accountants June 11,2012 Page 2 FOR DISCUSSION PURPOSES ONLY 34 The Corporation of the City of Pickering Consolidated statement of financial position as at December 31, 2011 2011 2010 $ $ Financial assets Cash and cash equivalents 47,408,45• 41,273,2. Investments(Note 3) 33,659,9 4 33,947 69 Taxes receivable 17,22; 149 16,01 ,670 Accounts receivable 3,5;1, 3 :71,991 Investment in Veridian Corporation (Note 4(b)) 4 7 4 ,119,548 Promissory notes receivable(Note 5) ,069,000 5,069,000 69,399,984 161,286,580 Liabilities Accounts payable and accrued liabilities 12,104,48 13,173,379 Other current liabilities 85, .9 94,481 Deferred revenue(Note 6) 44,327,687 40,429,995 Long-term liabilities (Note 9) 19,1.1,687 16,582,742 Post-employment benefit liability(Note 8(a)) 3 18,600 2,882,900 WSIB benefit liabilities(Note 8(b)) 826,859 1,672,898 79,694,574 74,836,395 Net financial assets 89,705,410 86,450,185 Non-financial assets Tangible capital assets(Note 10) 187,940,852 187,669,237 Prepaid expenses 618,043 386,274 Inventory 229,258 391,536 188,788,153 188,447,047 Accumulated surplus(Note 11) 278,493,563 274,897,232 Approved by Council Page 3 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering , 5 Consolidated statement of operations year ended December 31, 2011 2011 2010 Budget Actual Actual (Unaudited) (Note 17) $ Revenues Residential and farm taxation 34,007,734 34 69 7 33 .40,378 Commercial and industrial taxation 9,281,452 :,4•,. '5 :,779,976 Taxation from other governments 7,832,507 8,236,4 7,427,687 User charges 10,672,473 10,658,960 7,661,881 Government grants and fees 1,808,593 2,487,283 4,024,406 Other contributions and donations 4,934,909 834,092 980,367 Development charges and developer contributions earned 2,153,8 0 864 .31 966,251 Contributed tangible capital assets 6: ,938 3,031,356 Investment income 1 5,1 i1 ,52,893 298,499 Penalties and interests on taxes 70,0'o ,678,684 2,499,536 Fines 855,500 919,576 886,995 Interest on promissory notes 1,426,850 1,426,852 1,588,823 Equity share of Veridian Corporation earnings(Note 4(c)) - 3,838,176 3,477,285 Other 163,50' 509,215 261,549 Gain on disposal of tangible capital assets - 373,707 94,823 D 75,68 ,388 77,598,047 75,319,812 Expenses(Note 19) Current General government 15,367,212 13,580,197 13,644,762 Protection to persons and prope, 20,090,546 19,208,938 19,016,456 Transportation services 12,276,475 11,293,153 9,558,606 Environmental services 2,355,699 3,486,332 3,363,579 Social and family services 603,115 574,734 475,524 Recreational and cultur. se 22,721,027 23,272,214 22,763,222 Planning and develop, ent 3,777,674 2,586,148 2,791,188 77,191,748 74,001,716 71,613,337 Annual (deficit)surplu: (1,509,360) 3,596,331 3,706,475 Accumulated surplu:, beginning of ye. 274,897,232 274,897,232 271,190,757 Accumulated su •lus,end of year 273,387,872 278,493,563 274,897,232 O Page 4 FOR DISCUSSION PURPOSES ONLY 3 6 The Corporation of the City of Pickering Consolidated statement of change in net financial assets year ended December 31, 2011 2011 2010 Budget Actual Actual (Unaudited) (Note 17) Annual(deficit)surplus (1,509,360) 3,59:,331 3,70:,475 Acquisition of tangible capital assets (24,397,825) (9,' '9, '1) (11,x.1,430) Amortization of tangible capital assets 9,684,209 •,57: 0 :,601,811 Gain on disposal of tangible capital assets - (3 ,7' • (94,823) Proceeds on disposal of tangible capital assets - 531,023 127,839 (16,222,976) 3,324,716 2,279,872 Acquisition of inventory of supplies (1,211,3•..) (1,046,647) Use of inventory of supplies - 1,373,:21 921,617 Acquisition of prepaid expenses (61 ,183) (386,273) Use of prepaid expenses :2,414 398,023 (69,491) (113,280) Change in net financial assets (16,222,976) 3,255,225 2,166,592 Net financial assets, beginning of year 76,604,829 86,450,185 84,283,593 Net financial assets,end of year 60,381,853 89,705,410 86,450,185 Page 5 FOR DISCUSSION PURPOSES ONLY • The Corporation of the City of Pickering 3 7 Consolidated statement of cash flows year ended December 31, 2011 2011 2010 $ $ Operating transactions Annual surplus 3,596,3 3,706,4 Non cash items Amortization of tangible capital assets 9,571,560 9,61 ,811 Gain on disposal of tangible capital assets • 340 7) 94,823) Equity share of Veridian Corporation •,8 , v6) :,477,285) Contributed tangible capital assets recorded in revenue (681,93 N (3,031,356) Change in non-cash operating items: (Increase)decrease in taxes receivable (1,222,379) 60,315 Decrease in accounts receivable 310,610 33,330 (Decrease)increase in accounts payable and accrued liabilities (1,068,8' ) 1,378,626 Decrease in other current liabilities (9 )22) (27,685) Increase in deferred revenue k 3,8' ,692 2,515,416 Increase in post-employment benefit liability •35,700 167,800 (Decrease)increase in WSIB benefit liabilities (846,039) 304,700 Decrease(increase)in inventory 162,278 (125,030) (Increase)decrease in prepaid expenses (231,769) 11,750 9,601,044 11,024,044 Capital transactions Acquisition of tangible capital assets (9,317,553) (8,030,074) Proceeds on disposal of tangible capital ass- s 531,023 127,839 (8,786,530) (7,902,235) Investing transactions Decrease(increase)in investments 287,195 (2,074,671) Dividends received from Veridian orporation 2,484,600 2,140,382 2,771,795 65,711 Financing transactions Proceeds from debenture iss : 4,707,000 4,046,000 Principal repayment of••bentures (2,158,055) (1,683,228) 2,548,945 2,362,772 Increase in cash an• cash equivalents 6,135,254 5,550,292 Cash and cash e• ivalents, beginni • of year 41,273,202 35,722,910 Cash and cas equivalents,end •if year 47,408,456 41,273,202 Cash and ,s -qui . ents •nsists of Cash 23,906,305 7,337,107 Cash -quivalents 23,502,151 33,936,095 47,408,456 41,273,202 Page 6 FOR DISCUSSION PURPOSES ONLY 38 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2011 1. Significant accounting policies The consolidated financial statements("the financial statements")of The Corporati 6 n of the City of Pickering (the"City")are the representations of management prepared in accord nce with accounti'g standards established by the Public Sector Accounting oard ("PSA ")of the -nadian Institute • Chartered Accountants.Significant accounting policies adopted by the City a - a. follows: (a) Reporting entity (i) Consolidated statements The consolidated financial statements reflect the assets,li..ilities, revenues . d expenses of the reporting entity.The reporting entity is comprised of t,e activities of all •mmittees of Council and the City of Pickering Public Library Board ich is controlled ,y the City. All material inter-fund transactions and balances ar>eliminated on co .olidation. (ii) Investment in Veridian Corporation The City's investment in Veridian Corporation ' accou for o a modified equity basis, consistent with generally accepted accounting principles a e •mmended by PSAB for investments in government business ente •rises. Under the • odified equity basis,Veridian Corporation's accounting policies are no adjusted to confo' to those of the City and inter- organizational transactions and balan -s are not elimina -d.The City recognizes its equity interest in the annual earnings or lo . of Veridian Corp ration in its consolidated statement of operations with a corresponding i rease or decreas: in its investment asset account. Dividends that the City may rec-' e •m Veridian orporation and other capital transactions are reflected as adjustments i he in�tl , as:et account. (iii) Operations of School Boar.. and the Ri..'on • Durham The taxation, other reve es,expenditures assets and liabilities with respect to the operations of the school boards and the Region of D,rham(the"Region")are not reflected in these consolidated financi. statements. (iv) Trust funds Trust funds an,, the ted operations administered by the City are not consolidated, but are reported sep.rat-qc .n artier us Funds Statement of Financial Activities and Statement of Financial P•sition. (b) Basis of acc•unting (i) Accr al basis of accou mg R: enue and expenses are reported on the accrual basis of accounting.The accrual basis of accounting recogn' es revenues as they are earned and measurable;expenses are recognized as •- are incur'ed and measurable as a result of the receipt of goods and services and the -. •• •f a lee al obligation to pay. (ii) Ca • - • c.sh equivalents s) Cash an• cash equivalents consist of cash on hand, demand deposits and short-term, highly liquid i estments that are readily convertible to known amounts of cash. Cash equivalents have . short-term maturity of three months or less from the date of acquisition. (iii) In estments ong-term investments are recorded at cost and any loss in value which is considered other than temporary is recorded as appropriate.Any premium or discount at purchase of an investment is amortized over the life of the investment. Page 7 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering 3 Notes to the consolidated financial statements December 31, 2011 1. Significant accounting policies(continued) (b) Basis of accounting(continued) (iv) Tangible capital assets("TCA") Tangible capital assets are recorded at cost less accumulated amo za• n. Cost inclu'les all costs directly related to acquisition or construction of the tangible '.p' sset inclu•'ng transportation costs, installation costs,design and engineering f•es, ga s an. site preparation costs.Amortization is recorded on a straight-line •.sis over the ti 'ated life of the tangible capital asset commencing once the asset is availa• e for use as folio . Buildings 15 to 45 yea Machinery and equipment 2 to 25 ye. s Vehicles 5 to 15 years Infrastructure- Roads 10 to 5% y ars Infrastructure-Storm sewers 25 to 0 ea s Infrastructure-Sidewalks 20 • 40 Information technology hardware 4 o 8 year Infrastructure- Parks 0 to 40 years Library collection materials 4 to 7 years Furniture and fixtures 10 to 50 year One-half of the annual amortization is charged in the y:-r of acquisition and in the year of disposal.Assets under constructio- are not amortize. until the asset is available for productive use. Land is not amortized. Tangible capital assets receiv-d as c•`'t�^'*•n are recorded at their fair value at the date contributed,and that amou is also rec. •ed •,s revenue. (v) Accounting for Property ax Capping Provi ons resulting from the Ontario Fair Assessment System The net impact in pr.perty taxes as a r.suit of the application of the capping provisions does not affect the Con:olidated Stateme of Operations as the full amounts of the property taxes were levied. Ho ,ev: he capping .djustments are reported on the consolidated Statement of Financial Pos' on 4 -ceivabl- payable from/to the Region. (vi) Deferred r- enue Deferre• revenues repres- t user charges and fees which have been collected but for which the re .ted services hav- et to be performed.These amounts will be recognized as revenues in th fiscal year the s- ices are performed. In addition,any contributions received with e -rnal restrictions . e deferred until the related expenditures are made. (vii) -ost employment •enefits .fie e�p - ent v. e of the cost of providing employees with future benefit programs is r 7 ni:d a: employees earn these entitlements through service.Actuarial gains and losses are ..• i ••d over the average remaining service period ("ARSP"). The actuary determined ARSP to •e 14 years. (viii) Invento ry Inv-ntory is valued at the lower of cost and replacement cost. Cost is determined on a w•ighted-average basis. Page 8 FOR DISCUSSION PURPOSES ONLY 40 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2011 1. Significant accounting policies(continued) (b) Basis of accounting(continued) (ix) Government transfers Government transfers are recognized in the financial statements in e riod in whic he events giving rise to the transfer occur,eligibility criteria are met, .. d onable es• ates of the amount can be made. (x) Intangible assets Intangible assets are not recognized as assets in the fina ial statements. (xi) Use of estimates The preparation of financial statements in conformi , with Canadian p •lic sector accounting standards requires management to make estimat: a • assumption: that affect the reported amounts in the financial statements and accom..nyd1T, �•�es.Accounts involving significant estimates include allowance for doubtful acco,nts,ce " ' accru:• liabilities,employee future benefits liabilities and estimates relating to t..ngible capita ..ss: s.Actual results could differ from these estimates. 2. Operations of school boards and the Regio of Durham Further to Note 1 (a)(iii)requisitions are mate by the Region o Durham and School Boards requiring the City to collect property taxes and pay -nts in lieu of pro.-rty taxes on their behalf.The amounts collected and remitted are summarizes ._ foil Region School board $ $ Taxation 87,215,555 41,840,203 Payments in lieu of taxes 6,072,491 422,060 93,288,046 42,262,263 3. Investments O 2011 2010 Cost Market value Cost Market value $ $ $ $ Long-ter investments 33,659,974 34,334,282 33,947,169 33,944,590 140 Lon. er 4 4 •ents .re comprised of deposit notes and bonds. Page 9 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2011 4. Investment in Veridian Corporation (a) Veridian Corporation is owned by the City of Pickering,Town of Ajax, Municip. ity of Clarington . d the City of Belleville.The City has a 41 per cent interest in Veridian Corpor. on.Veridian Corporation,as a government business enterprise, is accounted for on th- modified equity b.sis in these financial statements.Veridian Corporation serves as the electrical •is 'bution utility f.r a number of communities including the four noted above and conducts •n- elated utili service ventures through its subsidiaries. The following table provides condensed supplementary consolid. ed financial infor .tion for the corporation and its subsidiaries for the year ended December 3 . The amounts a - disclosed in thousands of dollars: 21 1 2010 (0 t 0's) (000's) Financial position Assets Current 79,455 74,269 Capital and intangibles 183,895 173,727 Other 19,296 20,633 Total assets 282,646 268,629 Liabilities Current 69,996 58,298 Long-term debt 86,649 76,928 Other 22,433 33,136 Total liabilities 179,078 168,362 Shareholders'equity Share capital 67,260 67,260 Contributed ca.'al 25 25 Retained ear ngs 36,283 32,982 Total equity 103,568 100,267 Total liabilities and equity 282,646 268,629 Financi: activities: Re enue 286,271 256,203 • her income 4,313 4,713 ET tom •'scontinued o•erations 285,142 3,919 252,843 408 Net eaat,r.�'j�•rrthe ear 9,361 8,481 Page 10 FOR DISCUSSION PURPOSES ONLY 42 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2011 4. Investment in Veridian Corporation(continued) (b) City of Pickering's investment represented by: 011 110 Promissory notes receivable(Note 5) 5,0 ,0 ,069,000 Investments in Veridian Corporation Initial investment in shares of the Corporation 30,496,196 30,496,196 Accumulated earnings 27,310,11• 23,471,933 Accumulated dividends received (16,442 02) (13,957,402) Increase in value of investments 1,1 0:,821 1,108,821 Total investment 42 •73,124 41,119,548 (c) Equity in Veridian Corporation 2011 2010 $ $ Balance, beginning of year 69,231,568 67,894,665 Equity share of net earnings for the ea 3,838,176 3,477,285 Dividend received from Veridian 'orporatt. (2,484,600) (2,140,382) Balance,end of year(Note 11 70,585,144 69,231,568 (d) Contingencies and guaran -es of Veridian Co 'oration(the "Corporation') as disclosed in their financial statements are .s follows: (i) Insurance claim The Corporal 4n i:�:y'yy,�ember of e Municipal Electric Association Reciprocal Insurance Exchange(" E• "iT�f�"ii -s created on January 1, 19 7.A reciprocal insurance exchange ay be •:rye d a a group of persons formed for the purpose of exchanging reciprocaI contracts of i d- nity or inter-insurance with each other. MEARIE provides general liabili insurance to me •er electric utilities. Ins-rance premiums arged to each member utility consist of a levy per$1,000 of service r: enue subject to - credit or surcharge based on each electric utility's claims experience. nsurance limits o up to$30,000,000 per occurrence are covered by MEARIE. Page 11 FOR DISCUSSION PURPOSES ONLY 43 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2011 4. Investment in Veridian Corporation(continued) (d) (continued) (ii) Other claims An action has been brought under the Class Proceedings Act: 199 T plaintiff cia . seeks $500,000,000 in restitution for amounts paid to Toronto Hydro a • t er Ontario unicipal electric utilities("LDCs")who received late payment penalties , ich oritii.,te int-rest at an effective rate in excess of 60%per year,contrary to Section .47 of the Cri a ode. By Order dated July 22,2010,the Ontario Superior Court if Justice formaliz-d a settlement pursuant to which the defendant LDCs will pay the amo-nt of$17,000,000 •lus costs and taxes in settlement of all claims. Under the settlemen ,all of the LDCs i olved in the settlement, including the Corporation, requested an .rder from the OE' allowing for the future recovery from customers of all costs related to the se lement. As per the OEB order dated February 22,2011 th os and da ages arising from the settlement of this class action shall be recov: able fr II rate..yers of the LDCs. The OEB issued its decision allowing the Corporatio o recover it a - of the settlement in the amount of$347,000. The payment to settle the Corporation: s portion of the cl=ss action suit was made on June 30,2011. The OEB order authorize, the Corporation t• recover the balance of$345,000 effective over a 12 month period o recovery from M.' 1,2011 to April 30,2012. (iii) Contractual obligation-Hydro Pne�-tw�orks Inc. HONI") The Corporation's subsidia ,Veridia�r�. -ec'ons Inc. ("VCI"), is party to a connection and cost recovery agreement th HONI reed t. the construction by HONI of a transformer station designated to me-t VCI's anticip.te• electricity load growth. Construction of the project was completed during 007 and VCI con ected to the transformer station during 2008. To the extent that t - cost of the proje' is not recoverable from future transformation connection reven es,VCI is obliged o pay a capital contribution equal to the difference between these -venues and the instruction costs allocated to VCI.The construction costs allocated to V'I f. project a - $9,975,000. The Corpo .tion ' eco .e. a liability and a corresponding intangible asset for$1,212,000 as at De.-mber 31, 4;1 ( .10- 1,212,000), based on management's best estimate of the presen value of the futur: transformation connection revenue shortfall. HONI will perform a true- • based on actual oad in 2012. Page 12 FOR DISCUSSION PURPOSES ONLY 44 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2011 4. Investment in Veridian Corporation(continued) (d) (continued) (iv) Environmental liability In 2008, Environment Canada issued its final regulations governin; th. anagement .f PCBs. Costs relating to future expenditures associated with the em vj and destr.ction of PCB contaminated transformers and remediation of chemicall con .m Iant s has been estimated in the amount of$412,000,which has been recor.-d as a liabili .t ►•ecember 31, 2011. Because such expenditures are expected to be rec. erable in future r. es,the Corporation has recorded an equivalent amount as a re. latory asset. (e) Lease commitments Future minimum lease payment obligations under opera'ng leases are as .flows: (000's) 2012 157 2013 2 2014 2 2015 2 2016 2 Thereafter 70 235 5. Promissory notes receivable Promissory note receivable fr. Veridian Corporation maturing November 12,20 2 and bearing in -rest at 7.62% until April 30,20 I,then the greate of 6% or the Ontario Energy :o. ►•-emed lo • term debt rate on an annual b-.sis 1'- uu.i, 6% effective May 1,2010) 7,095,000 7,095,000 Promissory not: receivable from V-ridian Connections Inc. maturing N 6 ember 1,2039 a•d bearing interest at 7.62% u d April 30,2010,t-en 5.57%from May 1, /010 to December 1,2014 and then the Ontario Ener: B..rd deemed ling-term debt rate for each su• e e : year .-riod thereafter 17,974,000 17,974,000 25,069,000 25,069,000 nterest revenue -:rued from these notes receivable totaled$1,426,852(2010-$1,588,823).The promissory note: from Veridian Corporation are convertible into common shares at the rate of one common shar: for every$1,000 of principal amount,at the option of the City. Page 13 FOR DISCUSSION PURPOSES ONLY The Corporation of the City of Pickering F Notes to the consolidated financial statements December 31, 2011 6. Deferred revenue 21 1 20 $ $ Obligatory Reserve Funds Development charges .4,.il4b •4 2t,593,895 Parkland 1,818,f1; 1,757,582 Federal gas tax 4,977,097 3,526,410 Third party/Developer's Contributions Reserve Fund 2,233,978 2,185,222 43,136,48 37,063,109 Other unearned revenues 1,19 ,200 3,366,886 44 7,687 40,429,995 Continuity of deferred revenue is as follows: 2011 2010 $ $ Balance, beginning of year 40,429,995 37,914,579 Restricted funds received 7,556,772 4,667,912 General funds received 74,724 325,058 Interest earned 795,497 908,828 8,426,993 5,901,798 Earned revenue transferred t. operations 4,529,301 3,386,382 Balance, end of year 44,327,687 40,429,995 7. lnterfund loans O As a means of fun.• g various :sital :cquisitions,funds are borrowed by the Capital Fund from Development Ch. ges deferred rev; ue(obligatory reserve funds).These funds are secured by promissory not: with interest rat; ranging from 3.5%to 4.7% and various payment terms ranging from 1 year to 10 y-ars.The financin; arrangements and ultimate repayment are approved by Council through the urrent budget pr. ess.Although these notes have payment terms as noted above,they are repayabl- on demand.The f.11owing is a summary of the related loans: 2011 2010 -oads and streetl'•hts 92,868 193,716 Community faci• ies, libraries and parks 235,770 360,844 Protection se- ices 445,579 520,145 Environme al services 11,962 23,475 Munici.. .uilding 20,669 25,292 806,848 1,123,472 Page 14 FOR DISCUSSION PURPOSES ONLY 46 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2011 8. Post-employment benefit liability (a) Post-employment benefit liability The City makes available to qualifying employees who retire before the ag: of 65,the opport ity to continue their coverage for benefits such as post-retirement extended 'ealthcare benefit . Coverage ceases at the age of 65.The City also provides full time and •erg anent part-ti ►e employees a sick time entitlement and any unused entitlement is acc.m , • ear to y•ar.This accumulated entitlement is not vested and is forfeited at the time of etirementi: The Corporation of the City of Pickering 4 Notes to the consolidated financial statements December 31, 2011 8. Post-employment benefit liability(continued) (b) Workplace Safety and Insurance Board(WSIB)benefit liabilities Effective January 1,2001,the City became a Schedule II employer under •e Workplace Safi & Insurance Act and follows a policy of self insurance for the risk associate* with paying bene'is for workplace injuries for all its employees.The WSIB administers the clai s r, ted to work, ace injuries and is reimbursed by the City.The most recent actuarial valu.. io a WSIB •-nefits was performed at December 31,2011. Information about the City's WSI liability is as follows: 201 2010 $ $ Accrued WSIB liability, beginning of year 1,. 2,898 1,368,198 Current service cost 118,460 301,800 Interest on accrued benefits 105,300 97,400 Amortization of estimation adjustment gain (996,074) - Benefits paid during the year (73,725) (94,500) Accrued WSIB liability,end of year 826,859 1,672,898 The main actuarial assumptions emplo ed in the actuaria aluations are as follows: (i) Discount rate The present value as at De.-mber 3 1 o he future benefits was determined using a discount rate of 3.75% (2e 0-6.0%). (ii) Inflation rate The rate of inflation as assumed to b- 2.5% per annum. (iii) WSIB Administr. ion Rate Liabilities for l SI= 'efits hav: .een increased 25%to reflect the administration rate charged by SI e A WSIB reserve Fun.4;as -stablished in 2001.The Reserve Fund balance at December 31, 2011 w:s$2,374,028(20 0-$2,021,105). In addition,the City purchased two insurance polici s that protect the ' ity against significant claims to the City.The occupational accident ins.rance pays loss c:ims up to$500,000 per work related accident.The excess workers compensation inde ,nity insurance has a$500,000 deductible and will pay for claims up to .nd including$15 00,000 per work related accident. 9. Long ert �' ies (a The ba''t .f I.ng-term liabilities is made up of the following: 2011 2010 $ $ The nicipality is responsible for the payment of p ' cipal and interest charges on long-term [abilities 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 19,131,687 16,582,742 Page 16 FOR DISCUSSION PURPOSES ONLY 48 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2011 9. Long-term liabilities(continued) (b) The above long-term liabilities have maturity dates of July 12,2011,2016 an 021, November , 2012, November 21,2012 and 2018,July 15,2014, December 23, 2014,O ober 15,2015 an 2020 and September 29,2016 and 2021 with various interest rates rangi from 1.10%to 5.%;%. Principal repayments are summarized as follows: 2012 3,688,665 2013 2,302,256 2014 2,188,598 2015 1,776,073 2016 1,731,168 Thereafter 7,444,927 19,131,687 (c) Long-term liabilities include a principal sum of ,057,000 as' fu'dable Debentures'which may be raised by the issuance of debentures over ., further period no o exceed 10 years. (d) The above long-term liabilities have been .:proved by Counc' by-law.The annual principal and interest payments required to service thee liabilities are wi 'in the annual debt repayment limit prescribed by the Ministry of Municipal ffairs and Housing. (e) Interest expense recorded in the ye. re:1 : to these .ng-term liabilities is$734,143(2010- $692,082). NIIII 10. Tangible capital assets Information relating to tangible capital assets is as .flows: (i) Contributed tangible ca."al assets The City records tan."•le capital assets ontributed by an external party at fair value on the date contributed.Typica ex- ''1is are roads, storm sewers and sidewalks installed by a developer as part of a subdivis'.n •Z L:,:,-en agreement. Contributions of tangible capital assets in 2011 amounted to$6:1,938 I.0-$3 031,356). (ii) Tangible ca. 'al assets recogni ed at nominal value Land und-r roads are assig -d a nominal value of one Canadian dollar because this land only support: or is intended to : pport road infrastructure and the majority of land acquired supporting road . owances was act ired at no cost. (iii) W. ks• art and hist. ical treasures he4 mu:eum which holds various historical treasures and historical buildings pertaining to the .- a-d history of the City of Pickering.These items are not recognized as tangible capital as . s the financial statements because a reasonable estimate of the future benefits associated " h such property cannot be made.Any acquisition or betterment of these assets is recognizes as an expense in the financial statements. (iv) Other The ,et book value of tangible capital assets not being amortized because they are under co truction is$2,327,618(2010-$3,962,111). i uring the year,there were no write-downs of assets(2010-$Nil)and no interest was capitalized during the year(2010-$Nil). Page 17 FOR DISCUSSION PURPOSES ONLY 49 CO in M O O1 N 10 in 0.7 CO U) N 00 1 I 1D Of /0 N 0 CO p0 CD 00 00 CO h O' N 10 .4 CD 0 n O N W. b 0 CD 01 a co . 1100 co to OD Oro M M e- s- N C 69 M (0 CO ' ' ' ' 00 r• N (O O N N 2 N(O y N N N C in C O M M N M N Q ob N OW CO ' Sr Or in 0 0 in 0 N N N N (r0 r 'M M N CD 3 M M O N N 4' 1O in 00 CD N N .- M 3 LL 2.C N f9 00 N 01 in O Of in in 0 0 (p 0) co r N 00) Oro N. N C') CO t.) C O) d O O co in n 00 CO-00 CO J p 00 0 7 r 1O (O 0 CO O Sr e C C ' N CO 00 CO in n CO N N 1O dY N n 3C 0 CO 1O (O CO l0 co CL O • W N W sr U) O C C O 2 1O O C O `Cr CO e- 0) 0 CO O) e- e- I- C 4:t C >+N - O M ' N CO n ' u N- V) Ui p (0 N. n N CO W in E O LCO M N N CO 0O') l0 N N (O n N T CO L C ' O) 19 co n M N. C N in Sr Y O n in M co co in N , et co 00 co, co c0 0) CO in n CO ( in 1O in CO } 2 V CO n N M 01 V)C CO Z Z N!n M n n O O 2 co C CO 1n O N so M C ' n 00 ' O n d y O N N 0 CO CO K 3 3 R CO ('7 n (O 0 t N D N n C' O. 2 0) N N - 00 0) 00 O Z O N O 00 00 C C M N _ to C CO 0 N •PEI I 0 CO CO 10 n (O 00 0 O T t Cl) "O CO C n M 0 CO CO CO 3 (0 co sr, n N lO n n 0_' /L� O) n O N M O V/ j M in 1O M CO * LL N 0 r N 1O N N M CO N CO N e- CO C C •••4 AW ' ` .41 co CO m 0 1N M V' (N0 N N N I.... O Of n N n 41 Sr O y OM (h 0-n N:N i 0 E > co W C n co M 0O Y••il O CO (o v 00 C 09 CO CO O N N n C 111 n • S �� Z'N n CO CD OC) 0 10O (0 N (D r l C Q (O co- M M (O O M (n O v �I L '7 M n co O (0 U) M N CO (I N y N CO Sr VS N m to N N CO N 0 n 1t) CO CI 0 s -. M CO N N CD in w N C fD O n 0 N r 0) N �• . r�1 = v 00 n n CO- M ao 0) in T /i='•1I C m CCO N CO CO C N CO O. (C0 0/ Q �i CO N C CO 0 0) 0C/ CO Q� V C t9 11 M M O ■ 1 , , O �1 C Q) CO CO Oiwt ,w J 0 C (0 00 CO .1....����V/�� f 000 N CO 00•• •r1 N CO CO CO CD tO sr sr sr CItt O ca Oo � a �1A N M "� T `� CD 'c » O i0 O E f0 �) co CI C co C N 0) T E C co N 7. N 0 U c _ p C C V r D m CO •N o N 3 /0 t•" 0(0 CC �, N C d A 21 10 .6' , a 0 0 0 O) O s OV) _E OV) 0 E c 8 8 O o m 0 -0< How (c° 3 iv ¢ vi¢ (�° « .5 Z Q ° 0m < � co <ma -I CO ' O a9 N co N M 0) N n M O) 0) O N N M S! {: O M m N CO h w CO (0 N O) N a0 (O co CO N O C O) ao N a` V 0 M 0 OD Cl) N 0) Of N N CO O (0 0) v) s l0 CO CO .-- CO t` W (n 1- (D CO N. CO d co co •- .- s- ti c (o 0 D5 . . . ° v a A r V, co 0))c ado 0) N y c N M CO Q q+f N (9 co M CO 0 CO V CV 2 N co M M co CD (VD r V 0) M O N N O w V O N - (n) LL Z.C (0 f9 N. O) (D CO co 0) n W O �0 M u) 0 N n a m v 0 0 co ao te a) d (D c') O N OO N- N J p W co n V ao co_ aUO N E ui DI ei e- a) 69 co N /b V V O(0 fV cl •-• ap C9 U) co CO o) O CO r O p a N N N O 0) O1 N. N V 2 N 5- OO 0) O S et 0 ) 0O O O) O 00 2 5 c -1 (9 n m .4. o) (0 u) coo NJ °- o aNa vm ((0 (0 n vO) o C "O N co 0 N CO M n N N CO O p U W co N N n N N N- N a) L ( (0 69 N N. .- co V 0) CD N. (O 2 - 0) V V 0 N N M CO �o co O ?OO N O (O a) • 3 �� O C.) N .4- N N D1 co OO CO M 5 2 f/J \, � (O I� O z N Z C u) W N I a9 N CO C M e. N . N N 0 0 N CO N d V D y M U) • N CO d O 00 O) a0 V Z m O Ni s_ M N O N p N. V V CO CJO ` rn c0) U)) • ( a) f9 N O) co co O) N- CO a0 y c 2 a (0 (D co M (D u) o am 2 p (0 N N 00 co O) 0�) a. CD 2 V a0 M 0)- m O 00 ed p V co O) aM-- aD N Oy, 2 O CO M N (� ,] W O N CV- s- e- V N l,(O� V .- c0 `�O\Q 0 69 ,) d N N K aUo (D CO V �.y �a N M N- OO 0 M N O i�_I CD CO V N 0 m r N V O 1.1 O 10 (O M u0 C f9 N a) OD CO n N V CI•�` �) Z'a) 0)) CO V O N- V el CO C CO O CO 1 co E N 0)) ( CO 0 n O n V v �y .0 0 N C] OO CO CO .(� N 0 N n a v N O) N M V0 �) CV N V a) N n N 43. N 0) N O (lC M O) N O thial till V CO O CO- V M U) C '_ N. co M r O) )- M' N(. 0 N co co O co O C co N Ni N N"d co (0 ( N = � .. a 69 v 0o r u) O 'ay j co () O 0 •� (n d t- 03 n O O 1. -4 0 N N CO cO et 05 et 03- et O O N Q C C c . ^ p 0 �� V Cl)1� N M 0 2 N >' N• y; © � d w W ti' p o l• 0 W cn�) (y C C C d T E C W a) T p cm) O .0 C 2 C)V-. C -o ',5 0 C W V as ��� — a) w co a N a ' d o R c o C o W ' o a A, U p T o.o E G U w 4,1.,A) c E O C C O N u 1 0 p a Q 2 0 A -o Q a) < � 2 1 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2011 11. Accumulated surplus The City's accumulated surplus is comprised of the following: 011 410 Capital fund 0,0 , I,355,677 Operating fund 125,09 125,092 Equity in Veridian Corporation 70,585,144 69,231,568 Tangible capital assets 187,940,852 187,669,237 Post employment benefits liability (3,039,600 (2,703,900) Internal loans (806,8, ;) (1,123,472) Net long-term liabilities (19,131 ;87) (16,582,742) WSIB benefit liabilities (8 .,859) (1,672,898) Reserves set aside for special purposes by Council Working capital 400,000 400,000 Self insurance 962,707 962,707 Replacement of capital equipment 852,792 1,090,998 Contingencies 1,447,278 1,277,278 Rate stabilization 16,310,644 16,579,632 City's share for development charge 4,370,874 3,695,929 Continuing studies 582,055 406,984 Vehicle replacement 93,722 149,158 Easement settlement D 17,595 - Eastern branch 155,000 130,000 Move Ontario 97,483 14,533 Capital asset management 240,000 165,000 Economic stabilization 830,000 830,000 Land Purchase 194,403 - Seaton Development Rev'-w 2,133,752 - Financial Systems 175,000 - Reserve funds set asid- or.e- ial purpo • by Council Recreation progra : an.40 •'-- 148,547 145,483 Acquisition of tan; •le cap . ,ssets 1,451,430 1,419,538 Squash courts - 116 WSIB 2,374,028 2,021,105 Animal shel -r 196,370 173,850 Men's slo pitch 138,985 136,359 Operati• s Centre 412,365 - 278,493,563 274,897,232 12. Pe ion=nts e City makes ributions to the Ontario Municipal Employees Retirement Fund(OMERS),which is a multi-employer . an,on behalf of the members of its staff.The plan is a defined benefit plan which specifies the a r ount of the retirement benefit to be received by the employees based on the length of service and r. es of pay. Contributi• s on account of current service for 2011 were$2,561,177(2010-$2,219,285). Page 20 FOR DISCUSSION PURPOSES ONLY 52 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2011 13. Trust Funds Trust funds administered by the City amounting to$318,169(2010-$308,443)hav- not been includ- in the Consolidated Statement of Financial Position nor have their operations be: included in the Consolidated Statement of Operations. 14. Related party transactions di Veridian Corporation The City of Pickering receives electricity and services from Veridian Porporation (Note , ,a corporation in which the City is a principal shareholder. 2' 1 2010 $ $ Transactions Revenues Interest on promissory notes 1,426,852 1,588,823 Property taxes levied 46,785 49,652 Expenses Electrical energy and services 1,788,931 1,668,472 Balances Accounts payable and accrued liabilities 371,799 378,767 Promissory notes receivable 25,069,000 25,069,000 15. Guarantees D In the normal course of business, 'e City enters into :greements which contain guarantees.The City's primary guarantees are as follow.: (i) The City has provided in t emnities under le.se agreements for the use of various facilities or land. Under the terms of these agreements the ity agrees to indemnify the counterparties for various items including, but it limited to, all lia•ilities, loss, suits,and damages arising during,on or after the term of the agr;em-. he maxi • m amount of any potential future payment cannot be reasonably esti :ted. , ) (ii) The City inde -nifies all em.b ye-s and elected officials including Library employees and board members fo various items including, but not limited to,all costs to settle suits or actions due to associatio, with the City,su•'ect to certain restrictions.The City has purchased liability insurance to mitig. e the cost of any •otential future suits or actions.The term of the indemnification is not explici y defined, but is li• ited to the period over which the indemnified party served as an emp .yee or elected o cial of the City.The maximum amount of any potential future payment ca•no •- reasonabl estimated. (iii) he %a me -d into agreements that may include indemnities in favour of third parties, such as pur . : :n. sale agreements,confidentiality agreements,engagement letters with advisors and consu .n outsourcing agreements, leasing contracts, information technology agreements and service -.greements.These indemnification agreements may require the City to compensate counterpa•ies for losses incurred by the counterparties as a result of breaches in representation and reg ations or as a result of litigation claims or statutory sanctions that may be suffered by the counte •arty as a consequence of the transaction. The terms of these indemnities are not explicitly defi -d and the maximum amount of any potential reimbursement cannot be reasonably estimated. The n. ure of these indemnification agreements prevents the City from making a reasonable estimate of the 'aximum exposure due to the difficulties in assessing the amount of liability which stems from the un•redictability of future events and the unlimited coverage offered to counterparties. Historically,the ty has not made any significant payments under such or similar indemnification agreements and herefore no amount has been accrued in the balance sheet with respect to these agreements. Page 21 FOR DISCUSSION PURPOSES ONLY b3 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2011 16. Contingent liabilities Litigation The City has been named as a defendant in certain legal actions in which dam..es have been so •ht. The outcome of these actions is not determinable as at the date of reporting .'d accordingly, no provision has been made in these financial statements for any liabilities whit result. 17. Budget figures The 2011 Budget adopted by Council on February 21,2011 was not ,,repared on a bas': consistent with that used to report actual results.The budget was prepared on a .dified accrual ba 's while Public Sector Accounting Standards require a full accrual basis of acco ting.The budget 'gures treated all tangible capital asset acquisitions as expenditures and did not• clude amortizatio• expense on tangible capital assets.As a result,the budget figures presented in the Statements of O•-rations and Change in Net Financial Assets represent the budget adopted by Cou•cil '• February 2 ,2011 with adjustments as follows: 2011 2011 Counci Non TCA Budget approv•d expenditure- presented in bu get from cap' al Amortization statements $ $ $ $ Revenue Taxation 51,1 - - 51,121,693 Capital 7,841, 0 - - 7,841,870 Other 16,718,8 - - 16,718,825 75,682,38 - - 75,682,388 Expenditures General government 14,7 5,272 100,000 541,940 15,367,212 Protection to persons a-d •-41•-rty 1',424,284 25,000 641,262 20,090,546 Transportation servic•s • 8,601,226 15,000 3,660,249 12,276,475 Environmental se 'ces 255,440 - 2,100,259 2,355,699 Social and famil services 603,115 - - 603,115 Recreational . d cultural services 19,980,528 - 2,740,499 22,721,027 Planning an development 3,777,674 - - 3,777,674 67,367,539 140,000 9,684,209 77,191,748 Annual rplus(deficit) 8,314,849 (140,000) (9,684,209) (1,509,360) Capit. e • • . es (24,537,825) 140,000 - (24,397,825) Tra-sfers r. rve :nd eserve fun. 2,372,246 Rividend from Veri•tan Corporation 2,483,180 Principal repay •nt of debt (2,779,450) Debt •roceed 14,022,000 Prior ear o•-ratin• fund sur•Ius 125 000 Page 22 FOR DISCUSSION PURPOSES ONLY 54 The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2011 18. Comparative figures Certain of the prior year comparative figures have been reclassified to conform to t'e current year's presentation. 19. Segmented information The City of Pickering is a diversified municipal government that provides - wit A:s�, a of se ices to its residents. Distinguishable functional segments have been separately di losed in th■:,-g 'ented information.The nature of the segments and the activities they enco •ass are as follow-. General Government This item relates to revenues and expenses of the City itself an• cannot be directly attributed to a specific segment. Protection to Persons and Property Protection includes fire services,animal control, bylaw service •&ding in:pection and enforcement of the building code to ensure the safety and protection • all citizen .4d t -ir property. Public Works Services Public works includes construction and mainten. ce of the City's r•adways, including snow removal, sidewalk repairs,street lighting, maintenance • the storm water - stem and environmental services. Social and Family Services Social services for assistance or service: for -4!Rr Recreation and Culture Services Recreation and cultural services i lude recreation p •grams, maintenance and rental of facilities and parks, operation of the City's m .eum and library s-rvices. Planning and Development Planning and developmen provides a numb: of services including municipal planning and review of all property development pl ns Segmented informati• has — • id'd in the following pages. 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U ctf N O `) > N an as.� •� (4 N O. ^fl a) > CODHOUwOO �° 0-(/) 2000 .° C v) N ce I- W H Q 14 U Z Q 0) 57 Financial statements of The Corporatio of the City of Pickeri ' g Trust !unds December 31, 2011 D O O FOR DISCUSSION PURPOSES ONLY 58 The Corporation of the City of Pickering Trust Funds December 31, 2011 Table of contents Independent Auditor's Report 1-2 Statement of financial activities and fund balances 3 Statement of financial position 4 Notes to the financial statements 5 FOR DISCUSSION PURPOSES ONLY 59 Deloitte&Touc•e LLP 5140 Yonge reet Suite 1700 Toronto 0 M2N 6L7 Canada Tel: •16-601-6150 F. 416-601-6151 • .deloitte.ca Independent Auditor's Report di To the Members of Council, Inhabitants and Ratepayers of The Corporation of the City of Pickering , We have audited the accompanying financial statements of r e ',••eation o'the City of Pickering Trust Funds,which comprise the statement of financial position :s at Dece .-r 3 ,2011,and the statement of financial activities and fund balance for the year then e .ed,and a summ. of significant accounting policies and other explanatory information. Management's Responsibility for the Financia tatements Management is responsible for the preparatio• an i .resent. ion of these financial statements in accordance with Canadian generally accep -d acco 71 g.ri'ciples,and for such internal control as management determines is necessary to e. able the pre.i.ra on of financial statements that are free from material misstatement,whether due to and or error. Auditor's Responsibility Our responsibility is to expres a ::-nion on t •se financial statements based on our audit.We conducted our audit in acco ■an' • _ .na.'an generally accepted auditing standards.Those standards require that we comply w'• ethica Q uire •ents and plan and perform the audit to obtain reasonable assurance about whethe'the financial at ments are free from material misstatement. An audit involves p-rforming proced. es to obtain evidence about the amounts and disclosures in the financial stateme. s.The procedur-, selected depend on the auditor's judgment, including the assessment of the risks of •aterial misstate -nt of the financial statements,whether due to fraud or error. In making those risk ass,ss •- • ,the aud' or considers internal control relevant to the entity's preparation and fair presentatio' of - cial atements in order to design audit procedures that are appropriate in the circumst. ces,bu .r e purpose of expressing an opinion on the effectiveness of the entity's intern. control. An a di also includes evaluating the appropriateness of accounting policies used and the reas. ableness of acc* nting estimates made by management,as well as evaluating the overall pr; entation of the f ancial statements. We believe that e audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opi 'on. . FOR DISCUSSION PURPOSES ONLY 60 Opinion In our opinion,the financial statements present fairly,in all material respects,the financial pos. ion of The Corporation of the City of Pickering Trust Funds as at December 31,2011 and the resul : of its operations for the year then ended in accordance with Canadian generally accepted accou ng principles. Chartered Accountants Licensed Public Accountants June 11,2012 Page 2 FOR DISCUSSION PURPOSES ONLY 61 The Corporation of the City of Pickering Trust Funds Statement of financial activities and fund balance year ended December 31, 2011 20 2010 Revenues Interest 9,726 1 ,093 Net revenues A 9,726 11,093 Fund balance, beginning of year ,I: 443 297,350 Fund balance,end of year 318,69 308,443 Page 3 FOR DISCUSSION PURPOSES ONLY 62 The Corporation of the City of Pickering Trust Funds Statement of financial position as at December 31, 2011 20 2010 Assets Investments 312,015 27 ,351 Interest receivable 6,154 1,092 018,169 308,443 Trust Fund position 319 308,443 Page 4 FOR DISCUSSION PURPOSES ONLY The Corporation of the 6 3 City of Pickering Trust Funds Notes to the financial statements December 31, 2011 1. Accounting policies The financial statements of The Corporation of the City of Pickering Trust Fun• are the represe .tions of management prepared in accordance with Canadian generally accepted .'co •ting principle: using accounting standards for Not-for-Profit Organizations. Significant accounting policies adopted include: Basis of accounting Interest revenue is recorded as earned. Expenses are reported on the accrual basis of accounting whic recognizes expe'ses as they are incurred and measurable as a result of the receipt of goods o services and the 'reation of a legal obligation to pay. Investments Investments are recorded at cost.The cost of invest 'ents approxi :te their fair value. 2. Future accounting changes In December 2010,the CICA issued a new ac-ounting framewor applicable to Not-for-Profit Organizations. Effective for fiscal years begi•ning on or after J. uary 1,2012 Not-for-Profit Organizations will have to choose betwee International Fin. cial Reporting Standards(IFRSs)and Canadian accounting standards for Not- sr-P ta. •.niza'•ns,whichever suits them best. Early adoption of these standards is permitt:•. The Mr d: currently plan to adopt the new accounting standards for Not-for-Profit Organiz. ons for its i ..I y ar beginning on January 1,2012.The impact of transitioning to these new standar. is expected to b: minimal. 3. Dorothy Card Estate The City of Pickering admi ' ters a trust fund .r the Dorothy Card Estate for the care and upkeep of the destitute elderly.The fun• sal. ce is compri.ed of investments and accumulated interest amounting to $318,169(2010-$308, 43 4. Statement of cash lows A statement of c•.sh flows has not •-en presented as the information is readily determinable from the financial state -ents presented. Page 5 FOR DISCUSSION PURPOSES ONLY 64 Financial statements of City of Pickerin■ Public Library : oard December 31,2011 D O O FOR DISCUSSION PURPOSES ONLY City of Pickering Public Library Board 5 December 31, 2011 Table of contents Independent Auditor's Report -2 Statement of financial position 3 Statement of operations 4 Statement of change in net debt 5 Statement of cash flows 6 Notes to the financial statements 7-10 FOR DISCUSSION PURPOSES ONLY 66 Deloitte&Touc•e LLP 5140 Yonge reet Suite 1700 Toronto 0 M2N 6L7 Canada Tel: •16-601-6150 F. :416-601-6151 .deloitte.ca Independent Auditor's Report To the Members of The City of Pickering Public Library Board, Members of Council, Inhabitants and Ratepayers of the City of Pickering We have audited the accompanying financial statements oft'e Cl. i�'ickeri'g Public Library Board, which comprise the statement of financial position as at D,cember 011 and the statements of operations,change in net debt and cash flows for the ye. then ended,an. . summary of significant accounting policies and other explanatory informatio Management's Responsibility for the Financia tatements Management is responsible for the preparatio• an a .resent. ion of these financial statements in accordance with Canadian public sector ac .untin� d ,and for such internal control as management determines is necessary to e•able the pr- .ra 'on of financial statements that are free from material misstatement,whether due to a and or error. Auditor's Responsibility Our responsibility is to expres an ••inion on the e financial statements based on our audit.We conducted our audit in accor.an.; 1 Canad'.n generally accepted auditing standards.Those standards require that we comply wi ethic. quire 'ents and plan and perform the audit to obtain reasonable assurance about whethe he financia at; ents are free from material misstatement. An audit involves p: forming proced es to obtain evidence about the amounts and disclosures in the financial stateme s.The procedure: selected depend on the auditor's judgment, including the assessment of the risks of .terial misstatem; t of the financial statements,whether due to fraud or error. In making those risk ass: s -.ts,the aud''or considers internal control relevant to the entity's preparation and fair presentatio of,'e'.:cial atements in order to design audit procedures that are appropriate in the circumst. ces,b got .r t•e purpose of expressing an opinion on the effectiveness of the entity's interna control.An . .di .lso includes evaluating the appropriateness of accounting policies used and the reaso•ableness of acco.nting estimates made by management,as well as evaluating the overall presentation of the fi'ancial statements. e believe that e audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opin.an. FOR DISCUSSION PURPOSES ONLY 67 Opinion In our opinion,the financial statements present fairly,in all material respects,the financial pos. ion of the City of Pickering Public Library Board as at December 31,2011 and the results of its operations,its changes in net debt and its cash flows for the year then ended in accordance with Canadia .ublic sector accounting standards. Chartered Accountants Licensed Public Accountants June 11,2012 Page 2 FOR DISCUSSION PURPOSES ONLY 68 City of Pickering Public Library Board Statement of financial position as at December 31, 2011 2011 2010 (Note 7) $ $ Financial assets Cash ',260 2 60 Accounts receivable 875 580 Due from the Government of Canada n134 21,142 Due from City of Pickering 4 252,887 154,4W 276,869 Liabilities Accounts payable and accrued liabilities 211,2 : 300,353 Post-employment benefits liability(Note 2) 150 -00 119,500 36 ,033 419,853 Net debt 7,540) (142,984) Non-financial assets Tangible capital assets(Note 4) 1,341,173 1,535,730 Prepaid expense 56,740 23,484 1,397,913 1,559,214 Accumulated surplus(Note 5) 1,190,373 1,416,230 Page 3 FOR DISCUSSION PURPOSES ONLY ti.+ .� City of Pickering Public Library Board Statement of operations year ended December 31, 2011 2011 2010 Budget (Unaudited) (Note 6) $ Revenue City of Pickering grants 4,860,265 4,:•1, 9 4 45,060 Federal grants 14,388 1 1,654 Province of Ontario grants 144,005 162,78 160,367 Fines and other receipts 201,465 187,463 185,463 Total revenue 5,220,123 5,260,990 5,092,544 Expenses Operating Salaries Salaries and wages 3,0: ,3 3,1.3,517 3,075,779 Fringe benefits 32,0 21,340 652,302 .,817,390 3,854,857 3,728,081 Material,supplies and utilities Books 92,000 111,241 96,574 Utilities 175,004 172,851 172,463 Other supplies 61,011 61,250 69,447 328 s 04 345,342 338,484 Services Repairs and maintenance 303,528 316,457 305,257 Insurance 49,949 46,268 43,894 Travel 4,500 4,524 4,443 Consulting and professional 64,340 54,878 37,165 Advertising 16,500 19,909 17,526 Conference 6,200 6,111 6,061 Postage O 5,500 4,152 4,248 Telephone 69,692 69,228 70,618 Seminars and educ. on 18,500 19,747 15,606 Vehicle repairs an• maintenance 5,200 2,706 2,708 Miscellaneous 90,470 97,959 85,314 634,379 641,939 592,840 Capital relat;• Amortiz. lo<r.•, se 647,514 644,709 891,394 ail ‘Total •aerating - l e 5,427,287 5,486,847 5,550,799 Ann .1 deficit (207,164) (225,857) (458,255) Ac'umulated surplus •eginning of year 1,419,484 1,416,230 1,874,485 ccumulated sur• us,end of year 1,212,320 1,190,373 1,416,230 Page 4 FOR DISCUSSION PURPOSES ONLY 70 City of Pickering Public Library Board Statement of change in net debt year ended December 31, 2011 2011 2010 Budget (Unaudited) (Note 6) Annual deficit (207,164) (2,2 ,857) (45:,255) Acquisition of tangible capital assets (440,350) (4 , ) 433,439) Amortization of tangible capital assets 647,514 644,70 891,394 207,164 194,557 457,955 Change in prepaid expense - (33,256 15,498 Change in net debt - (64,5 .) 15,198 Net debt, beginning of year 142 .84 (142 !84) (158,182) Net debt,end of year 1• ,984 (20 ,540) (142,984) Page 5 FOR DISCUSSION PURPOSES ONLY 71 City of Pickering Public Library Board Statement of cash flows year ended December 31, 2011 2011 2010 (Note 7) $ $ Operating transactions Annual deficit (2 •,857) (458 55) Non cash item Amortization of tangible capital assets 6 ,709 :91,394 52 433,139 Change in non-cash operating items Increase in accounts receivable (295 (321) Decrease(increase)in due from Government of Canada 10,01 ; (21,493) Decrease(increase)in due from City of Pickering 112,:63 (105,323) (Decrease)increase in accounts payable and accrued liabilities (8!,120) 125,502 Decrease in deferred revenue - (13,913) Increase in post-employment benefit liability 31,300 300 (Increase)decrease in prepaid expense (33,256) 15,498 31,300 250 450,152 433,389 Capital transactions Acquisition of tangible assets (450,152) (433,439) Net decrease in cash - (50) Cash, beginning of year 2,260 2,310 Cash,end of year 2,260 2 260 Page 6 FOR DISCUSSION PURPOSES ONLY 72 City of Pickering Public Library Board Notes to the financial statements December 31, 2011 1. Significant accounting policies The financial statements of the City of Pickering Public Library Board(the"Library :oard")are the representations of management prepared in accordance with Canadian public s- tor accounting standards established by the Public Sector Accounting oard("PSA ")of the -nadian Institute • Chartered Accountants. Significant accounting policies adopted by the Library Board are as follow . Basis of accounting (a) Accrual basis of accounting Revenues and expenses are reported on the accrual basis o accounting.The . crual basis of accounting recognizes revenues as they are earned and -asurable;expenses are recognized,as they are incurred and measurable as a result of the recei 2t of goods and se, ices and the creation of a legal obligation to pay. (b) Non-financial assets (i) Tangible capital assets Tangible capital assets are recorded at c.-t less accumulat-• amortization. Cost includes all amounts that are directly attributable to =cquisition,develo 4 ment or betterment of the asset. The cost of the tangible capital asset amortized on a s aight-line basis over the estimated useful life as follows: Machinery&equipment to 25 yea Information technology hardwa'e \ t. ; y-:rs Library collection material , to 7 ears Furniture and fixtures 10 • 50 years One-half of the annual . ortization is charged in the year of acquisition and in the year of disposal. Other major assets'ncluding the Libr. buildings are owned by the City and are not reflected in these financial st. ements. (ii) Contribution/d.na'• o .-••ible apital assets Tangible c.•ital asse .kceiv-d as contributions or donations are recorded at their fair value at the date • receipt,and that .it value is also recorded as revenue. (iii) Intan•i2 e assets Int. gible assets are it recognized as assets in the financial statements. (c) Defe ed revenue D- er -• :,-nue re,.resents amounts which have been received for expenditures not yet incurred. hes: : ou' s wi be recognized as revenue in the fiscal year the related items are purchased. (. Post ea?. • e t benefits The present 'alue of the cost of providing employees with future benefits programs is recognized as employee earn these entitlements through service.Any actuarial gains or losses are amortized on a straigh line basis over the average remaining service period (ARSP)of employees. The actuary estima -d the ARSP to be 14 years. Page 7 FOR DISCUSSION PURPOSES ONLY 73 City of Pickering Public Library Board Notes to the financial statements December 31, 2011 1. Significant accounting policies(continued) Basis of accounting(continued) (e) Use of estimates The preparation of financial statements in conformity with Canadian pub' s:.tor accounti • standards requires management to make estimates and assumptions at �-ct the repo,ed amount of assets, liabilities and the disclosure of contingent assets - d lia•ilitt the •ate of the financial statements and the reported amounts of revenues and expenses during a period.Actual results could differ from those estimates. Balances which require ignificant estima 's include employee future benefits and tangible capital assets. 2. Post employment benefits liability The Library Board makes available to qualifying employees ho etire before t e age of 65,the opportunity to continue their coverage for benefits such as .o,yeti ement e•ended healthcare benefits. Coverage ceases at the age of 65.The Library Board al-. pr.• L4full tim- and permanent part-time employees a sick time entitlement and any unused en' lement is :tum ated year to year.This accumulated entitlement is not vested and therefore's forfeited at the t' e of retirement or termination. The post-employment benefits obligation at Dece •er 31,2011 and e changes in the accrued benefit obligation for the 2011 fiscal year was determine. by actuarial valu.. ion prepared as at January 1,2011. Information about the Library oard's post e •loyment benefits abilities is as follows: 2011 2010 D $ $ Post-employment benefits liability, •-ginning of y r 119,500 119,200 Current service costs 23,300 17,500 Amortization of actuarial losses 11,100 3,900 Interest expense 15,300 9,300 Benefits paid during the ye. (18,400) (30,400) Post-employment benefit: lia••i ,end of y-:r 150,800 119,500 O2011 2010 $ $ Accrued post-: ployment benefi obligation 361,800 162,900 Unamortize• actuarial losses (211,000) (43,400) Post-employment benefits li..ility 150,800 119,500 The m•.in -."nr. 'al assu •tions employed in the actuarial valuations are as follows: (a) Cisco• 4it .,. ) The presen v. e as at December 31, 2011 of the future benefits was determined using a discount rate of 3.75°% (2010-5.5%). (b) Dental co The cu ent dental cost trend rate at January 1,2011 was 4.0% per annum. (c) Hea h costs -alth costs were assumed to increase at 8% in 2011 and decrease by 0.2%increments per year to .n ultimate rate of 5% per year in 2026 and thereafter. Page 8 FOR DISCUSSION PURPOSES ONLY 74 City of Pickering Public Library Board Notes to the financial statements December 31, 2011 3. Pension agreements The Library Board makes contributions to the Ontario Municipal Employees Retire 'ent Fund (OMER: , which is a multi-employer plan,on behalf of eligible members of its staff.The Fla, is a defined ben-It plan that specifies the amount of the retirement benefit to be received by the e ployees based o he length of service and rates of pay. Apehalf Contributions in the amount of$206,947(2010-$166,343)were paid to • E o its members during the year. 4. Tangible capital assets Machinery Information Library Fur,iture and technology collection and equipment hardwar materials fixtures 2011 -- - $ $ $ $ $ Cost Balance beginning of year 9,992 79,495 5,810 •56 292,082 6,491,625 Additions during the year - - 4 1,152 - 450,152 Disposals during the year - - 4 -88,259 - 4,488,259 Balance, end of year 9,992 379,495 ,771,949 292,082 2,453,518 Accumulated amortization Balance, beginning of year 1 •99 D 5,8:6 4,537,879 90,661 4,955,895 Amortization 999 29 59 608,709 5,842 644,709 Accumulated amortization on disposals - - 4,488,259 - 4,488,259 Balance,end of year 2,498 355,015 658,329 96,503 1,112,345 Net book value 7,494 24,480 1,113,620 195,579 1,341,173 Oachinery Information Library Furniture a • technology collection and -quip -nt hardware materials fixtures 2010 $ $ $ $ $ Cost Balance •-ginning of year 9,992 405,830 5,376,617 292,082 6,084,521 Additio during the year - - 433,439 - 433,439 Disp•-als during the ye. - 26,335 - - 26,335 Bal-nc: f year 9,992 379,495 5,810,056 292,082 6,491,625 cumulate. .i.rti ation Balance, begin 'rig of year 500 313,511 3,692,006 84,819 4,090,836 Amortization 999 38,680 845,873 5,842 891,394 Accumulat-• amortization on dis•.sals - 26,335 - - 26,335 Balanc:,end of ear 1,499 325,856 4,537,879 90,661 4,955,895 Net bo• value 8 493 53 639 1 272 177 201 421 1 535 730 Page 9 FOR DISCUSSION PURPOSES ONLY City of Pickering Public Library Board 5 Notes to the financial statements December 31, 2011 5. Accumulated surplus Accumulated surplus consist of the following: 2011 010 $ $ Invested in capital assets 3 1,535,730 Post employment benefits liability (150,8 ) (119,500) 1,190,373 1,416,230 6. Budget figures The 2011 budget was not prepared on a basis consistent wit' that used to repo- actual results.The budget was prepared on a modified accrual basis while pu. lc l'tor accounti'g standards require a full accrual basis of accounting.The budget figures treated . to 'I apital .:set acquisitions as expenditures and did not include amortization expense •n tangs• - capital .ssets.The following provides a reconciliation from the approved budget to the bud•-t numbers ` e ed in the financial statements. 2011 TCA adju- ment Non A 2011 budget Council approved for City expen.'ures presented in budget ow ed assets fro , capital Amortization statements $ $ $ $ $ Revenue City of Pickering 4,860,265 - - - 4,860,265 Federal and provincial grants 158 .93 - - - 158,393 Other 20 ,465 - - 201,465 5 '20,123 - - - 5,220,123 Expenditures Salaries # ,390 - - - 3,817,390 Material,supplies and utilities 3 No04 - - - 328,004 Services 602,572 - 31,800 - 634,379 Amortization - - - 647,514 647,514 4,7, ,973 - 31,800 647,514 5,427,287 Annual s plus 472,150 - (31,800) (647,514) (207,164) Capital -xp:- res/ ad,,itio. (472,150) - 31,800 - (440,350) 7. omparative fig es Certain comparative figures have been reclassified to conform with the current year financial statement presentation. Page 10 FOR DISCUSSION PURPOSES ONLY